Advice for newbie

[Bailey Cocuzzi]

I am new to the real estate world and getting stuck on making my first move. Real estate is something I’ve taken an interest in the past few years by doing research, watching seminars/videos, ect., but I have no clue where to begin. Anyone that feels like they may be able to provide some advice/guidance, I would love to chat! 

[Chris Webb]

Quote from @Bailey Cocuzzi:

I am new to the real estate world and getting stuck on making my first move. Real estate is something I’ve taken an interest in the past few years by doing research, watching seminars/videos, ect., but I have no clue where to begin. Anyone that feels like they may be able to provide some advice/guidance, I would love to chat! 

Yes. Learn cash on cash return and find the average for your market. I know InvestLYH has great videos on how to do this right off of Zillow. 

[Dave Meyer]

Hi @Bailey Cocuzzi, welcome to the community! It sounds like your off to the right start -- but watching some videos and doing some research -- keep doing that. The goal should be for you to home in on a few tactics to focus on for your first deal. Will you do a long term rental? A house hack? What market will you invest in? Once you have some direction, I think you'll find this community to be very eager to help you on your journey -- but only you can set your goals and intentions. So my advice would be to keep self-educating, ideally by reading some books, and listening to the podcast. Once you've done enough of that to have a goal, find an agent and a lender, learn to analyze deals (tons of good resources here on BP for that), and land a deal! 

[Randall Alan]

Quote from @Bailey Cocuzzi:

I am new to the real estate world and getting stuck on making my first move. Real estate is something I’ve taken an interest in the past few years by doing research, watching seminars/videos, ect., but I have no clue where to begin. Anyone that feels like they may be able to provide some advice/guidance, I would love to chat! 

 Hi Bailey,

I have a couple of suggestions...

I just read this bigger pockets article that sums up the current market situation pretty succinctly:

https://www.biggerpockets.com/blog/a-robust-economy-is-wreck...

In short, it says it's pretty tough to get started right now.  Money is expensive to borrow, and prices are high, and there is a lack of inventory, and there is little expected to change in the next year.

The take away from that might be that you need to realize that real estate is a long term, cyclic 'game'.  Right now we are on the high side of things.  2 years ago, we were on the low side of things where money was cheap, and cash flow was easy to be had.

Some will argue to go ahead and buy now for a 'no cash-flow, future appreciation' play.   I'm personally not a fan of no cash flow.  Cash flow is what allows you to not only have short term profit off your investment, but also provides the funds to do repairs, maintenance, etc on your property.  Without cash flow you have to come out of pocket for anything you property needs.  If you have a great job where you can absorb things like, a new $4,500 AC, or a $10,000 roof with little concern - a cash flow play could make sense.  Most newbies aren't in that category and should be more cautious of such a first entry into the market.  

No cash flow real estate investing can be frustrating to newbies... you are doing all the work, and not seeing any 'pay' for the effort except on paper where you property is worth more.  A more financially stable, long term investor can see the long term appreciation play without the need for the cash-flow.  As a newbie, if you do get into an appreciation play, you can look a little bit more short-term down the road and recognize that you can likely refinance your property once interest rates drop and actually see some cash-flow once you reach a lower payment.  Rents also appreciate over time - this can also give you hopes for some cash flow.  But realize that expenses also rise... property taxes, property insurance, etc will offset higher rents.

The shortest answer I can give you (in my opinion) is that it isn't a great time to be jumping in for most newbie investors.  Some will argue that prices will only go up as rates come down.  I think prices will continue to increase, but at a more steady single digit per year increase... not any sort of rate at what we saw during the pandemic where prices doubled over the course of 2 years.  

We follow a saying that "you do what the markets tell you to do."  High interest rates and high housing prices don't scream "BUY" to us.  While an appreciation play makes perfect sense to some (ie. if you see the price of your newly purchased house increase by 3.3% a year, in 3 years you will have gained 10% equity - which would be $20,000 on a $200,000 house), you have to be in a position to sustain that purchase.  When all the expenses associated with owning and maintaining that house exceed the rent you can get from the property you are effectively upside down and are actually paying your tenant to live in the property.  This is what the numbers work out to be on a large percentage of houses in the market right now.  

So you have to evaluate your situation and make the decision whether real estate is the right move at the moment.  It's a great vehicle for investing (we have 37 doors)... but we bought them from 2018-2021 and they cash-flow extremely well.  If we were just jumping in today, we couldn't even come close to what was done when interest rates were in the 3-4% range, and houses were 1/2 the price.  

 From a percentage return perspective, we currently have our money that is ready to invest in real estate sitting in a high yield savings account earning over 5% interest.  That is over 2/3rds the average long term return on the stock market with absolutely zero risk.  That is what the market is telling us to do right now.  (That's not a knock on the stock market - we have money their too... but we see 5% as an ok no-risk return that exceeds the cash flow most real estate is giving right now. <<caveat though - once inflation is considered, it isn't the greatest overall return - real estate market appreciation still likely way out performs it - but while we wait for a property, it works for us.  Everyone has to balance their own risk / reward preferences.)

I would continue to follow real estate, follow the conversations in the forums, save money, watch for opportunities (there are always diamonds in the rough that are out there - you just have to find them), and work to move yourself to the best position to be able to be an investor.  This includes increasing your income through a better job, and attending local real estate investment groups where you will circulate with other like-minded individuals.  Just being involved in real estate - even in a cursory way - will not only keep you motivated, but educate you and keep you focused.  You will eventually find your first step forward through all of that.  There is a famous book by Napoleon Hill called "Think and Grow Rich."  It's been forever since I read it, but one of its basic premises is to stay focused on your goal - daily -  and you will eventually achieve it. 

I hope some of that helps.  

Randy

[Theresa Harris]

Short answer is:

1) figure out how much you can borrow and your price point

2) decide where you want to buy

3) decide what type of place you want (duplex, single family, condo, etc). Something without a HOA is best.

4) find a local group and go to some of their meetings (if you are buying locally)

5) contact a realtor who works with investors and look at a few places after you've run the numbers and be prepared to put in offers and follow through

[Daniel McDonald]

House hack! It’s the best beginners strategy and is a super forgiving way to get started. Highly recommend. 

[Wale Lawal]

@Bailey Cocuzzi

Jumping into real estate can feel big, but breaking it into smaller steps helps. Set clear aims, like making money long-term with rental properties or short-term profits through fix-and-flip projects. Learn more through books, talks, online shows, and blogs. Pick an investment plan that fits what you like and what you have, like rent and hold, fix and flip, selling contracts, or living in one part while renting the rest. Look at ways to pay, build a team, start with something small, check everything carefully, move forward, and keep going even when it's hard.

Begin with a small property or an easy project, aiming to learn by doing and slowly grow your holdings. Do deep checks on possible deals, including looking at the property, having it inspected, checking the title, getting legal advice, and weighing risks. Keep going and be ready to change, keeping up with market shifts, and focusing on your big aims. With hard work, learning, connecting with others, and planning, you can slowly build a thriving real estate career.

Good luck!

[Bailey Cocuzzi]

Quote from @Daniel McDonald:

House hack! It’s the best beginners strategy and is a super forgiving way to get started. Highly recommend. 

Thank you for this!  

[Bailey Cocuzzi]

Quote from @Wale Lawal:

@Bailey Cocuzzi

Jumping into real estate can feel big, but breaking it into smaller steps helps. Set clear aims, like making money long-term with rental properties or short-term profits through fix-and-flip projects. Learn more through books, talks, online shows, and blogs. Pick an investment plan that fits what you like and what you have, like rent and hold, fix and flip, selling contracts, or living in one part while renting the rest. Look at ways to pay, build a team, start with something small, check everything carefully, move forward, and keep going even when it's hard.

Begin with a small property or an easy project, aiming to learn by doing and slowly grow your holdings. Do deep checks on possible deals, including looking at the property, having it inspected, checking the title, getting legal advice, and weighing risks. Keep going and be ready to change, keeping up with market shifts, and focusing on your big aims. With hard work, learning, connecting with others, and planning, you can slowly build a thriving real estate career.

Good luck!

Thank you for responding I really appreciate you! 

[Bailey Cocuzzi]

Quote from @Theresa Harris:

Short answer is:

1) figure out how much you can borrow and your price point

2) decide where you want to buy

3) decide what type of place you want (duplex, single family, condo, etc). Something without a HOA is best.

4) find a local group and go to some of their meetings (if you are buying locally)

5) contact a realtor who works with investors and look at a few places after you've run the numbers and be prepared to put in offers and follow through

Thank you for this!

[Bailey Cocuzzi]

Quote from @Randall Alan:

Quote from @Bailey Cocuzzi:

I am new to the real estate world and getting stuck on making my first move. Real estate is something I’ve taken an interest in the past few years by doing research, watching seminars/videos, ect., but I have no clue where to begin. Anyone that feels like they may be able to provide some advice/guidance, I would love to chat! 

 Hi Bailey,

I have a couple of suggestions...

I just read this bigger pockets article that sums up the current market situation pretty succinctly:

https://www.biggerpockets.com/blog/a-robust-economy-is-wreck...

In short, it says it's pretty tough to get started right now.  Money is expensive to borrow, and prices are high, and there is a lack of inventory, and there is little expected to change in the next year.

The take away from that might be that you need to realize that real estate is a long term, cyclic 'game'.  Right now we are on the high side of things.  2 years ago, we were on the low side of things where money was cheap, and cash flow was easy to be had.

Some will argue to go ahead and buy now for a 'no cash-flow, future appreciation' play.   I'm personally not a fan of no cash flow.  Cash flow is what allows you to not only have short term profit off your investment, but also provides the funds to do repairs, maintenance, etc on your property.  Without cash flow you have to come out of pocket for anything you property needs.  If you have a great job where you can absorb things like, a new $4,500 AC, or a $10,000 roof with little concern - a cash flow play could make sense.  Most newbies aren't in that category and should be more cautious of such a first entry into the market.  

No cash flow real estate investing can be frustrating to newbies... you are doing all the work, and not seeing any 'pay' for the effort except on paper where you property is worth more.  A more financially stable, long term investor can see the long term appreciation play without the need for the cash-flow.  As a newbie, if you do get into an appreciation play, you can look a little bit more short-term down the road and recognize that you can likely refinance your property once interest rates drop and actually see some cash-flow once you reach a lower payment.  Rents also appreciate over time - this can also give you hopes for some cash flow.  But realize that expenses also rise... property taxes, property insurance, etc will offset higher rents.

The shortest answer I can give you (in my opinion) is that it isn't a great time to be jumping in for most newbie investors.  Some will argue that prices will only go up as rates come down.  I think prices will continue to increase, but at a more steady single digit per year increase... not any sort of rate at what we saw during the pandemic where prices doubled over the course of 2 years.  

We follow a saying that "you do what the markets tell you to do."  High interest rates and high housing prices don't scream "BUY" to us.  While an appreciation play makes perfect sense to some (ie. if you see the price of your newly purchased house increase by 3.3% a year, in 3 years you will have gained 10% equity - which would be $20,000 on a $200,000 house), you have to be in a position to sustain that purchase.  When all the expenses associated with owning and maintaining that house exceed the rent you can get from the property you are effectively upside down and are actually paying your tenant to live in the property.  This is what the numbers work out to be on a large percentage of houses in the market right now.  

So you have to evaluate your situation and make the decision whether real estate is the right move at the moment.  It's a great vehicle for investing (we have 37 doors)... but we bought them from 2018-2021 and they cash-flow extremely well.  If we were just jumping in today, we couldn't even come close to what was done when interest rates were in the 3-4% range, and houses were 1/2 the price.  

 From a percentage return perspective, we currently have our money that is ready to invest in real estate sitting in a high yield savings account earning over 5% interest.  That is over 2/3rds the average long term return on the stock market with absolutely zero risk.  That is what the market is telling us to do right now.  (That's not a knock on the stock market - we have money their too... but we see 5% as an ok no-risk return that exceeds the cash flow most real estate is giving right now. <

I would continue to follow real estate, follow the conversations in the forums, save money, watch for opportunities (there are always diamonds in the rough that are out there - you just have to find them), and work to move yourself to the best position to be able to be an investor.  This includes increasing your income through a better job, and attending local real estate investment groups where you will circulate with other like-minded individuals.  Just being involved in real estate - even in a cursory way - will not only keep you motivated, but educate you and keep you focused.  You will eventually find your first step forward through all of that.  There is a famous book by Napoleon Hill called "Think and Grow Rich."  It's been forever since I read it, but one of its basic premises is to stay focused on your goal - daily -  and you will eventually achieve it. 

I hope some of that helps.  

Randy

Thank you for taking the time on this. Very informative! 

[Bailey Cocuzzi]

Quote from @Chris Webb:

Quote from @Bailey Cocuzzi:

I am new to the real estate world and getting stuck on making my first move. Real estate is something I’ve taken an interest in the past few years by doing research, watching seminars/videos, ect., but I have no clue where to begin. Anyone that feels like they may be able to provide some advice/guidance, I would love to chat! 

Yes. Learn cash on cash return and find the average for your market. I know InvestLYH has great videos on how to do this right off of Zillow. 

I appreciate this, thank you! 

[Bailey Cocuzzi]

Quote from @Dave Meyer:

Hi @Bailey Cocuzzi, welcome to the community! It sounds like your off to the right start -- but watching some videos and doing some research -- keep doing that. The goal should be for you to home in on a few tactics to focus on for your first deal. Will you do a long term rental? A house hack? What market will you invest in? Once you have some direction, I think you'll find this community to be very eager to help you on your journey -- but only you can set your goals and intentions. So my advice would be to keep self-educating, ideally by reading some books, and listening to the podcast. Once you've done enough of that to have a goal, find an agent and a lender, learn to analyze deals (tons of good resources here on BP for that), and land a deal! 

I appreciate you responding. Thank you for this!  

[Carol Hiott]

Quote from @Bailey Cocuzzi:

I am new to the real estate world and getting stuck on making my first move. Real estate is something I’ve taken an interest in the past few years by doing research, watching seminars/videos, ect., but I have no clue where to begin. Anyone that feels like they may be able to provide some advice/guidance, I would love to chat! 

 Hi Bailey,

I work for a real estate company in the investment department and I was just having a conversation with my supervisor on this very thing this morning. We are seeing a lot of investors who want to find flips/brrr properties and get a great profit fast but as everyone is saying, cash flow would be a great place to start. If you're looking to get started in Pittsburgh, there are a lot of turnkey, duplexes and smaller multi-units you could invest in first to secure a good cash flow. Once you have that, then it would be a great time to look into flipping. In my experience, there are a lot of houses in Pittsburgh that need TLC and the initial closing cost are appealing, but a lot of those projects end up needing a huge cost in renovations and then once it goes back on the market, you're unable to get the value you need to make the profit you want. If you can secure a couple great cash flowing places first you can go after the projects where you can get the most out of your investment.

Please let me know what you think!
Thanks,

Carol Ann

[Taz Zettergren]

@Bailey Cocuzzi are you looking to actively work on the real estate deal you purchase or would you prefer to passively invest for the rental income? 

[Wale Lawal]

Quote from @Bailey Cocuzzi:

Quote from @Wale Lawal:

@Bailey Cocuzzi

Jumping into real estate can feel big, but breaking it into smaller steps helps. Set clear aims, like making money long-term with rental properties or short-term profits through fix-and-flip projects. Learn more through books, talks, online shows, and blogs. Pick an investment plan that fits what you like and what you have, like rent and hold, fix and flip, selling contracts, or living in one part while renting the rest. Look at ways to pay, build a team, start with something small, check everything carefully, move forward, and keep going even when it's hard.

Begin with a small property or an easy project, aiming to learn by doing and slowly grow your holdings. Do deep checks on possible deals, including looking at the property, having it inspected, checking the title, getting legal advice, and weighing risks. Keep going and be ready to change, keeping up with market shifts, and focusing on your big aims. With hard work, learning, connecting with others, and planning, you can slowly build a thriving real estate career.

Good luck!

Thank you for responding I really appreciate you! 

 My pleasure!

Keep learning and growing...

[Elise Bickel]

Quote from @Bailey Cocuzzi:

I am new to the real estate world and getting stuck on making my first move. Real estate is something I’ve taken an interest in the past few years by doing research, watching seminars/videos, ect., but I have no clue where to begin. Anyone that feels like they may be able to provide some advice/guidance, I would love to chat! 

 Hey Bailey! Welcome to investing! Bigger Pockets is the best place for advice (imo) but a lot of people get stuck when taking the plunge. A great question for you is what is the end goal? Are you looking to flip properties primarily? Buy and hold rentals? In 5 years are you hoping to have 5-10 solid investment properties that cash flow but also appreciate nicely or are you looking for some high yielding cash flowing properties that you can dump in 3-5 years? 

If you are looking for something with a little less risk I would say that either a house hack (where you live in one unit and out the other(s)) or a single family rental would be a good place to start. Single family homes have the benefit of the tenant paying all utilities, taking care of all landscaping/snow, and lower cost replacement when things go wrong (a roof on a single family home is a lot less then on a large multi). If you are ok with a little more risk then completing some flips is a great way to go. I usually see the first couple can be a learning process but once you've hit flip 3, 4, 5 most of the time you have figured it out. If you ever need anything I'd be happy to be a resource for you including lenders, vendors, etc!