Investing in Real Estate and my small business

[Robbie82]

Hey everyone!  This is my first post on the forums here.  I have heard many people recommend the Mr. Money Mustache forums and blogs, so I decided to join.  My name is Robbie, I am 24 years old, and I am hoping to invest in real estate and grow a small business I am working on now.  In my current situation, I am working an incredible job, but it doesn't pay well at all.  The problem I am facing is that I need to figure out if I should save the money I am able to for the small business I am growing, or for a property I can house hack.  So far, the advice I am being told is to invest in my small business, and then while I am growing that, I can learn more about investing in real estate.  Once I start making more profits with my small business, I can then use that to invest in real estate.  Would you agree with that route? What would you do in this situation?  Thanks in advance for any help/advice!

[Papa bear]

Well - that all depends on what your business is and what you want to do in real estate.

I bought my first rental at 22 and a 2 unit at 26. I used the rental income to be an income “floor” so that I could go off and start a business. And have since done fair in the business and bought 4 more rental units.

So this isn’t a chicken or the egg question, you could go in either direction and be just fine.  Or you could skip that and find a lucrative career. There’s no wrong path.

To the point of business or real estate, specifics would be helpful.  If your business isn’t scalable, then I’d pass on dumping more money in it.  If your idea of a real estate investment is to buy a 350k sfh and rent it for 1500/month in the hopes it appreciates, then I’d pass on that too. 


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[Robbie82]

Thanks for your response!  You are right, specifics would help.
As for real estate, I want to grow a portfolio of rental properties, preferably residential multifamily.  I would like to have the cash flow to cover my expenses and maybe a little more so I can focus on working on my other business.  Once I hit my goal for cash flow, I would look into investing in larger commercial deals or syndications.
As for my business, I breed ball pythons.  Working with snakes has always been my passion and I know this business a lot better than real estate right now.  It's a dream of mine to grow the business into something great.  This business is scalable and I know many people who have done very well in it.  I am already a couple of years into growing it as well, and continue to educate myself on the market and animals. 
With that being said, if I magically had a lot of money to invest, as of right now, I would be able to make a higher ROI with my business because I am more familiar with it than REI.  I don't want to discount real estate investing, though, because I know how great of an investment strategy it is. 
Thanks again for your post!

[A Fella from Stella]

REAL ESTATE: Here is a great resource: https://www.youtube.com/user/BiggerPockets

Avoid a single family home with the exception of if you want to live there. Unless you buy it practically for free, you'll maybe break even while it takes up your valuable time.

You can get a regular loan for a property with up to 4 units. A 4-unit place still only has 1 set of gutters, 1 roof, 1 lawn, etc. Yes, it has up to 8 bathrooms, but when 1 bathroom needs to be gutted, you have 3-4 rent checks to pay for it.

I've heard of already-rich investors who say after trying to have single family homes, they refuse to buy anything less than a building.

[Another Reader]

REAL ESTATE: Here is a great resource: https://www.youtube.com/user/BiggerPockets

Avoid a single family home with the exception of if you want to live there. Unless you buy it practically for free, you'll maybe break even while it takes up your valuable time.

You can get a regular loan for a property with up to 4 units. A 4-unit place still only has 1 set of gutters, 1 roof, 1 lawn, etc. Yes, it has up to 8 bathrooms, but when 1 bathroom needs to be gutted, you have 3-4 rent checks to pay for it.

I've heard of already-rich investors who say after trying to have single family homes, they refuse to buy anything less than a building.

I have a couple of dozen single family properties.  Better quality tenants, lower turnover, and much easier to manage  Appreciation, the icing on the cake, has been very good.  It depends on the market, but I would not own 2 to 16 units in my market.  Low quality tenants, too much turnover, and the vacancy and collection loss is much higher.

OP:  Investing in real estate is not like investing in the stock market.  There is a steep learning curve and a lot of work involved, much of it ongoing.  You need to understand the numbers on paper and in real life before you write any checks.  Get to know actual, active investors, talk to property managers, and follow rents and prices for awhile.  Take a class on real estate investment analysis or read a few books on the subject.

[A Fella from Stella]

REAL ESTATE: Here is a great resource: https://www.youtube.com/user/BiggerPockets

Avoid a single family home with the exception of if you want to live there. Unless you buy it practically for free, you'll maybe break even while it takes up your valuable time.

You can get a regular loan for a property with up to 4 units. A 4-unit place still only has 1 set of gutters, 1 roof, 1 lawn, etc. Yes, it has up to 8 bathrooms, but when 1 bathroom needs to be gutted, you have 3-4 rent checks to pay for it.

I've heard of already-rich investors who say after trying to have single family homes, they refuse to buy anything less than a building.

I have a couple of dozen single family properties.  Better quality tenants, lower turnover, and much easier to manage  Appreciation, the icing on the cake, has been very good.  It depends on the market, but I would not own 2 to 16 units in my market.  Low quality tenants, too much turnover, and the vacancy and collection loss is much higher.

OP:  Investing in real estate is not like investing in the stock market.  There is a steep learning curve and a lot of work involved, much of it ongoing.  You need to understand the numbers on paper and in real life before you write any checks.  Get to know actual, active investors, talk to property managers, and follow rents and prices for awhile.  Take a class on real estate investment analysis or read a few books on the subject.

Great point on quality of tenants.

OP, see about getting a 15-year loan if you can. I started with a 30 just to get the place (a home I lived in). Every month about $100 was taken of the principle. Then I refinanced to a 15 and every month $500 was taken off t principle. This was terrific because even if I had a situation where the rent was less than the payment, I' be ahead in growing my equity.

[changed for protection]

I really want to learn more about this python breeding business. How has it been going for you? How do you market? What's the realistic cash flow look like? :D

[Robbie82]

Thank you all for messaging on this post, sorry I haven't kept up with this forum!  I may be moving to a different location soon, but right now my goal is to house hack my first investment property.  I will likely be living in a SFH and rent out the other rooms while building my business in my own room.  Then I can continue to house hack year after year with home owner occupant loans.  Thank you all for your input!

Robbie

[jb1]

Thank you all for messaging on this post, sorry I haven't kept up with this forum!  I may be moving to a different location soon, but right now my goal is to house hack my first investment property.  I will likely be living in a SFH and rent out the other rooms while building my business in my own room.  Then I can continue to house hack year after year with home owner occupant loans.  Thank you all for your input!

Robbie

thats what I do now. I rent it out to my friends (have been the last 16 months) and only pay $4 a month to the mortgage (also throw in $100 extra). My area has also appreciated in coastal North Carolina.