30k to invest what would you do ?

for the new years one of my biggest goals was purchasing my first income property . i had made some sacrifices and its looking like by the summer i should have 25-30k to invest. after talking and researching i have come up with three possible ways i could use this money in the best possible way.

1. Buy a income property cash free and clear and cash flow it you may be wondering how could i buy a house with 30k cash mind you I'm from camden nj cheap housing

2. Put 20 percent down on 2 houses split the 30k into 15k and put 20 percent done on 2 houses listed at 75keach cash flow this houses and pay the mortage which should be around 500

3.Use the whole 30k and put it down on a duplex in a better community even if the unit doesn't leave me enough money to cash flow the unit will be going up 10 percent a year .. being that I'm young i can easy wait 10-20 years to sell this property .or i can easily refinance (hopefully) in 5 years and purchase another building

So this are my options i have been beating myself over the head about this . what would you do ? in my position any advice is will received ....

Joel Owens

Commercial Real Estate Broker · Canton, Georgia

Pro Basic

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Feb 20, 01:32 PM

"3.Use the whole 30k and put it down on a duplex in a better community even if the unit doesn't leave me enough money to cash flow the unit will be going up 10 percent a year."

Do you have hard data for your local area to prove this assumption?? My thought would be that you do not.

Appreciation should be the icing on a cake and NOT the cake.What you CAN quantify today is cash flow.You can look into the future on appreciation based on data but it is not an absolute.

The one item you didn't mention is do you have a job that pays all your bills that allows you to save up this money?? If so you can buy a few properties at a time and grow small..

If however you need this investment to immediately make money for you to live off of and do real estate full time that is very different scenario.

Danny Day

Rehabber · Houston, Texas

369 posts
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Feb 20, 01:39 PM

I'd go for the 2 houses, thats my .02

Brian Hoyt

Real Estate Investor · Arlington, Texas

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Feb 20, 01:58 PM

Although I like the idea of two houses, I think you will need more than 30K to *successfully* obtain and operate two 75K homes. There will be more money required for closing. More money required for make ready (most likely) and more money required for reserves. You have only accounted for DP. I would not want to walk into two 75K mortgages with less than 40K on hand to handle DPs and other minutia that add up pretty quick. I would get a good duplex with 30K, but that is where my goals are currently set, coincidentally.

Mike Jakobczak

Rehabber · Toronto, Ontario

267 posts
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Feb 20, 01:59 PM

I'd partner up with someone who flips properties and learn the business. Then turn my profits into long term rentals. Keeps your money working, and also keeps you actively investing.

Where if you buy one/two properties and all your money is spent, you are now just waiting until you save up again. Or start looking for money partners.

All depends on what type of investor you are/want to be. What type of risk you can handle, etc.

Arthur Garcia

Real Estate Investor · Pasadena, California

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Feb 20, 03:10 PM

I would buy a higher quality rental that cash-flows. Keep heavy reserves, especially for your first property - things come up.

If you can't make that purchase happen with 30K, wait a few more months then buy. Trust me you'll sleep better at night having money in the bank. Take your time, especially if you are going to buy rentals.

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Will Barnard

Rehabber · Santa Clarita, California

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Feb 20, 03:35 PM

Regardless of your choice of path here, you MUST first fully understand all that is involved as a landlord, paying special attention to operating costs and how to evaluate deals and your market you intend to invest in.

Will Barnard, Barnard Enterprises, Inc.
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Conny Wolfram

Wholesaler · Santa Monica, California

60 posts
3 awards
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Feb 20, 04:17 PM

Lisandro~

since you didn't mention how experienced you are with landlording, rehab or any other part of owning real estate, I can only assume that you have not a lot of experience yet (you mentioned you are still young). :)

My advice would therefore be....

a) Find a more experienced investor than yourself, and buy a CASH-FLOWING rental building (at least 3 units, better 4 or 6), and "go dutch" with him/her....

b) Buy a cheap 2, 3 or 4 unit property for under $10K, rehab it for no more than $10-$15K (30-45 days), and use a contractor who knows how to rehab (you are NOT moving in yourself, so don't fix it up like you would). And then get the cash flow going by renting to already waiting, pre-approved renters. A good, experienced local property manager can have these tenants waiting (pre-screened and all) before the 30-45 days of rehab are over.

c) Take out a non-recourse loan (takes approx. 2 weeks to 2 months), get 40 to 50% of your original seed money out.

d) Reinvest it (like above) via your Roth IRA into the next project (alone or with partner). And if necessary use PM (private money) or HM (hard money) to do the rehab.

Keep repeating this a few times, and your monthly cash flow from these units can carry.... And make sure that you have somebody advising you who has done this before. My 2 cents.

Conny Wolfram

Lisandro Garcia

Real Estate Investor · Camden , New Jersey

30 posts
2 awards
50 influence

Feb 20, 08:24 PM

thanks for all the replies..

i should've gave more info i am a small time business owner so i make enough income to cover my expenses a month. my whole life i know real estate in some form was going to be something i pursued in life .although i don't have experience in being a landlord i have been to many seminars and have had conversations with a lot of landlords i also come from a family( brother and father who are active landlords).You may be saying if u know all this why are u asking because i want to see what other people would do i love hearing suggestions one little suggestion can change my view on investing.

A couple of people made points about rehabbing ,, i would look into that right now I'm focus on cash flow and rentals.i actually have some investors who want to buy i may bring up that idea later done the road and J-V with 1 or 2 of them.

somebody also brought up Appreciation - one of the reasons i do look into that is because as a small business owner i don't have a 401k so without no retirement fund i could use a duplex as my retirement fund also the area I'm thinking of buying this duplex is actually a very hot area .

Ziv Magen

Real Estate Investor · Gold Coast, Queensland

29 posts
50 influence

Feb 20, 09:16 PM

Great advice, great pointers - my own 2 cents are - consider alternatives with high cashflow, such as Asia (to toot our own, and others', horns). Your 8-12% can suddenly look more like 12-15% - even without any icing, that's bloody good to take to the bank.

Ziv Magen

Edited: 02/20/2012 at 09:47PM by Administrator : Signature info belongs in your signature, please.

Mike Hasemann

Real Estate Investor · Manteno, Illinois

108 posts
1 award
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Feb 22, 08:31 AM

Use your 30k as reserves to help qualify for hard money loans and the conventional refi's so you won't have to dip into your cash as much. If you're with a good hard money lender and are willing to wait to cherry pick the deals, you should be able to limit your expenses to 10% total of the purch and rehab.

Ziv Magen

Real Estate Investor · Gold Coast, Queensland

29 posts
50 influence

Feb 22, 07:57 PM

Smare advice from Mike there...