Real Estate Investing Basics

The Best Way to Start Investing in Real Estate With $50,000

Expertise: Real Estate Investing Basics, Personal Development, Landlording & Rental Properties, Real Estate News & Commentary, Business Management, Flipping Houses, Real Estate Deal Analysis & Advice, Personal Finance, Real Estate Marketing
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increasing-income

Today we’re talking about how to invest $50,000. Let’s get it started.

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OK, so you wouldn’t believe how many investors that I’ve spoken to over the last five years that have $50,000 to invest. I don’t know why, but I guess it’s a magical number.

Everyone goes out, works hard, lives frugally, and then they save $50,000 and want to start investing in real estate. And that is something that I think is absolutely fantastic. I think you all are troopers for saving that much money to invest in real estate. I also think that is a great amount to get started with real estate investing.

You’ve proven to yourself that you can work hard and live frugally. You can save, and you have aspirations, desires, and dreams of financial freedom or making a lot of money in real estate—hopefully to help out your loved ones and create a bigger and better course for your life.

How to Invest $50,000 in Real Estate

Now, here’s the deal. All of you who have $50,000 and want to buy turnkey properties or want to purchase buy and hold properties, I am not a fan of that. I'm not a fan, because I think that you're going to tie up every last penny that you have in a certain amount of real estate that is not going to produce the result that you need to live the life that you want to be living.

Things are getting expensive these days, and there’s a bigger gap between very wealthy people and very poor people. Middle America is superior; I’m sure you’ve seen it plastered all over the news. I’ve read a lot of articles out there, where people have millions of dollars in their bank account but don’t feel rich because their cost of living is probably very high. So, times have changed.

All in all, I don't feel that taking $50,000 and using leverage to go and buy two to five turnkey properties with debt on every single property is going to give you the cash flow to make a significant dent on your monthly lifestyle. I also don't believe that taking $50,000 and buying one property with cash is going to get you where you need to be.

Related: Why You Should Only Invest in $50,000 Properties or Less

All good things take time. Money makes money. I’m just finishing a book right now, where I’m talking a lot about these things. I just don’t believe in doing something for nothing. I also don’t believe in borrowing a lot of money or leveraging out the wazoo—especially when you don’t know what you’re doing when you’re first starting out.

Using leverage should be for experienced investors. Using leverage should be for investors who understand what expenses come with owning investment properties. And you’re not going to understand those expenses until you’ve been in the game for two to five years.

The furnace screws up, hot water heater blows up, or the tenant vandalizes the property. A lot of you guys don’t know these things, and I’m telling you if you don’t think it’s going to happen to you, Uncle Dingo here (or the “Real Estate Dingo,” your favorite Aussie) is telling you that it will happen.

Always underestimate your income and overestimate your expenses, which is something that I’ve been saying for a very long time. And always base your investment decisions on a worst-case scenario.

If You Only Have $50K, DON’T Do This

With that said, if you only have $50,000 to your name and you want to go all-in and park every single penny in an investment property… If you don’t have any reserves set aside for any catastrophe that could happen to you and your loved ones… I don’t think you should do it.

Guys, don’t invest what you can’t comfortably afford to lose. Always have enough money set aside for an emergency. Please, you have to look after yourself and you have to look after your loved ones. Forget about real estate.

Now that we’ve got that out of the way—you’ve got $50,000, so what do you do? You take that money, and you move to the Midwest.

I’m sorry. There’s no other way that I know of. I did it. I went from Australia to bloody Toledo, Ohio, and I’ve made millions here. I suggest you do something like that.

Find the market, find your niche, and pack up your family (if that’s what you have to do), and remember that nothing comes easy in life. It’s all going to take a lot of work and sacrifice, and it’s not going to happen overnight.

You can take $50,000 and find some amazing properties in the Midwest in Michigan, Indiana, Ohio, Illinois, Kansas, Missouri, and Wisconsin. Guys, there are some amazing B-class properties—even A-class properties—that you could purchase distressed via auction for $20,000 to $40,000. Then, put in $10,000 to $30,000 in rehab.

You could do the work yourself and project manage the job. Then, I think you could sell it for $100,000 or more and make a great profit on the deal. Then, you can rinse and repeat. The more deals that you do, the more money you will accumulate.

Related: How to Save $50,000 in 2 Years on a Modest Salary

So, the deals are out there, especially in the Midwest. People still want to live here, kids still go to school here, and there are jobs here. This is the market to be in. All of you East and West Coast folks: personally, I would not be investing half a million dollars to make $50,000. That’s too much risk.

I’d rather be investing $50,000 in a market like Toledo, Ohio, to make $30,000. I think that makes so much more sense, and it’s worth the sacrifice and worth the move.

Once you have enough lazy capital lying around, where you do not need it to support your fix and flip efforts, use that capital and tie it up in a buy and hold property. Simple as that. Keep buying, fixing and flipping, and remembering money makes money. Accumulate as much of it as you can, and then, once you have lazy capital lying around that you do not need for your fix and flip efforts, park that money in an investment property.

And keep parking that money until you get to the desired cash flow, where you and your loved ones can live the lifestyle that you want to live.

That’s my 0.2 Australian cents. I hope you enjoyed this blog!

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Do you agree or disagree with my opinion? If you disagree, what would you do with $50K?

I’d love to hear from you in a comment below.

Engelo Rumora, a.k.a."the Real Estate Dingo," quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate al...
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    Barry H. Investor from Scottsdale, AZ
    Replied 10 months ago
    ENGELO - I always enjoy your articles because we invest in the same markets. You do so (or have done so) on a much larger scale, but the numbers you reference can be imprinted onto my KC MO market, which is not all that far from Toledo. In a brief article, you have summed up what it takes. If someone wants financial freedom with $50K, it is a journey and an education, NOT a get rich quick - it never is - NOTHING is (except an inheritance). I started with one property 15 years ago. It was a good cash-flower, and as you might guess, I figured I was a genius (not market forces, not got lucky with a tenant, etc - oh no - it was ME - the GENIUS !!). Scaled up too fast to 7 doors and TOOK A BATH over the next several years, culminating in a net $200K loss when I sold 4 of those doors in 2009. It was great for my tax liability (paid little or no Fed income taxes since then), but buying bread, cheese and gas for my 15 year old mini-SUV was dicey for awhile. In summary - you have provided good advice here. Buy a cheapo-creepo house (in an Okay hood), get your hands and pocketbook dirty, rent it out, sell it, do whatever feels right for your lifestyle, and see if it is something you want to try again. If the answer is YES - do it AT LEAST one more time successfully before scaling up.
    Engelo Rumora Specialist from Toledo, OH
    Replied 9 months ago
    Hi Barry, Thanks for your reply and kind words. KCMO is a great market. Same here mate. Got too big, too fast and it all became a monster with too many heads. You live, you learn and you never give up hehe I wish you continued success
    Shannon S. Investor from Cincinnati, OH
    Replied 10 months ago
    I'm an experienced flipper, realtor, and work with other investors. In Cincinnati OH it would be hard for an inexperienced (or even experienced) investor to find a property at that price point, whether wholesale or MLS. At least in the greater metro area. At that price you'd be in an undesirable area, or have some pretty seriously distressed properties. Or both. Same thing in some of the lower MI areas where my parents live. And Chicago, where my sister lives. Saying "the Midwest" is overly general. I would suggest talking to experienced flippers and Realtors in any city you are looking to invest in. In this area the proportion of flippable houses at that price point that would be suitable for a newbie is VERY low.
    Engelo Rumora Specialist from Toledo, OH
    Replied 9 months ago
    Thanks Shannon, There are many markets all across the Midwest where $50,000 goes a long way. Cinci in my opinion is another one. Especially the Incline District for example. We did 20+ deals in Cinci and Dayton so we know what is on offer. Thanks again
    Chris Hummel
    Replied 10 months ago
    Find, fix and resell. All easier said then done in any market. Who does the fix? What gets fixed first and why? Condition of a property is HUGE. Do you know about cost to upgrade low class properties. I do not think so. Pie in the sky advice is way to vague to be useful. Sorry to rain on your parade. My suggestion, wholesale a property to a contractor with crews to fix it. Collect your $5000 finders fee and move on while you learn how to determine the condition and renovation options on a property. Good Luck my friend.
    Engelo Rumora Specialist from Toledo, OH
    Replied 9 months ago
    Thanks Chris, The margins are much bigger on fixing and flipping. Too many broke folks are trying to wholesale. No skin in the game = nothing to loose which = Giving up to quickly/easily. Nothing beats hard work. With hard work, no luck is needed. All the best.
    Mei Ye from Chicago, Illinois
    Replied 10 months ago
    I am looking to invest in Chicago market, if you have any great flip ideas please let me know, I can do private lending or looking for partner who know construction, plumbing, electrical, ECT.
    Chris Hummel
    Replied 10 months ago
    So with hard money lending you have holding costs which includes points and the interest only loan. This is a short term non-owner occupied non-conventional loan. That all factors in to cash on cash return that you are hoping for. The goal of all renovations for resale is to make the property eligible for a conventional loan and meet underwriter requirements. The appraiser, the eyes and ears of the bank, will look for specific work order items such as: A reliable roof, pipes with no leaks, modern wiring and electrical panel, a crawlspace with good drainage and free from pests. Again, set your priorities on not just pretty paint and new carpets but updated system improvements. For example, you need to know if the property has modern 200 amp power or not. A professional property inspection helps you understand what you have, and what will take to make it better.
    Edward Granville
    Replied 10 months ago
    Thank a lot Chris! "The appraiser, the eyes and ears of the bank, will look for specific work order items such as: A reliable roof, pipes with no leaks, modern wiring and electrical panel, a crawlspace with good drainage and free from pests. Again, set your priorities on not just pretty paint and new carpets but updated system improvements." This is extremely important. I'm rehabbing an apartment owned by my mother and (unexpectedly) having to renovate the wiring and having it reexamined totally screwed up the budget.
    Viktoras Truchanovicius from Nashville, Tennessee
    Replied 10 months ago
    There are so many ways to invest in real estate without moving anywhere or needing 50k: 1. REITs 2. eREIT like fundraise.com 3. Crowd sourced platforms like iintoo.com Not all of these may be available outside the US but you mentioned them if you're gonna write an article like this.
    Chris Hummel
    Replied 10 months ago
    REITs lack control over the asset, the property. You can not force appreciation with the purchase of a REIT, a paper asset, but you can with property. Paper assets are fine if you are not interested in getting involved with the education required to invest in the business of real estate. Spend your evenings watching tv and not using YouTube to learn financial statements. Real Estate is all about the numbers.
    Carlos M Ferraresi
    Replied 10 months ago
    Very good and clear article. Even though I don't know if I would move from FL to the Mid West. Thank you!
    Engelo Rumora Specialist from Toledo, OH
    Replied 9 months ago
    Thanks Carlos, Success takes sacrifice. I moved from Sydney, to Toledo, Ohio. Spent 6 years pounding the pavement in Ohio. 1,000+ deals later I can live wherever I want lol This year I spent 3 months in Croatia, 6 in Italy, now I'm in the US and soon will be going back to Europe. The world becomes your oyster once you get to a certain level with your real estate business. Much success
    Lorenzo Wright Rental Property Investor
    Replied 10 months ago
    Kind of a weird article for the BP community...a community that was founded on small RE investors. How to invest 50K in real estate...dont invest in real estate
    Edward Granville
    Replied 10 months ago
    True, but he advices against it because of this: "All in all, I don’t feel that taking $50,000 and using leverage to go and buy two to five turnkey properties with debt on every single property is going to give you the cash flow to make a significant dent on your monthly lifestyle. I also don’t believe that taking $50,000 and buying one property with cash is going to get you where you need to be." ....which is true. Flipping (if possible in your area) and invest to hold everything except for your working capital and an emergency fund I find is a fast and still quite secure way to go about it.
    Christian O' Reilly Flipper from Park City, Utah
    Replied 10 months ago
    Just my opinion on this video as a previous investor in Toledo. On paper it all looked great, I did the deal and it rapidly went down hill due to extremely bad property management and tenants. I’d a 6 plex beside a school and just blocks from the hospital. It was broken into numerous times and by contractors who were not paid by management. Anything and everything from tankless water heaters to every lightbulb in the common area of the building was stolen. Picked up the pieces with new management who were great people but they just could not find tenants that could pay rents or last more than 6 months. Almost every tenant that left, left a mess from bed bugs to broken windows or old appliances out on decks or dumped behind the building.. Living in toledo is probably the key here but as an “out of state” investor I would strongly advise against Toledo. Lastly if you have made millions In Toledo, honestly congrats coming from another country and working your ass off, but I really do find that hard to believe given my experience with the people in that city.
    Engelo Rumora Specialist from Toledo, OH
    Replied 9 months ago
    Thanks Christian, I'm sorry to say but you probably didn't know what you where doing. I'm not the only investor doing well in this market. All good things take time and even to this day we loose on some deals. The goal is to never give up and to learn from your mistakes. The hardest part about Toledo is the contractors and property management. They both suck and that's why we do all of our work in-house. Where there is a will, there will always be a way. I wish you much success
    Chris Hummel
    Replied 10 months ago
    Well said my friend, the article paints a pretty picture but ignores the pitfalls related to poor property mgt. which includes tenant screening. This is more of the buy and hold strategy and not fix and flip.
    Emmett Bond Investor from Bellingham, WA
    Replied 10 months ago
    A bit disappointing as an article. Most of the content that people come to BiggerPockets for are advice on how you CAN invest in real estate and advice on how to make your learning process and revenue generating process smoother than your predecessors. It’s one thing to say “I have found good deals in my local market. Check our XYZ strategy and another to say that everyone on the East and West Coast should move to the MidWest if they want to find a good deal. I just put a 4plex under contract in Washington state in a desirable small town near the coast with multiple stable employment sources, that was an incredible deal. Owner financing. Only 10% down and 3.5% interest rate for 15 years. Sure it has some deferred maintenance but nothing major (roofs were replaced 2 years ago, etc.) So, as many of the others have indicated, I beg to differ with your advice.
    Chris Hummel
    Replied 10 months ago
    You forgot to mention how the property cash flows which is the basis for passive income. Condition of the property and management of the property are so important. So are the tax benefits called phantom income through depreciation. Good luck my friend, Mukilteo, WA.
    Benjamin Tighe from Medford Oregon
    Replied 10 months ago
    I love the fact that you push the CYA aspect of investing and personal finance. While investing and starting the journey is super tempting, we should not ignore the fundamentals of making sure our basic needs are met.
    James Rodgers
    Replied 10 months ago
    Good points. Known too many people who have lost big money in past recessions or whatever (2008-9 was just the latest and largest). We've also lost our share of money along the way...but we've made quite a bit too.
    Martin Minkus from San Francisco, CA
    Replied 10 months ago
    Good points, but most of us will never move out to the midwest... life is far more interesting, exciting, and fun living on the coasts and salaries pay substantially higher. You're talking about moving to the midwest to start your own business, and if that's what you want to do, sure. But I want to invest my money passively while I enjoy life where ever I may be.
    Eugene Gutierrez Rental Property Investor
    Replied 10 months ago
    Great video. The headline caught my eye. You helped me understand what I have done. I live in South Florida where real estate prices are very high and the capitalization rates are very low and the competition to buy is extensive. In 2014, I went up to Maine and began buying properties. At the time, the Maine real estate market was still recovering from the 2008 real estate recession. Maine real estate is a lagging indicator. In any event, I first bought a 6-unit apartment for next to nothing, compared to South Florida. Today, we have over 100 units and beginning to buy larger properties - i.e. a minimum of 15-units. Every Sunday morning, I sit with my ipad and scan the whole east coast of the USA for deals. I still cannot afford Miami, Boston, New York or other major urban areas. Buy, Hartford, South Carolina, Maine, Alabama are looking good for value-deals. Thanks for the video.
    Engelo Rumora Specialist from Toledo, OH
    Replied 9 months ago
    My pleasure and thanks for your kind words. Well done on your success. Keep the dream alive Eugene
    Chris Prichard from Birmingham, Alabama
    Replied 10 months ago
    Great article, thanks! I'm about to sell an IRA owned rental house and will end up with closer to $150k after selling it have been wondering how to reinvest; fix and flip, leverage, etc. I live in the South and know that we have deals with similar numbers as you describe in my metro area of Birmingham, AL. The strategy you describe would be a good way to build up more equity and "lazy capital." Especially considering that I can't draw on it personally for at least another 7 years. Or would you leverage in a situation like mine; i.e. a little more cash but can't tap into it personally just yet.
    Dewey Kit
    Replied 10 months ago
    I'll say what many others are thinking: this is a ridiculous article.
    Engelo Rumora Specialist from Toledo, OH
    Replied 9 months ago
    I agree. It's ridiculously awesome :) Much success
    Brad Hahn Rental Property Investor from Metairie, LA
    Replied 10 months ago
    I encourage the readers of this article to follow Brandon Turner/David Green for advice to invest your 50k. My preference would be to use the 50k as leverage to buy a 150-200k duplex or triplex and generate instant cash flow (know your numbers and use the BP calculators to make sure you get a property that cash flows), gain experience as a landlord/investor, then sit back and wait for the tenants to pay down the debt. Re-analyze the property after a few years and go from there. Option 2 would be to keep saving until you can pay cash for a property and do the BRRRR method (read David Green's BRRRR book). Real estate investing should be thought of as a long term play, not get rich quick. Assuming you found a comparable job in the new city, how much of the 50k is left after moving expenses and putting a deposit/down payment down on a new place? The article also assumes that flipping will be successful which is more of a speculation and not guaranteed profits.
    Jerome Kaidor Investor from Hayward, California
    Replied 10 months ago
    Once upon a Time.... Around 1996 we had $60K burning a hole in our pockets. My wife wanted a tax write off, so she dragged me in kicking & screaming. We bought a fourplex in San Mateo, California for $360K. We swung hammers and wielded paintbrushes. Seven years later, I said goodbye to the W2 world for good, having accumulated some 64 units. When we bought that fourplex, I had real doubts about the whole thing - back then, you could make 10 - 15 percent in a mutual fund. And your mutual fund would never call you with upchucking toilets. But around 2001, high tech was in the toilet, and that fourplex was standing tall. Also, the company where I worked was having layoffs...and more layoffs...and more layoffs. The company stock was in a relentless slide from 96 dollars down to 48 cents. So I refinanced the fourplex and bought an 8 unit building. Then in 2003, I refinanced the fourplex again, and also our overpriced SF Peninsula house, and bought a 52 unit complex in the central valley. And 6 months later - poof! I was gone! From Silicon Valley, anyway. The big complex became profitable just about when my layoff package ran out.
    Rob Aliberti from Richmond, Virginia
    Replied 10 months ago
    This article is nothing but a bunch of garbage! There is nothing here except a bunch of hypothetical nonsense from another "guru". Just what this business needs another know it all writing books.
    Engelo Rumora Specialist from Toledo, OH
    Replied 9 months ago
    Sorry you feel that way Rob. The article is based on my experience and after doing 1,000+ deals. I have a have tonne of it. No guru talk here mate. I make too much money "doing it" so there is no need to "teach it". My content is free. I do have a book coming out soon though. You should buy it hehe :) Much success
    Jerry M Cutrona Developer
    Replied 10 months ago
    As in all things, take the best (advice) and leave the rest. I’ve learned more from the follow up posts than from the original headline....
    Mark Keeler from Fremont, California
    Replied 9 months ago
    I agree with Engelo about not tieing up your life's saving in 1 deal. However, it's a start. Our family plans on packing it up in a year or two from California and moving to where we want to invest. I had my first phone meeting with Engelo about Ohio Cashflow. The conversation was priceless. It felt like Engelo hit me with a baseball bat. It was a wake-up call.
    Engelo Rumora Specialist from Toledo, OH
    Replied 9 months ago
    Thanks for your kind words Mark and it was a pleasure connecting. I wish you much success with your endeavors.
    Michael P. Rental Property Investor from Toledo, OH
    Replied 9 months ago
    I think there is money to be made in Toledo. Just provide the tenant a quality product. Don't be a penny pinching slum lord.
    Engelo Rumora Specialist from Toledo, OH
    Replied 9 months ago
    Agreed mate
    Frederick. Van Arnam
    Replied 9 months ago
    Dear Sir; would like to discuss real estate in a more secure form. Realize your time is precious. Please respond to my email with a phone number we could use. Thanking you in advance. Respectfully. Fred