I have $5000, what do i do?

15 Replies

I am a full-time student and working part-time as a personal trainer and I know real estate is going to the tool to build my wealth over many years to come. I'm located in the bay area so there really isn't a thing I can do with this kind of money and I am open to looking at deals in a much different geographical area as long as the deal is right. Any tips on what I should be doing? Certain areas, what I be doing while in school to advance my knowledge/experience in the field, just keep on saving? Anything helps, thanks so much guys.

Is real estate going to be your primary occupation?  If so, why are you gaining student loan debt in college (I'm assuming you're not in high school)?

When I was in college, one of the students biked around campus selling cookies his girlfriend made.  2 cookies, 1 buck.  Text him and he'd be there within 15 minutes.  The cookies were good and the people made a lot of money.  

In another part of campus there were a lot of apartments yet landlords only had one dumpster far away from most people.  A few of students went around and posted notices that they'd collect your trash and throw it away for a small monthly fee or a larger single day fee.  Many signed up. (and everyone disliked the corporate overlords)

Find some way to help people out and then charge them a little bit for it.  You can make a surprising amount.  If being a personal trainer is good enough then ok, keep at it.  Don't forget to minimize your expenses.  Play on someone else's console instead of buying your own.

What type of real estate do you intend to do?  Wholesaling, flipping, rentals, turn keys, etc...

What to do with $5000? Nothing. You will need that money to finish school, car repair, or pay your deductible on an insurance claim. Get as much free education on real estate investing as you can through podcasts, youtube, etc. Make connections that may help you syndicate in the future. @Douglas Krofcheck great advice. 

Hello, there is a YouTube video where a real estate investor gives a lecture to college students. He talked about how he started investing in the state of Tennessee with no money down getting into buying SFR and then renting out rooms to college students who do not prefer to live in a college dorm. Their parents co-sign and ensure the rent payments . He got his first through seller financing. He talked about applying lease options or rent to purchase contracts with owner or seller ; which then can be assigned or subleased to another tenant or tenant buyer who give a Down payment above your earnest money down payment. Monthly rent payments for a few years . Equity above what you promised to pay . You found a buyer and renter. At closing you payoff the original seller/owner. The new buyer pays you off the balance of the of the equity subtracted from the amount of rent ( preferably amortized). Recommend using the $5000 ( skin in the game) as a down payment on a lease option or rent to buy deal that you analyze will bring a positive cash flow after all cost and expenses to get your first rental home under contract. Highly Recommend going through a title company or real estate lawyer ( preferably one who is experienced with doing these deals or contracts). Start with one deal as a test or learning experience or introduction into real estate law, financing, insurance, taxes, dealing with tenants, management company , and contractors, structuring positive cash flow deals, etc. if all of this is too soon or time consuming; recommend around your college town to check out rentals- ask the owner will they be willing to sell to you under a lease purchase contract if you give them a down payment ( suggest using a RE lawyer or title company). Or if you find a rental , ensure your lease allows you to sublet, or how many people can live in the property or home under the lease. You can rent to room mates or do the air bnb, etc. Another option is to use crowdfunding sources . Not only can you use them to fund your real estate deals; you can fund deals through them. Realtyshares and other real estate crowdfunding companies give you access to real estate investing and cash flow, etc. Third option is to use the $5000 to fund a REIT (Real estate investment trust) where you go through a stock broker or discount broker such E-trade, Schwab, Ameritrade etc. after researching management fees and dividend income payments or payout ( monthly) . You buy 1000 shares of say REIT FHA INC. it pays out 25 cents per share monthly= $250 per month or $3000 gross dividend income per year before taxes are subtracted. More income to add to your future Real estate investing strategies- buy rent and hold, fix and flip, etc. There are other miscellaneous real estate investments such as real estate ETFs, etc. Whatever decision you make- make it an informed decision. Research all above options thoroughly- ask the tough questions . Know the risks and rewards of each. I find investing in real estate to be much like doing a 1000 piece puzzle. What pieces makes the frame or outer border, what pieces makeup the middle etc. until you see the bigger or whole picture . Good luck!

@Tony Choe

I have a simple suggestion, and I personally think it would be a good investment considering the amount of money you have saved.

I would suggest that you get your real estate license. I'm pretty sure the cost is less than $5000 (I'm not sure on the cost, but it is under $1000 in my state). It will give you access to the MLS, and you would be able to work in the industry.

Hello and welcome to BP!  I agree that starting up a business will come close to that.  You just have to go over all the typical start up money it takes and continue to  save more for investing.  You could maybe start off with wholesaling which takes hardly any mine and it helps you by learning a bunch about real estate investing and all the types of real estate.

Real estate does have a cycle and now-a-days it is a seller's market in most of the country which mean the owners have most control and it is a tough time to buy real estate.  You will have to compete with cash offerers because of the full price and the closing time tend to be attractive for owners.

By the way, I am 60 years old and I tend to be opinionated.  The bulk of my experience is in the construction business and a little bit of experience in real estate.  I held a broker license for about 30 years but never did that full time.  I figure that it costs me about 30K over those years.  After I had a brain annuerism and a stroke and unknowingly let it expire, they told me I would have to start all over from the beginning.

I did not see a question in your letter.  College school renters is a good way to go sometimes but the number analysis should tell you that.    Do not "cloud" your estimate to make any project look better to attract others who invest in your deal.  Remember that real estate has cycles and those changes in value, possibly, of most properties.

Experience can make a difference in buying something like this because it might be a specialty to give you any return.  $5,000 cannot be used in most real estate purchases and creativity can make a big difference for the buyer. Good prereparation can make a big difference.  One way I could recommend having a partner that has money and complements you.

Partnerships and owner financing can both be a better way to go. Giving up, say, 50% versus zero is better than nothing. You could be the managing partner in a conventional general or limited partnership that has more than 2 partners. Of course, your smartness and experience can benefit you and create a way to pay/offer cash.

Good luck to you!

Hello again!  I am so sorry it has taken me so long to reply to you but they keep on changing this site and it is not very easy for an old man to use something that is new.  I want to thank you for my initial response.  If there is anything you think I can help you with, just let me know.

Best wishes!

Hi @Tony Choe

I just moved from the Bay Area myself and was there when I discovered Real Estate Investing was the way to go. Truthfully, purchasing any property in the Bay Area will be extremely out of your $5k budget. My suggestion would be to drive for Uber & Lyft while you finish up school and stash that money away for investing. 

While doing this, be sure to watch the BiggerPockets webinars, listen to the podcasts, and consistently read the books recommended in the podcast. As a beginner, I highly recommend BiggerPocket's Ultimate Beginner's Guide (https://www.biggerpockets.com/real-estate-investin...) and from there just take the book recommendations of the interviewees mention at the end of the show. Rich Dad Poor Dad, E-Myth, 4-Hour Workweek, Millionaire Real estate investor to name a few.

Once you've educated yourself and saved up some capital, then you can seek a low money down way to purchase your first property. You may need to head a couple hours away from your home base or invest/move to another area. 

Hope this helps.

Craig

Thanks @Craig Curelop ! I have been listening to almost about 30 podcasts by now in the past couple months or so and definitely learning more and more every time I listen. I definitely do hear those book recommendations a lot and will have to look into it and read it some time! thanks again.

@Tony Choe , I agree with an above response about wholesaling simply because as a personal trainer you have access to so many people that it can come up in every day training session conversation. Eventually you will come across someone who is looking to sell fast and that could be your opportunity to jump in and have some investors lined up. Or you may meet a contractor where you could volunteer some sweat equity into the project have have them fund the project.

It really could be anyone in REI where you can jump in, so just by thinking ahead as you are, can really prepare you for that moment. And in the mean time, keep building that $5K up.

Wow! All the negativity! I somewhat agree.... It is not as simple as "I have 5k, take my money and make me rich..." but once you learn, $5000 is enough to put you inside a property.. but you need to have back up money- for reserves - for your personal life etc. Good Luck!

@Tony Choe I want to challenge you to find a way to get started. There are places in CA that you can pick up between 60k-80k and if you put 3.5% down, you may be able to get in. We bought an 80k unit for 60k, spent less than $900 on getting it rented. It currently rents for $795. Stay focused and analyze transactions regularly.

@Robert Schumacher Thank you for your suggestion Robert, I will definitely do my due diligence looking into the nearby areas and seeing what would work and what wouldn't. I know there has to be a way, I just have to be smart about it and analyze everything and anticipate different outcomes and speed bumps it may throw at me. 

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