Middle age man Starting Out?

29 Replies

It depends on several things. Your market, risk, cash flow goals, etc. I can probably buy at least two decent rentals in my area with $100K. With no mortgage, they will cash flow very well and produce $1600 gross per month. What is harder to find, but a faster way to build wealth, is to find a portfolio of existing rentals for sale. You will need 25% down, so you would be looking for a $400,000 deal of 6-8 houses in the portfolio. This increases your risk because of the debt, but also increases your holdings very quickly. I've done it both ways and either way works.

Thank you very much Anthony,

Questions: 

1. As a conservative person. I'm not sure if throwing my entire savings. Wouldn't mind putting $50k in on a $200k portfolio. Where would you stand on that?

2. I'm in NYC where the prices for homes are insane. My goal is to invest out of state. I've been looking at Memphis, Alabama, Illinois, and Maryland. Where would you recommend for a first time investor?

3. I know you mentioned buying a portfolio is hard. However, where would I find portfolio of that sort?

I really appreciate your response

Well, if 40 is middle-aged, then I'm extinct. But ... I do wish you the best of success and as a newbie myself, I'll just follow this threat to learn as you're doing. In the market I'm concentrating on to get started out, $100,000 would buy a house, fix it, and sell or refinance it (BRRRR), but that would be one deal at a time, and completely as a cash buyer.

1. That what savings are for. Besides an emergency fund, savings are actually losing money sitting in the bank. You should probably go get another $100K before investing.

2. I would recommend a market that you know very well. The numbers in Memphis are off the charts, but it's a rough town and you need to know how local people feel about the area you are buying. Find a neighborhood or zip code, learn it well, then buy. Property management and repairs will be the biggest challenge with being out of state, which is why I don't do it. Nobody will look after your stuff as well as you. You should consider moving. Whatever you do in NYC for work, is also done in other states.

3. You may find one listed online, perhaps on FB marketplace or wholesalers. You will likely need to market to landlords who want to retire. Running ads on FB, craigslist, etc. Property managers can point you to these landlords. Also, probate attorneys.

Hi Austin,

Nice that you're getting into the game. I've faced a similar dilemma over the last couple years of whether to save up and pay cash or mortgage up. My cash reserves at the time were in the same ballpark as what you have now.

I ultimately decided to mortgage up. I looked at a couple different markets here in Texas, and time and time again found that the properties I could afford with cash were often in skeevey parts of town or were something well outside what a standard family would look for. Mortgaging opened up options for me in desirable neighborhoods, towns and suburbs. In addition, I now still have a good sum of cash left over for capital improvements and, ultimately, a second property should I choose to do so.

That's been my experience. 

Hey @Austin Charlton , congrats on getting to where you're at and deciding to make the jump.  

Have you looked at Kansas City?  It really checks all the boxes for an out of state investment; stable economy, good blue collar tenants, great cash flow and appreciation... 

For $50k or so you would have the down payment available for probably 2 good properties. I sell my rentals for around $130-$160k with roughly 15-17% ROI the first year. I'd be happy to walk you through one of mine or just do your own research in the area and see what you think.

Best of luck!

Austin,

IMO, you don't need to save another $100k. If you want to finance your properties and put down 25%, you could get 3 to 4 properties, depending upon their price. However, I strongly recommend you don't drain your savings! Having an emergency fund is critical. You can get sfr's in certain cities in Illinois and also Indiana, for somewhere between $75k and $100k and rents between $900 and $1300 per property. So the profit margin is substantial and they are NOT in bad neighborhoods. Those purchase prices include the rehab costs. So that equates to a down payment $40k or less. You could also get a duplex anywhere from $100k to $160k and rents between $1400 and $1600. That's approximately $45k down. The key is to find the "correct" properties or have someone assist you with that. I hope this helps. 

Originally posted by @Anthony Dooley :

 You should probably go get another $100K before investing.

I disagree. $100k is not that easy to just 'go get'. For some people that may be impossible to do in any reasonable period of time.

Just go for it Austin. You will make more $$ as a result of your RE investment. Don't wait.

Hi Austin,

There is no black and white in entrepreneurship. You can make the best decision with your known information and that's it. In your case, I recommend you get real clear about what lifestyle you want to create. Then determine the market and the strategy that supports that vision. Analysis of the available options and estimating what your return would be in a best case, a worst case and a most likely case. 

Originally posted by @Bruce Woodruff :
Originally posted by @Anthony Dooley:

 You should probably go get another $100K before investing.

I disagree. $100k is not that easy to just 'go get'. For some people that may be impossible to do in any reasonable period of time.

Just go for it Austin. You will make more $$ as a result of your RE investment. Don't wait.

He already got $100k from somewhere. He should be able to get another $100k.  I wasn't talking to everybody. 

@Austin Charlton

First identify what strategy you’d like to pursue, flip, brrr, buy and hold….

Figure out the time costs associated with each and the monetary costs

Then repost what market you’re in, and what strategy you’re aiming at for the best answers here

My $0.02

@Austin Charlton With interest rates as low as they are I would definitely consider getting a loan on at least 1 property. While inflation continues to rise you'll have the loan locked in and a resident paying off the note for you while the value of the house continues to rise (if you're in a solid area). 

I don't have any experience in Maryland or Illinois but we have had great success in Memphis and Alabama. Best of luck! 

Borrow as much as you can! You wont be the one paying back the notes so try to stretch your 100k as far as possible! It's more profitable to own 3 mortgaged duplex's than 1 duplex owned out right. Your equity will build up 3 times faster and you will end up cash flowing more as well. The more assets you can buy the better. You could also focus on the BRRR, build in your own equity, rent, and refi. You should be able to pull out the down payment so you can rinse and repeat the process.

Spend a few months building a mastermind of other investors local to you.  Know your market and the people.  Once you some solid players around you,  you will have a better idea on what to do.

Originally posted by @Matthew Crivelli :

Borrow as much as you can! You wont be the one paying back the notes so try to stretch your 100k as far as possible! It's more profitable to own 3 mortgaged duplex's than 1 duplex owned out right. Your equity will build up 3 times faster and you will end up cash flowing more as well.

Yes ^^^.....also if you buy now while rates are still low and pay off with inflated money (inflation is rising quickly) you will be ahead of the game....

@Austin Charlton Welcome to BP and REI! My first question for you is why are you investing and what is your end goal... Once we know that you will get some much more targeted ideas. with the amount of savings you have you should be able to purchase at lease one rental. It depends totally on the market you want to buy in. I am not a big fan of out of state in vesting unless you have family or someone really trustworthy to manage it or manage the PM. Have you looked at alternative ideas like an index fund or even possibly syndications? You might research those alternatives also.

As an Investor-Agent myself, I have had several conversations on this topic with my clients and customers. Everyone has different goals and investment criteria, so this is not a one size fit all kind of situation.

I will suggest that you clearly define what you want, as there are many exit strategies, and do some research.

A local Investor-Agent can help shorten your learning curve and save you a lot of headaches as they tend to understand the market better.

I will say to decrease your risk, and I am glad you’re looking out of state.

Good Luck.

@Austin Charlton I would take advantage of leverage, how much cash flow will you get on a 100k house? Even if you made 10% return which is 900 a month in cashflow after every other expense which is unrealistic you are only getting a few percent better than the average return in the S&P the magic of RE is in leverage.

@Austin Charlton I started older than you with slightly less money. I would put as little down as possible to get the best rate on a 30 year mortgage. You can get around 3.5% with 25% down. Interest rates will go up at some point and you will be locked in for 30 years. Do this once and each one will get easier and be far less mysterious. Whatever city you decide on, you could consider buying the best school district. Those maintain demand, but they usually cost a bit more than the other neighborhoods. With that said, there's usually less investors in that area which means less rentals which means more demand. My pockets still need to be enlarged, but so far this has worked well for me.  

@Austin Charlton

First, congrats. You are in a fabulous financial position that many of us on here would have killed for as a starting point. You worked hard, now you get to jump in the game with a strong starting position.

Don't think of it as having only $100k to spend. Think of it as having $400-$500k of buying power (with your credit score using conventional financing). In the right market that could be anywhere between 2 or 3 decent properties (once you factor in closing costs).

I'd strongly reccomend surfing these boards first for a while and learning about the type of deals that others are doing. Opportunities in real estate vary by market and economic cycles...you need to find what appeals to you weighing your level of risk tolerance vs desired yield. Don't put any pressure on yourself to invent anything new and spend your time building a network of people who can hekp you fogure it out. The best part of real estate is that there is plenty of room to learn from and imitate the success path of others.

Wish you much success.

Originally posted by @Austin Charlton :

Thank you very much Anthony,

Questions: 

1. As a conservative person. I'm not sure if throwing my entire savings. Wouldn't mind putting $50k in on a $200k portfolio. Where would you stand on that?

2. I'm in NYC where the prices for homes are insane. My goal is to invest out of state. I've been looking at Memphis, Alabama, Illinois, and Maryland. Where would you recommend for a first time investor?

3. I know you mentioned buying a portfolio is hard. However, where would I find portfolio of that sort?

I really appreciate your response

 For a person just starting with real estate investing, the last thing you want to do is invest out-of-state. Prices are cheaper in other states, but there is a reason the prices are cheaper e.g. the rents are lower. When you own properties out-of-state there are several inherent risks and costs you cannot avoid e.g. you need to pay a property management company 10+% and no property management company will manage your properties as well as a hands-on owner.

Keep your rentals close to you and look for no less than a 4-plex because when you increase the rents for a 4-plex you automatically increase the value of the property. You barely keep up with paying your bills and inflation when collecting rents. The big money is earned from inflation and you cannot increase the value of single-family homes by increasing the rents.

I know very little about financing because I always went with conventional loans, but I have many friends who purchased properties with financing and just about zero money down. Maybe, you need to wait until you have more cash, or watch Pace Mobry's videos about getting seller financing.