How to allocate my cash to get started
Hi all - looking to get started with long term rentals. I am thinking of starting with 1 single family home. I have about $150k cash to get started. Not sure if I should purchase a lower value home, finance a nicer home (given interest rates), or something else? What have others in a similar situation done to get started and so you have any tips or lessons learned? Thanks!
Quote from @Matthew Harding:
Hi all - looking to get started with long term rentals. I am thinking of starting with 1 single family home. I have about $150k cash to get started. Not sure if I should purchase a lower value home, finance a nicer home (given interest rates), or something else? What have others in a similar situation done to get started and so you have any tips or lessons learned? Thanks!
Welcome to the BiggerPockets forums!
Read a few books on real estate investing to learn the power of leverage. I like the Unofficial Guide to Real Estate Investing. Here's a very basic explanation to get your juices flowing:
Assume a house costs $200,000 and rents for $1,500. The market appreciates 3% per year.
Pay cash for one house and rent it for $1,500. After five years you'll have earned $90,000 in rent income and gained $34,000 in appreciation.
Buy four houses with $50,000 down on each. Mortgage payment is $1,000 on each house, so you're essentially earning $500 per house or $2,000 a month. After five years you'll have earned $120,000 in rent income and gained $136,000 in appreciation. You've earned $132,000 more by splitting your money and leveraging it.
- Rental Property Investor
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Quote from @Matthew Harding:
Hi all - looking to get started with long term rentals. I am thinking of starting with 1 single family home. I have about $150k cash to get started. Not sure if I should purchase a lower value home, finance a nicer home (given interest rates), or something else? What have others in a similar situation done to get started and so you have any tips or lessons learned? Thanks!
Househack small plex or Adu with 5% down OO mortgage if you are currently a renter.
After that it's a decision tree. Distressed house unbankable with significant discount if purchased quickly with cash? Use cash.
Vanilla on market with agent ok to close in 45+ days? Get a mortgage.
- Investor
- Austin, TX
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What are your goals? Do you want steady cash flow? Do you want to turn a profit and put the money in bigger and better deals? So many ways to leverage your money. I am personally buying as much as I can without using my own money
Good question. My main goal is to generate enough cash flow that I can save to fund the next one - timing will depend of course, and I could always cash out refinance when rates settle down. But would definitely like to buy and hold until I can save enough to add another rental.
Your idea is good however, buying for pure cash flow limits the future buying capacity!!
Targeting more equity is the faster way to boost your net worth than $1000 a month cash flow.
Instead of buying a cash-flowy house in the midwest with my $40,000 cash, I signed a construction contract in a good neighborhood, and after 18 months, that $40,000 turned into $110,000. Now you can buy more cash flowy assets!!
Quote from @Steve Vaughan:
Quote from @Matthew Harding:
Hi all - looking to get started with long term rentals. I am thinking of starting with 1 single family home. I have about $150k cash to get started. Not sure if I should purchase a lower value home, finance a nicer home (given interest rates), or something else? What have others in a similar situation done to get started and so you have any tips or lessons learned? Thanks!
Househack small plex or Adu with 5% down OO mortgage if you are currently a renter.
After that it's a decision tree. Distressed house unbankable with significant discount if purchased quickly with cash? Use cash.
Vanilla on market with agent ok to close in 45+ days? Get a mortgage.
What's an example of an ADU and how can you find out if it's possible to do?