I have 5 grand saved, what should I do with it?

Question

I am a 24 year old with an associates degree in accounting in Washington State. I'm currently working on my bachelors degree in Business Administration. I just got a job at a bank and have saved up 5 grand the past three months. I have no investing experience but from an article I read here and from recently reading Rich Dad Poor Dad i have concluded that real estate and stocks is the way to go to acquire money producing assets. Can someone give me advice or point me in the right direction what a good move would be for me to invest my $5,000 or is it even enough? I'm currently living in my parents house. And if all you are going to say is do research and read books, can you tell me which books would help me on deciding on what my first real estate investment would be, and how much I need to save up? Thank you I appreciate any and all help.

Michele Fischer · Answer

We started with about $30K and strong credit.  $5K is about what you need for a safety net to weather a bad period, so don't stretch yourself too thin.  You could keep saving, look for owner financing with very little down, or look for a partner on  deal where you put in sweat equity.  Both of those options are easier once you have a reputation, so get involved.  The book recommendations at the end of hte podcasts are great, as is immersing yourself in your desired market.

Zach Schwarzmiller · Answer

Welcome Cory!

I purchased my first deal via 3.5% down FHA owner-occupancy. You can purchase 2-4 unit buildings with very little down if you intend to owner-occupy which is a pretty sweet deal. I’ve learned a lot through the experience: management, remodel, etc. It seems like on the MLS I see deals every now and then that advertise less than 3.5% down – they appear to be homepath deals or something like this, honestly I have never looked into them. I’ve seen duplexes lower than $200,000 that are “homepath” – might be best to seek out a local agent who is familiar with this stuff.

The only issues with these deals is regulations (which are good and bad), you will need the money, cash reserve of some sort as well as tax returns, etc. to qualify.

I purchased the home next to me on an owner contract for a very good deal as it wasn’t for sale and controlled by a family trust that just needed some creative problem solving to get rid of it. That’s always an option as well.

As others have stated the first step is just educating yourself and saving some money.

We have a REI meetup which you may find of interest:

http://www.meetup.com/SnoCo-Connected-Real-Estate-Investors/

Kyle Hipp · Answer

if I were in your shoes I would continue to agressively save as you are. Spend time on this site if you are interested in real estate and go to the book store and just look around for something that peaks your interest. You need to find a passion to make it long term.

As far as your $5,000, that might not get you too far but it is a fantastic start in a short period of time. I would consider looking for a duplex to purchase where you could live in one half and rent out the other. This is an easy way to get your feet wet and get out of your folks house if you desire that as well. I would also recommend going to open houses in the area when you get a chance just so you can see a lot of properties and get a feel for price ranges and features.

Jerry W. · Answer

@Cory Mackay Welcome to BP.  My cents is to say keep saving, but start investigating your market now.  There is a curve of learning you go through by reading, looking at MLS listings, calculating ARVs.  learning the bad spots or neighborhoods, learning the good or hot spots.  Finding out how fast houses sell at certain prices in certain neighborhoods, etc.

If you start doing your due diligence now, when you have a little more saved up you will understand your market a lot better.  I would try to get about an extra 6 months bank payments on the property saved up and maybe a little for the rainy problems.  Good luck

Joel Owens · Answer

Might try to wholesale to build that amount faster.