Just starting out..how to invest $50-$75K?
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Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
2yHey Khu, I live up in the Central Coast of CA but invest in Detroit. I have 12-doors there and am very active in the market outside my own stuff.
We're typically doing cash BRRRR's in the $75k-$95k range right now. That's buying something for $50k-$60k and putting another $20k-$30k into rehab. The properties are in solid C class areas that have potential to transition to B. So staying out of D class.
My point is, if you were looking to do something similar you have just enough to do something like that. A bit more and your options (in terms of deal flow) open up significantly.
All that said, if it makes sense for your goals you should absolutely stay local. But I know how hard that can be for us Californians :-)
Happy to help more or send some Detroit specific resources if you'd like.
20 Replies
- 2yJason WrayPro MemberBanker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
Khu,
You can easily get into more than just (1) Duplex 2 unit with $50K to $75K in cash reserves. My biggest piece of advice would be to focus out of the state of California. May states ca provide a good return/cash flow on a purchase price of $175K to $300K. Now those prices do not exist in Cali for the most part but in states like OR, AZ, IN, OH, FL, TN they do in many counties.
Most of my investors who live in CA buy in those states above just to avoid the taxes, HOA, and over priced homes. Buying out of state can seem a little out of your comfort zone at first until you see it can be managed. You also do have to always hire a management company there are other options. For the most part you can buy a home that needs a little TLC or a home that is run key.
I would rather buy a duplex for $200K with solid rents versus a $800-$900K duplex in CA. even with higher rents once you calculate in the taxes, insurance and PITI based on the price its little to No cash flow.
Hi Khu,
If you haven't already, I'd suggest attending REI meet ups and events. Even if they're SoCal local meet ups, there should definitely be some out of state investors or people similar to your situation. Maybe you'll pick up ideas along the way and have a clearer idea if you want to wholesale and/or flip.
As for self employment, there are other financing strategies as well! You can check out hard money lenders and private money where they focus more on the deal itself than your employment.- Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes2y
Hey Khu, I live up in the Central Coast of CA but invest in Detroit. I have 12-doors there and am very active in the market outside my own stuff.
We're typically doing cash BRRRR's in the $75k-$95k range right now. That's buying something for $50k-$60k and putting another $20k-$30k into rehab. The properties are in solid C class areas that have potential to transition to B. So staying out of D class.
My point is, if you were looking to do something similar you have just enough to do something like that. A bit more and your options (in terms of deal flow) open up significantly.
All that said, if it makes sense for your goals you should absolutely stay local. But I know how hard that can be for us Californians :-)
Happy to help more or send some Detroit specific resources if you'd like.
- 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
@Khu Far everyone wants to wholesale - until they find out how hard it actually is!
You typically fall into a deal or two at the start, but then you have to really go to work to keep it going.
Biggest mistake most investors make is assuming all properties perform the same, regardless of location, tenant pool, etc.
Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.
When investing in areas they don’t really know, investors should research the different property Class submarkets. If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.
Here’s our OPINION for the Metro Detroit market (always verify each area for yourself!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:
Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 yearsClass C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.
Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
What else can we assist you with?
Logical Property Management4.9459 Reviews - 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
@Khu Far I understand not wanting to invest OOS, it's a little nervous for anyone! But take a look just to the East over in AZ. I did and ended up moving completely out of Cali. From Riverside to Havasu or Kingman is only a 4 hr drive and houses will be (roughly) half what you'd pay in Cali. The appreciation nowadays is quickly approaching that in CA. Drive over and take a mini vacation, look at some houses....
Quote from @Khu Far:
I would like to start my REI and not sure how to move forward.
I vote no for single and multi units unless you're going to add nice ADU duplexes with the extra land, take advantage of the SB1033 ADU/condo and SB9 lot splits. Otherwise, you're better off investing in the S&P 500 like VOO and 401k matching. Here's why:
100k into the S&P 500 10 years ago would net you 370,000 today or 580k ~17 years ago.
https://www.officialdata.org/us/stocks/s-p-500/2013?amount=1...
You can also invest an additional 3k/month and have $1,000,000 in 10 years at the same rate.
https://www.calculator.net/investment-calculator.html?ctype=...
Meanwhile my 100k house I bought in cash 17 years ago sold for 325k but net only 237k after selling expenses, renovation and taxes. I don't think multis are any better, just multiplying the problems by 4.- Investor · FL · Member since 2024 · 7 posts · 2 votes2y
$50-$75k cash reverse seems to be tight for buying in CA (I might be wrong as I'm not living there). However, it is feasible to start your REI with that much money. If I were you, I would start buying an owner occupied home so you can down little, and rent out the ADU or rooms. If you have enough money to buy a duplex then go for it instead of buying a SFH and rent out rooms.
Then, I may try to get the contractor license and start doing some work to learn how to fix a house. This will allow you to earn some income while learning. Once you learned all the techniques, buy a fixer upper and start flipping.
Good luck
Quote from @K S.:
Quote from @Khu Far:
I would like to start my REI and not sure how to move forward.
I vote no for single and multi units unless you're going to add nice ADU duplexes with the extra land, take advantage of the SB1033 ADU/condo and SB9 lot splits. Otherwise, you're better off investing in the S&P 500 like VOO and 401k matching. Here's why:
100k into the S&P 500 10 years ago would net you 370,000 today or 580k ~17 years ago.
https://www.officialdata.org/us/stocks/s-p-500/2013?amount=1...
You can also invest an additional 3k/month and have $1,000,000 in 10 years at the same rate.
https://www.calculator.net/investment-calculator.html?ctype=...
Meanwhile my 100k house I bought in cash 17 years ago sold for 325k but net only 237k after selling expenses, renovation and taxes. I don't think multis are any better, just multiplying the problems by 4.>Meanwhile my 100k house I bought in cash 17 years ago sold for 325k but net only 237k after selling expenses, renovation and taxes.
You do not indicate if it was owner occupied but let’s do use same numbers but leveraged.
- 17 years ago non-fha and non-va was likely max 90% LTV. That $100k house was $10k plus closing. Let's use $3k closing so $13k. This would allow you to purchase 7 with money left over. 7 * $237k= $1.659m.
- same condition above today has max LTV of 95% allowing 15 purchases with the $100k. 15*$237k=$3.55m.
- non owner occupied SFR max LTV was 80%. With closing costs 4 properties. 4*$237k=$948k.A big advantage of RE investing is leverage. Other advantages include value add, tax benefits, capability to legally avoid paying taxes on extracted money, and ideally cash flow.
If you purchase a property with no loan such that you are not leveraging your money, you are missing out on a big advantage of investing in RE and you may be better off investing in stocks as it is much more passive.
Good luck
Quote from @Dan H.:
Quote from @K S.:
Quote from @Khu Far:
I would like to start my REI and not sure how to move forward.
I vote no for single and multi units unless you're going to add nice ADU duplexes with the extra land, take advantage of the SB1033 ADU/condo and SB9 lot splits. Otherwise, you're better off investing in the S&P 500 like VOO and 401k matching. Here's why:
100k into the S&P 500 10 years ago would net you 370,000 today or 580k ~17 years ago.
https://www.officialdata.org/us/stocks/s-p-500/2013?amount=1...
You can also invest an additional 3k/month and have $1,000,000 in 10 years at the same rate.
https://www.calculator.net/investment-calculator.html?ctype=...
Meanwhile my 100k house I bought in cash 17 years ago sold for 325k but net only 237k after selling expenses, renovation and taxes. I don't think multis are any better, just multiplying the problems by 4.>Meanwhile my 100k house I bought in cash 17 years ago sold for 325k but net only 237k after selling expenses, renovation and taxes.
You do not indicate if it was owner occupied but let’s do use same numbers but leveraged.
- 17 years ago non-fha and non-va was likely max 90% LTV. That $100k house was $10k plus closing. Let's use $3k closing so $13k. This would allow you to purchase 7 with money left over. 7 * $237k= $1.659m.
- same condition above today has max LTV of 95% allowing 15 purchases with the $100k. 15*$237k=$3.55m.
- non owner occupied SFR max LTV was 80%. With closing costs 4 properties. 4*$237k=$948k.A big advantage of RE investing is leverage. Other advantages include value add, tax benefits, capability to legally avoid paying taxes on extracted money, and ideally cash flow.
If you purchase a property with no loan such that you are not leveraging your money, you are missing out on a big advantage of investing in RE and you may be better off investing in stocks as it is much more passive.
Good luck
You made a few assumptions so here are a few more details for you to see. I find it interesting that nobody really crunches the actuall numbers in Real Estate which I think is part of the cognitive dissonence we practice in order to make our investments look a little better.
No 1031:
Purchase: 120k, Sold 330k = 210k in just equity
Gross Rent: 220k - 60k expenses - 15k taxes = 145k <-- actual rental income
$210k (equity) + 145k (rent) = 355k
i.e. 355k -30k(closing) -50k(taxes) -25k(renovation) -14,500(recapture) = $245k
=245k profit (including all rental income, tax deductions and appreciation.
So if you had a mortgage, you would subtract the 145k in rental income and add 30k in principal. So I think that's 130k total.
130k x 4 houses = 520k (less than 580k in the S&P 500). Or 740k with 1031 exchanges but not everyone wants to tie up their money again.
On top of that, you're negative because you only put down 5% and $900-1000 in rents back then wouldn't cover you. You needed ~25% down.
This guy only has 75k-100k and is looking to put it somewhere to grow. Not hustle as he sounds like a passive investor as his age would suggest that he doesn't want to be in debt for the next 15-30 years and risk quitting his day job that close before retirement.
You can always purchase land in California and build a small cabin to rent out. You would just need to come up with another 100k or so.
If you like truly passive real estate and don't mind risk, you can go half on a hard rock hotel property in San Diego. They sell for 250k and return 7.5%. Little upside in appreciation but you get the cash flow and the tax benefits.Quote from @K S.:
Quote from @Dan H.:
Quote from @K S.:
Quote from @Khu Far:
I would like to start my REI and not sure how to move forward.
I vote no for single and multi units unless you're going to add nice ADU duplexes with the extra land, take advantage of the SB1033 ADU/condo and SB9 lot splits. Otherwise, you're better off investing in the S&P 500 like VOO and 401k matching. Here's why:
100k into the S&P 500 10 years ago would net you 370,000 today or 580k ~17 years ago.
https://www.officialdata.org/us/stocks/s-p-500/2013?amount=1...
You can also invest an additional 3k/month and have $1,000,000 in 10 years at the same rate.
https://www.calculator.net/investment-calculator.html?ctype=...
Meanwhile my 100k house I bought in cash 17 years ago sold for 325k but net only 237k after selling expenses, renovation and taxes. I don't think multis are any better, just multiplying the problems by 4.>Meanwhile my 100k house I bought in cash 17 years ago sold for 325k but net only 237k after selling expenses, renovation and taxes.
You do not indicate if it was owner occupied but let’s do use same numbers but leveraged.
- 17 years ago non-fha and non-va was likely max 90% LTV. That $100k house was $10k plus closing. Let's use $3k closing so $13k. This would allow you to purchase 7 with money left over. 7 * $237k= $1.659m.
- same condition above today has max LTV of 95% allowing 15 purchases with the $100k. 15*$237k=$3.55m.
- non owner occupied SFR max LTV was 80%. With closing costs 4 properties. 4*$237k=$948k.A big advantage of RE investing is leverage. Other advantages include value add, tax benefits, capability to legally avoid paying taxes on extracted money, and ideally cash flow.
If you purchase a property with no loan such that you are not leveraging your money, you are missing out on a big advantage of investing in RE and you may be better off investing in stocks as it is much more passive.
Good luck
You made a few assumptions so here are a few more details for you to see. I find it interesting that nobody really crunches the actuall numbers in Real Estate which I think is part of the cognitive dissonence we practice in order to make our investments look a little better.
No 1031:
Purchase: 120k, Sold 330k = 210k in just equity
Gross Rent: 220k - 60k expenses - 15k taxes = 145k <-- actual rental income
$210k (equity) + 145k (rent) = 355k
i.e. 355k -30k(closing) -50k(taxes) -25k(renovation) -14,500(recapture) = $245k
=245k profit (including all rental income, tax deductions and appreciation.
So if you had a mortgage, you would subtract the 145k in rental income and add 30k in principal. So I think that's 130k total.
130k x 4 houses = 520k (less than 580k in the S&P 500). Or 740k with 1031 exchanges but not everyone wants to tie up their money again.
On top of that, you're negative because you only put down 5% and $900-1000 in rents back then wouldn't cover you. You needed ~25% down.
This guy only has 75k-100k and is looking to put it somewhere to grow. Not hustle as he sounds like a passive investor as his age would suggest that he doesn't want to be in debt for the next 15-30 years and risk quitting his day job that close before retirement.
You can always purchase land in California and build a small cabin to rent out. You would just need to come up with another 100k or so.
If you like truly passive real estate and don't mind risk, you can go half on a hard rock hotel property in San Diego. They sell for 250k and return 7.5%. Little upside in appreciation but you get the cash flow and the tax benefits.I will point one thing, 2024-17 equals 2007. That is as we were entering the Great Recession. The purchase you are using as an example was purchased in one of the worse years for purchasing RE ever.
Try using 2012 and the numbers would be very different. Of course using one of the best years for purchases is also misleading.
My own belief on RE is that we are in a more challenging period than 2012 to 2021 largely due to rate hikes. RE is unlikely to produce similar return to that great decade for RE investors. I also do not believe owning residential RE to be passive.
If OP seeks passive returns, he should not be choosing residential RE.
- Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 655 posts · 623 votes2y
Hmmm. This is a lot to contemplate. First, you have 50k to 75k and want to invest in Calif - that's going to be tough. Secondly, you'll be interested in wholesaling (which by the way is the hardest thing to do in real estate investing), and finally, you are open to flipping houses (which is the best way for a newbie to lose all of their money). Sorry to be so brutal and (actually honest). My advice is find an out of state market where you can by a duplex. The funds you have to be a down payment and some for rehab to rent the property. Use the DSCR loan program since you are self employed. And here's the kicker: "this is a get rich slow scheme". Don't think about making a quick buck. That's how you lose. Real estate is a long game. And will pay off - in time...
- 2yCaleb ReitsPro MemberInvestor · Grand Rapids, MI · Member since 2020 · 129 posts · 50 votes
Quote from @Tim Ryan:
Hmmm. This is a lot to contemplate. First, you have 50k to 75k and want to invest in Calif - that's going to be tough. Secondly, you'll be interested in wholesaling (which by the way is the hardest thing to do in real estate investing), and finally, you are open to flipping houses (which is the best way for a newbie to lose all of their money). Sorry to be so brutal and (actually honest). My advice is find an out of state market where you can by a duplex. The funds you have to be a down payment and some for rehab to rent the property. Use the DSCR loan program since you are self employed. And here's the kicker: "this is a get rich slow scheme". Don't think about making a quick buck. That's how you lose. Real estate is a long game. And will pay off - in time...
Absolutely, here's a draft response:I appreciate your insights, and there's definitely a lot to weigh here. I do believe, however, that wholesaling, when approached correctly, isn't the toughest part of real estate. It does come with its own set of challenges, of course, and I agree that the market in Calif can be highly competitive.
I see where you're coming from about wholesaling and flipping, especially for someone just starting out. The risks are real, and the need for caution can't be overstated. That said, I think with the right strategy and a bit of patience, there are ways to navigate even a tough market successfully.
Your suggestion about looking into duplexes in out-of-state markets is a solid one. Using the funds for a down payment and some rehab, followed by renting it out, seems like a prudent approach. The DSCR loan program does sound like a fitting option for someone self-employed.
I’m on board with the idea that real estate is more of a 'get rich slow' journey. Quick gains can be tempting, but they often come with higher risks. It’s the long-term commitment that tends to yield meaningful returns. Thanks for the honest advice! It’s a good reminder that real estate investing is indeed a long game, but one well worth playing.
- Specialist · NJ · Member since 2022 · 1k+ posts · 663 votes2y
Cali is a tough market and a ballers market, depending on where in the state but there's plenty of zones in Cali where a real estate deal will cost way more than 75k, I also here the permitting process is a pure headache out there. I spoke to investors in Cali that deal life cycles are commonly 9 - 12 month.
I have a few Cali people in my out of state investment group. Lots of people are shut-out of their home market for one reason or another. Sometimes it is capital constraints, sometimes it is the quality of the market.
- Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes2y
Quote from @Khu Far:
I would like to start my REI and not sure how to move forward. I have access to $50-$75K to start. I own my own home for the past 15 years. Have 780+ credit. I am self employed though so not consistent income. I'd like to get into a duplex or something, but don't want to live at the property. I'd like to invest in my own area (So Cal), but if not feasible I'm willing to find something out of state. Also I am open to either start doing wholesaling too if that gets my feet wet and start bring in some cash. My goal is to get good cash flow and possibly flip short term to cash out. I
I don't know much about your market, but from what I've heard, you likely won't be able to find a property for $ 50K-$75 K (I could be wrong). I would consider OOS investing.
- Lender · Redlands, CA · Member since 2017 · 30 posts · 16 votes2y
Welcome to biggerpockets khu! Have you ever looked in the Inland Empire area? There is great opportunity here, especially in terms of small multifamily properties. Please feel free to connect with me if you have any questions or would like to learn more about the IE!
- 2yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
When embarking on a real estate investment journey, it is important to establish both short-term and long-term goals, conduct thorough research on local markets, explore various investment opportunities, and take into account the possibility of investing out of state. A good starting point could be purchasing a duplex or a small multi-unit property to generate rental income either by living in one unit or by hiring a property manager. If investing in Southern California proves to be challenging due to high costs, it may be worth considering other markets outside the state that offer lower entry barriers, high rental demand, and favorable regulations for investors. It is essential to educate yourself on different real estate investing strategies, financing options, property management techniques, and the dynamics of the local market.
Create a group of experts in real estate, such as agents, lenders, contractors, property managers, and attorneys, to simplify the process of investing. Begin with smaller projects or wholesaling to acquire knowledge and boost your self-assurance. Establish a strong financial strategy that includes budgeting, various financing possibilities, risk assessment, and backup plans. Think about collaborating with a financial consultant or a real estate guide. Keep in mind that real estate investment demands patience, thorough research, and ongoing education.
Good luck!
NETWORTH BUILDERS5237 Reviews - Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes2y
Quote from @Khu Far:
I would like to start my REI and not sure how to move forward. I have access to $50-$75K to start. I own my own home for the past 15 years. Have 780+ credit. I am self employed though so not consistent income. I'd like to get into a duplex or something, but don't want to live at the property. I'd like to invest in my own area (So Cal), but if not feasible I'm willing to find something out of state. Also I am open to either start doing wholesaling too if that gets my feet wet and start bring in some cash. My goal is to get good cash flow and possibly flip short term to cash out. I
Hi Khu, if you wouldn't mind moving, I would suggest doing a house hack. If you'd like to stay put, I would look into a DSCR loan and potentially invest out of state. Ohio has some great options.
- 2yJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
Quote from @Khu Far:
I would like to start my REI and not sure how to move forward. I have access to $50-$75K to start. I own my own home for the past 15 years. Have 780+ credit. I am self employed though so not consistent income. I'd like to get into a duplex or something, but don't want to live at the property. I'd like to invest in my own area (So Cal), but if not feasible I'm willing to find something out of state. Also I am open to either start doing wholesaling too if that gets my feet wet and start bring in some cash. My goal is to get good cash flow and possibly flip short term to cash out. I
Hey Khu, I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!
Jimmy Lieu, Red 1 Realty4.9124 Reviews - 2yAlfath AhmedBusiness MemberReal Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
Quote from @Khu Far:
I would like to start my REI and not sure how to move forward. I have access to $50-$75K to start. I own my own home for the past 15 years. Have 780+ credit. I am self employed though so not consistent income. I'd like to get into a duplex or something, but don't want to live at the property. I'd like to invest in my own area (So Cal), but if not feasible I'm willing to find something out of state. Also I am open to either start doing wholesaling too if that gets my feet wet and start bring in some cash. My goal is to get good cash flow and possibly flip short term to cash out. I
Hey Khu! I recommend looking into the Columbus market. A lot of out-of-state investors from the east and west coast are investing here due to the crazy growth over the last 3-5 years. Columbus has become a major tech hub in the Midwest with large companies like Intel investing $20 billion, Amazon investing $3.5 billion, Google building 2 new data centers: one in downtown Columbus and the other in right outside of U.S. 33 in Lancaster.
I would work with an investor-friendly agent who focuses on cold-outreach methods like cold-calling, cold-texting, etc to bring you off-market deals. That is where you will be able to buy deals that are 70 to 80 cents on the dollar.
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