150,000 to start investing and don’t know where to begin!
Member since 2024 · 1 post · 1 vote
150,000 to start investing and don’t know where to begin!
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Jason WrayPro Member
Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votesDesstani,
Having access to $150K is a large chunk of equity and it can be spread over 2-3 properties. Most people do not realize you only need to put 5% down on a New primary home and still get a good rate. An investment property only requires 15% down even up to 4 units and only 10% down for a Second/Vacation home.
When you talk to the Bank for example we run the numbers to ensure you have enough money to cover downpayments, closing costs, renovation/repair money etc. You only need to put a small game plan together to start running the numbers base don zipcode, property type, sale prices, common rents/cash flow.
You would be surprised how far $150K can get you to cover a New primary home and 1-2 rental properties back to back. If you sold your home its not a bad idea to do a little BRRR move into the duplex to be able to put less down and move out in 6-12 months to transition it into a full rental. I see it every day so its fairly common to me the process in general so if you ever have any questions feel free to reach out or send me an email. I enjoy helping and talking REI to help other members avoid mistakes.
13 Replies
- 2yJason WrayPro MemberBanker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
Desstani,
Having access to $150K is a large chunk of equity and it can be spread over 2-3 properties. Most people do not realize you only need to put 5% down on a New primary home and still get a good rate. An investment property only requires 15% down even up to 4 units and only 10% down for a Second/Vacation home.
When you talk to the Bank for example we run the numbers to ensure you have enough money to cover downpayments, closing costs, renovation/repair money etc. You only need to put a small game plan together to start running the numbers base don zipcode, property type, sale prices, common rents/cash flow.
You would be surprised how far $150K can get you to cover a New primary home and 1-2 rental properties back to back. If you sold your home its not a bad idea to do a little BRRR move into the duplex to be able to put less down and move out in 6-12 months to transition it into a full rental. I see it every day so its fairly common to me the process in general so if you ever have any questions feel free to reach out or send me an email. I enjoy helping and talking REI to help other members avoid mistakes.
- Member since 2024 · 94 posts · 43 votes2y
Hey there! First off, congrats on selling your first house and having $150k to invest—that’s a huge milestone! It’s completely normal to feel a bit of analysis paralysis, especially when you’re in a position to make a move.
The choice between a short-term rental (like Airbnb), long-term rentals, or a duplex comes down to your personal preferences and lifestyle. Short-term rentals often bring in higher income but can require more hands-on management (or a property manager). If you're living on the road, this could be a bit challenging unless you're comfortable working with a reliable property management team.
On the flip side, long-term rentals (whether it’s one or two properties) typically offer steadier, more passive income but might not generate as much monthly cash flow. A duplex is a great way to get your feet wet in multifamily investing, giving you two rental incomes under one roof, which can be a great balance between cash flow and passive income.
I’d also suggest looking at markets that offer solid rental returns. Indianapolis, where I work, has a strong build-to-rent duplex market that’s perfect for investors looking for a mix of solid cash flow and appreciation. I’d be happy to walk you through how investors like you are getting started here!
Feel free to reach out if you'd like to chat more about strategy and next steps!
Best,
Ryan Cheek
- 2yEric DeNardoPro MemberReal Estate Agent · Denver · Member since 2020 · 366 posts · 151 votes
Hey Desstani,
Are you looking to move into a home for yourself? If so, I think buying a single family home and renting out a portion of it to airbnb or a long term renter. If you travel often, you could also rent out your whole home when you leave. This is the simplest way to invest!
- Rental Property Investor · Orlando, FL · Member since 2024 · 9 posts · 4 votes2y
Hi Desstani,
We recently found ourselves in a similar position. We sold our TX home and relocated to Orlando so my son could attend school and save money by living at home. This was an opportune time to start our REI venture. We knew we wanted to invest the money from the house sale.
We decided to rent first to become familiar with the area before buying. Our initial goal was to buy a duplex and house-hack it. However, that would mean a long commute for my son. Our other option was to purchase a multi or SF to rent. To avoid falling into analysis paralysis, we started touring homes, meeting realtors, and running numbers. Talk to the realtor and see if they invest themselves or have done deals with investors. Does the realtor have a good team behind them (lender, home inspector, contractors)? After living here for 2 months, we are under contract! Our realtor showed us a house that should make a good STR investment. I am excited and nervous at the same time. We are still in the beginning stage so I have lots of questions and am here seeking the advice of seasoned investors.
Being a newbie, I can't offer much insight. The only two things I can suggest are:
1. Don't get emotionally attached to a property you tour. STRs are cute and fun. I had to stop envisioning personal family events at the property. I had to remind myself this is a business purchase only. I will get the luxurious dream vacation home down the line.
2. The numbers don't lie. Make sure the numbers make sense.
This is an exciting time. Best of luck!
Angela
- 2yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
Recommend you first figure out the property Class you want to invest in.
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.
So, when investing in areas they don’t really know, investors should research the different property Class submarkets.
Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) 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+ (roughly 5% probability of default), 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 (around 10% probability of default), 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 (approaching 22% probability of default), 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 little, maybe even 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 (almost 30% probability of default), 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.
PM us if you’d like to discuss this logical approach in greater detail!
Logical Property Management4.9462 Reviews - 2yJonathan GreeneBusiness MemberReal Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
You don't have analysis paralysis. You are way too new for that. Don't rush to invest that money into real estate because your post makes it clear you are looking for something easy that will make money while you travel and nothing that you mentioned is that. Money in the bank is not smart. Money in index funds is smart while you figure out what you want out of real estate. You sound like someone could pitch you on almost anything right now and if the number seemed good, you would dump your appreciation cash in the bucket. Don't. Learn more.
- Property Manager · Orlando, FL · Member since 2016 · 479 posts · 277 votes2y
@Desstani R. I agree with @Jonathan Greene it sounds like you're a little early for analysis paralysis. That comes when you've started looking at properties you could actually buy and you start over analyzing because you're afraid to pull the trigger.
I experienced this in a different fashion when we bought a property and we were gutting our first kitchen and I didn't want to pull the trigger because I was a little afraid of just ripping everything out and what would actually happen. Luckily my partner pushed me and we did it and everything was fine, but thats more of an example of paralysis.
The only other thing I caution about is debt. A lot of investors want to buy as many properties as they can and utilize as much debt as they can. Debt is a great tool, but you have to be very careful with it. Too much of a good thing can be bad. Over leveraging a deal is the fastest way to losing your investment and losing the property. If you overpay for a property but put no debt on it you will probably still cash flow some money, even if it's less than you thought. If you put a ton of debt on that same property you might break even or actually start losing money every month.
Make sure you really understand what your expenses could be, and what they could be in worse case scenario. Make sure to inspect all the major systems thoroughly (HVAC, plumbing, foundations, roof, electrical) and make sure you know what they look like today. I recommend spending a little extra money and pay to have trade specific people inspect the property too, not just an inspector. Pay to run a camera in the sewer lines during your inspection because a few hundred bucks lost is better than $5-10k lost.
Also, keep some money in cash reserves. Don't put all $150k in down payments and renovations. Maybe put some of that into a money market account or the stock market, so if an HVAC does go out in 2 months you can pull out $4-8k to replace it (depending on size, location, etc).
Real Estate is get rich slowly, $150k to invest is an amazing place to be and a great achievement, but it's also not going to produce a life changing amount of cash flow every year. Even 10% is $15k and with how much stuff costs today, $15k doesn't get you too far.
Figure out where you want to invest and what type of strategy you want to invest in first, and have a reason for it. Then start finding properties and I would encourage you to lean towards finding less riskier versions of that strategy at first and get your feet wet, and after you gain some experience you can start evaluating different options and offshoots.
- Real Estate Agent · Emerald Coast, FL · Member since 2016 · 820 posts · 487 votes2y
Personally, if I were younger and not tied to anything (kids/schools/jobs), I would house hack over and over and over. I would buy duplexes, tris, and quads, live in one, rent out the others, move in two years, and do it again. You can put 5% down on multifamily if you house hack. DO IT!
- 2yRene HosmanPro MemberRental Property Investor · Denver, CO · Member since 2024 · 583 posts · 655 votes
Quote from @Desstani R.:
We just sold our first house and made 150,000 we now live traveling on the road but want to invest that ASAP so it’s not just sitting in the bank Into real estate but don’t know where to start. Should we buy one nicer single family home and short term rent like airbnb? 2 not so nice single family homes and long term rent get a duplex? We listen to the podcast and have started reading the books but the analysis paralysis is real especially having the money to actually do something and never having this much in our bank before at once!
I am reading Start with Strategy by Dave Meyer right now and I could not recommend it more! It sounds like you're doing a good job of educating yourself which is great, but you can educate yourself as much as you want, however without a direction or destination in mind you'll never have enough information to make a decision.
The book comes with worksheets and concrete strategies, and if you're on the road is available as an audio book too. I think it could give you a better sense of what aligns with your strategy.Congrats on your house sale and pocketing that kind of cash! You're in a great place to start no matter what direction you decide to go
- 2yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
Investing in single family homes for short-term rentals can generate higher cash flow and flexibility, but can be management-intensive. Owning two less expensive homes for long-term rentals offers diversification and stable cash flow, but may also generate lower monthly cash flow and property quality issues. Buying a duplex or multi-family property offers house hacking potential but may require more stringent financing or higher down payments.
Good luck!
NETWORTH BUILDERS5236 Reviews - 2yJim PfeiferBusiness MemberInvestor · Dublin, OH · Member since 2014 · 241 posts · 495 votes
I think the first question you need to answer for yourself is - do you want to be an active real estate investor or passive? An active real estate investor will buy a property and rent it out (long term or short term) or flip it. This takes a lot of time, expertise and knowledge. A lot of people do it, enjoy it and make a lot of money - it's a great option! This is how I started out - it was not passive, even though I hired contractors to do the work and property managers to manage the tenants. It was, at the very least, a part time and active job. I was not very good at managing the assets.
When I discovered passive investing in real estate syndications everything changed for me. With this approach, you can truly be passive - effectively hiring an asset manager to deal with finding a quality property, hiring contractors to do the work and hiring property managers to handle the tenants. These asset managers operate the entire property on behalf of the investors. You get similar returns as active investing, the same great tax benefits and none of the hassle. There are clearly downsides - the investments are even less liquid than active real estate, they are completely out of your control and they are long term in nature. Although the investment is passive, the finding of a quality operator and good deals is not - that is very active. The nice thing is you can do all of that from the comfort of your mobile home, Airbnb or however you are traveling!
I made the switch from active to passive because it fits my skillset and my lifestyle. I don't have a W2 - I am a full time passive investor in real estate. And now, there is plenty of help as BiggerPockets is launching a Community focused on passive investing called PassivePockets. It is critical to educate yourself on this type of investing and joining a Community of like-minded investors is a great way to find and vet operators together, analyze deals and work together to become better investors.
Good luck!
- Real Estate Agent · Kansas City · Member since 2018 · 5k+ posts · 3k+ votes2y
Happy to chat. Overland Park is a great area for STR along with some other suburbs in Johnson County. For LTR they are expensive so it's more of a appreciation play. Happy to chat on the different parts of KC
- Investor · Dallas, TX · Member since 2020 · 104 posts · 43 votes2y
Congratulations on your sale! You have some great options. Short-term rentals like Airbnb can be a great choice, but they require a lot more management. Long-term rentals offer steadier income with less day-to-day involvement. Since you’re new to this and wanting to travel, I’d suggest looking into passive investment funds. You’ll get the returns without the management needs. I’ve been in the industry for a while, so if you need advice, I’d be happy to help!
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