How much capital do I really need to get started

Question

Hi BP,

I have been lurking around the forums and blogs for sometime now, and feel I am ready to start my journey into real estate investment. I am in my young 20's, starting a full-time job next week that pays a 70k salary, and have a credit score of nearly 800. I have no prior experience in real estate investing, but have done a lot of research, and am determined to reach the personal real estate goals of having my first rental property by early 2015. I plan on buying and holding single family homes between $75,000 and $100,000 and renting them out.

I have 10k in the bank right now, and plan to have around 20k by the end of November. I want to get started as soon as possible. Now my question is, what is a ballpark estimate of the real amount of capital I need to have a stable start in buying and renting 75,000-100000$ SFH, if I plan on putting a 20/25% down-payment?

I have a friend with similar goals, that has capital in the bank as well. However, the only thing he offers is capital since he lacks any experience in real estate, contracting, etc. The only reasons I would bring him on are because we both work full time jobs, and our rental property is likely to be at least a few hours away from where we reside. That way we can split weekends and the amount of time we spent managing the property.

I want to get started ASAP, but if I don't have enough $$, should I just wait a few more months, or bring my friend in on the deal? Thanks alot BP. Once I figure this out, I can move onto the next step of my plan.

Richard Redding · Answer

I don't know your market so feel free to ignore me... but I will say it's not going to be fun managing a property that is a few hours away.

Would you be willing to buy a duplex or other multi-family unit and live in it? If so, with an FHA loan you only need 3.5% down . So instead of 25K down on a 100k property, you could put down half of that ,$12.5k, and get a $350k property with your tenants paying most of the mortgage.

Instead of having your friend as a partner, make him a tenant or a roommate.

As Scrooge McDuck on 'Ducktales' always says, "work smarter, not harder'.

Paul Z. · Answer

@Casey Cuppy great advice. I also have to side with Casey. However I would also say that there's nothing out there that says you can't get started with little to no money out of pocket. You just have to be creative, have a good plan, surround yourself around a like minded inner circle, and most importantly have a GREAT deal.

Casey Cuppy · Answer

Bring in a partner is always a very complex question. A lot of things come into play (trust, business savvy, capital, ownership, responsibility, etc.)

If he doesn't make you feel comfortable as a partner then go in on your own, remember even good friends don't always make good business partners.

Keep saving up your money and preparing yourself by reading, watching, and listening as much as you can about investing.

Bryan N. · Answer

Satisfaction, confidence, and independence is always best achieved without borrowing money from family. Continue to save and do it on your own. You will then understand that it can happen without help and you will have no strings attached to a family member for better or worse. Just my opinion.

Kenton C. · Answer

Thanks for all the great advice! I am currently living in NYC, and working here, so investing here is out of the question, and moving is out of the question. Areas of potential investment would be North Carolina, New Jersey, Pennsylvania

Maybe a better way to finance the deal is to just borrow some money from my parents, and pay them back when I can.

How much capital do I really need to get started

How much capital do I really need to get started

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