Any advice would be great

15 Replies

Hi my name Branden. Im 25 lm going to be selling my first house soon and need advice on what to do with that income. I currently live in the bay area but Im from phoenix and have family and friends out there. My dad is my realtor so obviously I talk to him a lot aswell, I just want an investors opinion. Its looking like I might have around 50k when everything is done and over with. My thoughts were to look for something cheap in the phoenix area and just pay cash then slowly start building my empire. Anyway suggestions, things to look into, different cities to look at, Im open to everything.
Thanks for everyones thoughts and guidance.

@Branden Davis  ,

Had you considered using an FHA loan to buy a duplex or 4plex here in the Bay? That's what I did with my first 4plex here, but I only had $12K! Probably the best investment of my life! You can also buy a LOT of property (about 10x more) with that $50K at 30X leverage w/ FHA vs 3-4X w/ conventional/commercial. That's a whole different risk. But big reward!

You'll get tons of other advice on out of state and everything else, so just wanted to throw that out there as a Bay Area investor/resident who has done it myself.

Good luck whatever you choose ;)

I havent considered buying anything out here, I figured that the prices of houses out here are to crazy and that my money wouldnt go far at all out here. Like I said Im totally new to this outside of just getting my first house. If its possible I would absolutely buy a 4 plex out here

@Branden Davis  

What is you risk tolerance? Are you willing to leverage debt? Do you have a W2 income? Are you going to live in the house ?

We own 5 houses and have put a total of $75k into our class A properties worth over 960k in appreciating rent/market cities (mortgaged considerably less since teh properties were short sales and foreclosure). We were able to make 3 of the houses personal properties and than rent them out when we left. So 2, of the properties were 0 down VA loans and one was a 5% convention.

I totally agree with @J. Martin   Depending on if you income could support the debt, your down payment could buy 1 million dollars worth of debt with 5% down conventional. If the numbers worked you would be having your tenants be paying down a appreciating asset.

We are in this for the long haul. Our goal is not for the cash flow now, but for the cash flow later (15 years) so my husband can retire at age 44 from the Navy. We do not follow the rules on this website (1%, 2% or 50%) but buy higher quality of houses and keep tight control of our costs. We have done very well. I am creating a free ebook about our strategy and philosophy that will be on my website.

Best of Luck

Originally posted by @Branden Davis:

I havent considered buying anything out here, I figured that the prices of houses out here are to crazy and that my money wouldnt go far at all out here. Like I said Im totally new to this outside of just getting my first house. If its possible I would absolutely buy a 4 plex out here

Yes, prices are high. But rents are very high and increasing. I would not especially want to live down there, but I just bought and renovated a few units in a 4plex down on a pretty nice street in East Oakland. It now has just over $60K in rents/yr. Guess how much I spent on it?

Elizabeth Colegrove is right. You may be able to afford around $1MM with a decent job, on a 4plex. They use the other rents to qualify you (at least on FHA). I believe $1.2MM is the top for FHA in the Bay Area on a 4plex. I plan to do one next year (refinanced out of my prior FHA on 4plex) for another 4plex that better suits my needs and neighborhood choice now. A GREAT use of capital IMHO. But again, you have to assess those risks.

Elizabeth, will conventional lenders do 5% down on owner-occ 4plexes, in addition to SFH? I know FHA will, and uses 75% of in-place rents, or 75% of market rents if there are vacant units. So that goes a long way in qualifying. Just add that into your income when you're calculating your DTI.


How flexible are you on where you live? Are you willing to live in an apt in an area that you may not otherwise go rent, if not for making a great investment? If the answer is no, it may be very difficult or not right for you. If you're a bit flexible (you sign stating that you will live there for a year, and this program is intended for owner-occupants, not investors), it might be worth looking into. Peninsula is tough on price. But willing to drive from Gilroy? SF is tough, but willing to check out a nice street in mid-east Oakland? West Oakland? Richmond/San Pablo? Pittsburgh? Concord?

At least for this strategy, that should give you a place to start..

How about this building in Concord as an example? You might have to pay normal "rent" in addition to the tenants' rent to cover everything, but you'd be getting a lot of principal paydown over time, significantly increasing rents in the Bay, just below replacement cost (but including the lot). I would consider a property like this if I were in the market for that right now. It's actually shocking to me that the rents are only $1k/mo for a 2br out there in Concord. I'm charging $1,400/mo on newly rented 2br/1ba apartments in East Oakland!

J Martin,

I am assuming yes on the 5% conventional but honestly don't know. I am a big fan of the conventional because it is cheaper longer term since pmi can fall off. We plan on using that for a 4 plex in virginia beach if we ever go back.

thanks for the responses!! Definitely something I would think about. I work for delta at sfo full time. I would consider moving if the reality would be getting a 4 plex. I gross 3 to 4 with just the 40 hours. Is that enough be able to qualify? I bought this house in Phoenix when I lived there in 08 for 55000. I lived there and now I'm renting it out since moving to the bay. So I'm not very familiar with FHA.

The name of the game is leverage. Paying all cash for a rental that you plan on holding is a fool's game (unless you capture massive equity and don't plan on holding long term). You drop your only $50K (which is really peanuts, no insult intended) then what? Back to counting beans at work 8am on Monday morning!

Real estate is such an awesome vehicle because you can buy properties worth way more than the cash you have on hand. You use your money to leverage your way into more expensive assets, time increases the value of those assets (hopefully) and maybe you get some amortization on the debt, you collect rent and get tax deductions. Real estate is a great place to grow your money up, but you have to plant lots of seeds. Buying one house free and clear is going to take you much longer than using your funds to either flip more properties to build more capital and/or buying several properties with leverage.

Elizabeth Colegrove . Whether it be an FHA deal (>30X leverage), leveraging it into some flips, or some other strategy, I do NOT recommend buying something cash!

You're heard it right, Aaron:

If cash is king, then leverage is god!

Since you have your dad's help in this, it might actually be very beneficial if he can get a great cash deal for you on a rehab in his area, buy an all cash fixer, put the work into it and turn it into a great rental, rent it out, then cash-out refi after required time (not sure what financing delays are on cash purchases where you can use the new appraised price versus purchase price).  But if you do it right, you could possibly get all your cash, including the renovation costs back out, with the new mortgage more than covered by the rents received, then repeat the process.  You'll have access to good deals that conventional financing won't cover (some weird rules for habitability, like needs flooring, oven, etc., to close on conventional loan).  It gets very difficult, almost impossible, to cash-out refi property after 4 mortgages, at least with a low interest conventional loan, so I'd take advantage of it while I could.  If you're not strong on repairs and your dad doesn't have contacts for good contractors, it might not be such a good idea, but if you've already got real estate investor expertise in your dad, you're willing to work with him, and he has good contacts lined up, it could be a great start for you.  

@Branden Davis  

You should look into what your financing options are -- then pick a few markets to explore.

I have a great lender I use. Feel free to PM me if you would like her info.


@Branden Davis  Leverage is a major key to use in real estate investing for the long term. Instead of one property for $50K cash, why not buy 5 - 50K properties with 20% down? Now you control $250K in properties.That's what nice about real estate. You don't have to put in 100% into the deal like you do with the stock market. You can grow your wealth much faster using leverage.

Hope this helps your thoughts.

Happy investing!

The other factor I don't see mentioned here is taxes. If it is a personal home, then you are covered at the amount and won't pay any. If it was exclusively a rental and you have profits, uncle sam is about to take out a solid chunk unless you do a 1031. There is a whole forum just on that topic, so I won't belabor the point. Just figured it was important to note.

Branden, congrats on the sale! lot's of great advice for you to consider. My question is how active do you want to be? Ever consider Fix and Flips? 50K is definitly enough to get started and will generate large chucks of money faster than rentals. There are hundreds of ways to invest the money, all depends what fits your personal goals the best. 


It would be nice to be somewhat active. I enjoy real estate. I work 40+ a week.  I would do fix and flips , I'm imtimdated with that because I feel like I might get in way over my head

@Branden Davis ,

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