What if...you were 30 years old with $75K cash...

17 Replies

What would be your first investment?

Would you buy and hold a solid 1-4 multi unit?

Try a fix and flip?

Or other?

I'm trying to plan for my first investment. My long term goals are monthly income producing properties so obviously buy and hold make sense. My larger concern is one I spend my $75K it could take me years to buy my next one. Currently I could save as much as $20-K a year; If things go well, maybe even $30K from earned income, but even at that rate it could take me years to save that kind of dough again.


Perhaps there is a hybrid strategy of buy + hold plus fix and flip to help generate more to buy more properties for buy and hold.


Thoughts?

thanks James. I think that is what I will do, but it requires so much capital to buy I'm thinking of ways to earn extra money to invest even more. 

Looking back , If I were 30 years old with 75K , I would spend some time  in Vegas , have a bad A$$ car , and drink alot  on weekends .   Come to think of it , thats what I did , then I got married ,  but I still have the corvette .

@Travis H.  best of luck!! I'm in a similar position myself and will be following this thread closely. 

I'm struggling with the trade offs between extremely liquid investments vs throwing money into a rental.

Were you wanting to buy your first with all cash or maybe consider putting $15k down on 4 houses priced around $80k each? (And keep $15k liquid for when something goes wrong, because it will.) Do you have any other liquid money for personal emergencies or does this $75k represent all your savings?

Eric,

That's a great question. $75k would be all my savings so I could not spend the full $75. I would have to save some of that for emergency expenses, reserves, etc.

My original thought was to reserve $50k for 1 nice class b/c property at 200k (assuming all the metrics were sound.)

Are there advantages to buying two less expensive properties versus 1 more expensive?

My intuition tellse that it probably just depends on the numbers and what those alternative invesents look like.

@Travis H. Yes that process would take some time to gain traction, but eventually your properties will starting generating enough income on their own that you'll be able to buy more from your NOI and not have to save up your own cash. It requires more patience that way, but the reward is great.

I would take the time to find the right property with some equity in it and get to know a banker very well and tell him your intentions.  Hopefully you can buy a property with $20k in equity or more and pull out a heloc against the property to buy another and do it over and over.  Its all about building a relationship with the banker and being honest with him about your intentions.  

Casey, that's a good suggestion. Speaking with a banker is probably a great first step. I'm sure they have a lot of advice to offer. My real interest is buying income producing properties for the long term.  My only real interest in  flipping is to generate more income to  buy more properties, but maybe that's not an effective strategy based  on my position, the market, etc 

@Travis H.  

I was in your shoes 1 year ago. I started looked at duplexes and bought one for 190k this past april. I'm netting 1k a month after all expenses. Good luck and have patience. I lost 6 deals before this went through.

I would probably invest with others on bigger projects or work with someone using it as hard money. I know a lot of investors with a lot less money that invest with me. I have been taking in investors on my flips lately. A friend just invested $20k with me at 10% for a 3 month flip. That's a 40% APR on their money. I'm happy to pay it because I can do bigger deals and get them done quick and they are making a great investment with much less risk because it's secured.

Thanks for all the advice and input. It's been very helpful.

Good luck Travis. First thing is don't rely on a banker because if he had any good ideas, he would not be working in a bank. You need to find a mortgage broker who can deliver various loans for you. Have him set you up with maximum leverage so you know how much down you will need and what you monthly payment will be per $10K borrowed.

The most important thing you must do is find a location that has been showing upward movement in both prices and rents. Any agent can pull those for you off the MLS. Once you have the location, buy as much property with as much leverage as you can finance. Look for value added rentals and ones that have below market rents. You have the income to carry the repairs and the vacancy factor if needed. Stay away from section 8.

Every time you have capital to make a down payment, go for it as long as the current rental income covers you.

Do not invest in someone elses deals. You are way too young to risk your money and give up control. You wil also learn nothing but heartache from being a minority investor outside your area of influence.

Ten years seems an eternity to you now, but it will fly by and you will be very happy at 40.

Travis,

It doesn't matter if it's a banker or a broker just someone who see's your vision and wants  to help you get there.  A good lender will tell  you how to go about it and will see your vision and help you get there.  So find that person, most of them don't see people who are trying to do what you want to do very often.  You will probably talk with a couple before you find the right one.  But when you find the one you will know it and then build a great relationship with that person.

Since you can save $20k per year, why not start with something small so the tough lessons don't hurt as much?

If you spent a total of $20k on a down payment and closing costs you should be able to profit a couple hundred dollars per month.

Where do you live now? It might be a good idea to buy a large single family or multi family with low down payment, rent some rooms out to friends and then use the left over cash to do a flip.

I have been buying SFRs renting rooms out to friends then moving and repeating. It's been working out great for me.

@Steven Zagaris  

   ... I thought about that but I have a girlfriend and she's crashing that party. 

@Brandon Hopkins  ... that's a good approach too. I might consider. It can't hurt to start slow.

@Steve Grace  ... thanks for the tips. Sounds like years of experience speaking. 

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