I'm 25 years old and I have about $250k in cash, and I want to put all of it into real estate.
I have no experience though. I'm just starting to learn the basics, like cap rates. I don't really have a mentor type of person to guide me along, so I'm learning as much as I can.
What should I do? How much property can I buy? (I have good credit.)
This forum looks like a treasure trove of information. I'll enjoy reading all of the old threads.
Investor · Bellefonte, PA · Member since 2008 · 1k+ posts · 88 votes
18y
Welcome to BiggerPockets. Go to the new member forum and introduce yourself.
On the bottom of the nav bar to the left there is a section called "Local Resources" under that you can look for a local investment club to join. Find someone there that looks like they know what they are doing and take them out to lunch and pick their brain on your local market.
You'll want to keep that cash in your pocket for now, the best thing about real estate is you get to do the majority of it with OPM (Other Peoples Money).
Keep reading the forums here so you learn the basics and hook up with some local investors. You may not want to tell your local investors that you have that money, if you do you may end up being the OPM for their deals. (unless that interest you).
Minneapolis, MN · Member since 2008 · 691 posts · 12 votes
18y
Welcome!
I agree to take it slow and dont' chase any edals that don't make sense. Check out the creative financing forum, and start to get a feel for what strategies seem like a match for your personality. I wouldn't advertise too much how much cash you have to any realtors or other invesstors. I nstead go into the process by trying to send as little of your cash as possible. If you get an opportunity to pay cash for a property and achieve a huge discount, then you would be in a good position to take advantage of that. You can find REI clubs at:
If I were you, I think I would do as you are doing, and spend several months reading the posts here, and some good books, adding to your education. Use a portion of your cash for quality marketing, then you are on your way. Good luck! Mike
Real Estate Investor · Lancaster, OH · Member since 2008 · 87 posts · 0 votes
18y
July 17, 2008
Welcome to the BP forums.
Education is key and knowledge is power so it is good to read everything you can.
There are several avenues of real estate investing... residential, commercial, reo (bank owned), auctions, pre-foreclosures, foreclosures,
short sales and so on.
Each is unique in its own way and every deal varies. The key is to run the numbers to make sure that you are not wasting your time, money and effort in each case.
REI clubs in your local area is a good start.
You can access valuable information by networking on the internet.
Run a search on real estate forums and have fun with it!
Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes
18y
First of all, never admit on a public forum or to any group of investors that you have a quarter of a million to spend and no idea what to do with it. There are plenty of sharks who will have every idea for you.
You want to hang back, say nothing and listen. Listen to see who invests based on decades of patterns and who invests based on a market anamoly from 2000-2005. Decide for yourself what kind of lifestyle it is you want to lead and what style of investing will serve you the best. Also, we know nothing of you or your background. This is a key element to how you decide to invest.
You'll want to keep that cash in your pocket for now, the best thing about real estate is you get to do the majority of it with OPM (Other Peoples Money).
From my understanding I definitely want to use as much OPM as possible. After reading some threads here, it looks like I'm going to need to put down 20-30% on each deal... Though I was hoping it would be more like 10%.
Originally posted by "TimWieneke":
First of all, never admit on a public forum or to any group of investors that you have a quarter of a million to spend and no idea what to do with it. There are plenty of sharks who will have every idea for you.
That is great advice, and I know exactly what you mean. I have more faith in the advice given here than that given by the bankers/investors/realtors I've spoken with who have a stake in a potential deal.
Originally posted by "TimWieneke":
Decide for yourself what kind of lifestyle it is you want to lead and what style of investing will serve you the best. Also, we know nothing of you or your background. This is a key element to how you decide to invest.
I have good income, about ~250k/year, with plans to double that in the next year. I have no need to re-invest that much cash into my business, so I'd like to put it all in commercial properties to start multiplying it.
My current vision is to buy as much property as possible now, and then use the income from that, plus the income from my business, to buy more property. And eventually pull out equity and buy more property. By my calculations, the amount of property I can sustain will grow exponentially over time.
Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes
18y
Not at all. The main reason to do this is exponential growth and the resulting cash flow.
Obviously you are good at running a business and have the concepts of cashflow down so holding commercial would probably work well for you. It's really no different than what you have already been up to. Find a stable market with solid returns and start negotiating. In this current climate, I'd probably stick to commercial that's anchored by products people will always need - food, clothing, shelter, insurance and alcohol.
Investor · Bellefonte, PA · Member since 2008 · 1k+ posts · 88 votes
18y
Originally posted by "TimWieneke":
people will always need - food, clothing, shelter, insurance and alcohol.
Haha I never heard alcohol put into the mix before. I know the owner of a beer distributer and he said his sales are slowing because of the economy. He thinks they're all switching from beer to spirits... more bang for the buck I guess.
Real Estate Investor · Reading, PA · Member since 2008 · 227 posts · 7 votes
18y
With a properly structured deal, you won't have to put anything down on a deal. Keep reading the posts. There are many different ways to not use your own money.
If on occasion a great deal does come along in which you need to move quick with cash then you can jump on it. If you tie up all of your money you, would have to pass.
Please make sure to educate yourself before you jump. That $250K will be nil if you make decisions with out knowing what you are doing.
Real Estate Investor · Indianapolis, IN · Member since 2008 · 1 post · 0 votes
18y
It is always a good idea to align yourself with a few real estate professionals in your area that understand real estate investing. Experts like Realtors and appraisers can go far in helping you putting together an investment plan. However, be sure they are very knowledgable about the market and about real estate investing.
Banker · sydney, Nova Scotia · Member since 2008 · 100 posts · 8 votes
18y
Originally posted by "troyce1":
I always see people talking about using OPM. But wouldn't the best strategy be if possible to buy ALL CASH?
People will argue both sides of this, all cash vs other people’s money. For rapid growth, you can't beat OTM. How many rentals can you buy with 250K? Just as an example, let’s say the average house is 125K. With all cash you could buy 2 rentals mortgage free. Using other people’s money with 20% down you could buy 10 rentals. Each one of those units will be paying down the mtg for you and giving you equity. If you only needed 10% down, you could by 20 rentals.
Not at all. The main reason to do this is exponential growth and the resulting cash flow.
Obviously you are good at running a business and have the concepts of cashflow down so holding commercial would probably work well for you. It's really no different than what you have already been up to. Find a stable market with solid returns and start negotiating. In this current climate, I'd probably stick to commercial that's anchored by products people will always need - food, clothing, shelter, insurance and alcohol.
Thanks for the advice. Sticking to staple industries makes a lot of sense.
Originally posted by "nephets":
How many rentals can you buy with 250K?
Originally posted by "TimWieneke":
25-30. :D But people here get all mad when I talk about this so I won't say anymore. :mrgreen:
Are you buying really cheap rentals perhaps? I'm more than willing to listen to your strategy, if you feel like talking. :D And I won't get mad either, I promise.
With a properly structured deal, you won't have to put anything down on a deal. Keep reading the posts. There are many different ways to not use your own money.
If on occasion a great deal does come along in which you need to move quick with cash then you can jump on it. If you tie up all of your money you, would have to pass.
Please make sure to educate yourself before you jump. That $250K will be nil if you make decisions with out knowing what you are doing.
I suppose one of the areas I'm least knowledgeable in is financing. How can you arrange a deal with out putting up any cash? 80% of purchase price from the bank and 20% from the seller?
I'd love to use as little cash as possible on each deal since I want to buy as many properties as I can right now.
I'll keep reading the threads here. Several hours of it has already helped tremendously.
I always see people talking about using OPM. But wouldn't the best strategy be if possible to buy ALL CASH?
People will argue both sides of this, all cash vs other people’s money. For rapid growth, you can't beat OTM. How many rentals can you buy with 250K? Just as an example, let’s say the average house is 125K. With all cash you could buy 2 rentals mortgage free. Using other people’s money with 20% down you could buy 10 rentals. Each one of those units will be paying down the mtg for you and giving you equity. If you only needed 10% down, you could by 20 rentals.
Just a thought...
steve
I'm wondering just the opposite, troyce1. I don't see how having your cash needlessly tied up can be beneficial, because you lose out on the exponential growth you can achieve with the bank's money.
The best I can figure where all cash is useful is to find a good deal and then refinance (correct me please if I'm wrong). Say you buy a $100k (appraised) rental for $65k (all cash). Then you use the 100% equity to get a loan from the bank based on the appraised value of the house. So I suppose you could get $70-90k cash from the bank, which you can sink into other properties.
However I'm sure deals that good are far and few between.
Investor · Bellefonte, PA · Member since 2008 · 1k+ posts · 88 votes
18y
Originally posted by "shoeshine":
Why would someone with good income want to get involved in Real Estate
in today's economy ???
Do you really need the headaches ???
Invest in a Real Estate fund, if you must.
.
Because this is probably the best time to buy real estate that any of us will ever see in our lifetimes. Talk with veteran real estate investors and they all will tell you that they have never seen a market so ripe for picking up great properties at great prices.
Investor · Bellefonte, PA · Member since 2008 · 1k+ posts · 88 votes
18y
Originally posted by "ramybob":
How many rentals can you buy with 250K?
Just as an example, let’s say the average
house is 125K. With all cash you could
buy 2 rentals mortgage free.
You don't use all cash. With 250k and being conservative by only taking out an 80% loan you could buy 1.25m worth of real estate. If you are able to work out a good deal (they're all over the place) and buy at the right price you should be able to buy 2m (TMV), that's 16 SFH's at the price you quoted. If you're buying duplexes-quads for 125k you're looking at 40-60 rentals.
Investor · Bellefonte, PA · Member since 2008 · 1k+ posts · 88 votes
18y
Originally posted by "cookarikappou":
like any other business man, you can start a small business and then add more units later....
That is correct, you would never want to start out with that many rentals. Get a few and run them for a year then get a few more.
You also you always want to keep a cash reserve. Keep enough cash in the bank to run your entire business for 3-6 months. The fewer rentals you have the longer the time period for the reserves. With one rental unit you want 6 months. If you have 10 or more rentals you can drop it down closer to 3 months.