With what you know now and forced to start over, what would you do with $30,000?

33 Replies

Yes, I've been mostly lurking these past few months as I try to deal with situations preventing me from focusing on REI without distraction.

In the meantime,  I need ideas to chew on until then.  So this question is really for the seasoned investor:

With the knowledge you have gained over the years Mr. or Mrs. Professional Investor, if I were to magically pluck you from your life and land you back on planet Earth, USA, with $30,000 in cash to start over.....where would you go and what would you do?

.....and trust me when I say that whether I'm a newbie or not I'm going to do my best to pick your plans apart!  :)

I'd go get more money.

@Randy Landman I agree and would get a job and double up my money... But sticking to just real estate Inwould start with finding the perfect market to get involved in.. 

Is 30k not enough to cover a first deal?  I suppose it is area dependent but I am looking for deals at every point my savings is at.  Although in New York City 30k might not go far.

@Conway Churaman well you still havent said what your goals are, for me I would take a complete a flip, prob have about 50k when done, depending on my goals, I would rinse and repeat, growing this money, then JV with others who did all the work and let me have 1/2 the profit, or I could take and put as downpayment for a smaller complex giving my cashflow. I tell people all the time till I know your goals I cant give good advice whats best for me may not be the same for you.

Find a good deal with seller financing... One that they're willing to carry 10%, you put down the $30k and then get the bank to cover 70%. 

Originally posted by @Jeremy Tillotson :

@Conway Churamanwell you still havent said what your goals are, for me I would take a complete a flip, prob have about 50k when done, depending on my goals, I would rinse and repeat, growing this money, then JV with others who did all the work and let me have 1/2 the profit, or I could take and put as downpayment for a smaller complex giving my cashflow. I tell people all the time till I know your goals I cant give good advice whats best for me may not be the same for you.

 Nope this isn't about me (okay it is).  I really want to know what YOU would do.  What your goals would be (short term and long term) if you were to suddenly have to start over and given $30k in cash to do it.  Oh, and say a little extra cash thrown in for a plane ticket to any place in the USA.

I would like to know what the aggressive investor might do as well as the passive. Would you plan to turn that $30k into $30 million Donald Trump style, or would you go the life hacker style like Paula Pant from affordanything.com. If all of life's problems would go away and you got to start over with a new identity, in a new town, with $30k in cash and a head full of REI knowledge what would you do? Whoever is reading this post what would you do?

Well I can't tell you what to do with the money, however I can refer you to the free bigger pockets book "real estate rewind" it's in the file place, it's about 12 successful REI investors and what they would do differently if they had to start over.

Just my 2 cents. 

I will be starting over again in less than two years and here is my short story and plan.  I filed bankruptcy and had my home foreclosed on, it went back to the bank and my four year wait period to buy an investment property (I already have a primary home, my wife isnt going to move so no house hacking for me) will be over in April of 2017.  I am FINALLY in a place where I can put some money aside to invest, I put money in my 401K, a little into a TD Ameritde account each month, pay all my bills, keep my wife happy and I am able to put $1,000 per month aside for real estate.  I believe at the start of next year I will be able to bump that up to $1,500 per month.  So, in April of 2017 I will have 30K (the exact number you are asking about) to buy some property.  I am going to be a slow and steady guy after my bankruptcy/foreclosure (I was newly married, we just bought a house and then my wife at the time decided she wanted a divorce, I couldnt afford the house on my own, couldnt sell it in 2011, so it went back to the bank).  Here in Tulsa Oklahoma my plan in to put 25% down on 100K homes that rent for 1000-1200 per month.  I will take the cash flow from that home, add it to the $1500 I am saving per month, then buy another 100K home with 25% down in 2018.  I plan to do that four times, by 2020 I hope to have four rental properties cashflowing $200+ per month.  I will just relax for a few years, pile up cash and then move into multifamilies.  

Originally posted by @Conway Churaman :

 Nope this isn't about me (okay it is).  I really want to know what YOU would do.  What your goals would be (short term and long term) if you were to suddenly have to start over and given $30k in cash to do it.  Oh, and say a little extra cash thrown in for a plane ticket to any place in the USA.

I would like to know what the aggressive investor might do as well as the passive. Would you plan to turn that $30k into $30 million Donald Trump style, or would you go the life hacker style like Paula Pant from affordanything.com. If all of life's problems would go away and you got to start over with a new identity, in a new town, with $30k in cash and a head full of REI knowledge what would you do? Whoever is reading this post what would you do?

Ok then here is my real answer. It would depend on other factors. I actually got started with no money down, but I had a great paying and stable job, no debt, good credit and plenty of collateral. I didn't need the cash flow right away and was able to pay down the 100% financing with my income. So if I still had that situation plus $30,000 I would start off the same way I did with a duplex close to home. I would do a duplex over a SFR because if one tenant moves, you're only losing 50% of your monthly rent instead of 100% with a SFR. What I would do different is to be more patient. Don't be in a hurry and buy something just to get started. Don't overpay. Wait for a good deal, or make some low ball offers. But if I had $30,000, a bad income, and a ton of debt, then I would use the $30,000 to improve my personal situation first.

Fun question to consider...

As I have gotten to 47 years old the difficult way, learning many lessons twice and spending money of foolish things, like most of my piers. Here is my answer...

Based on ALL of my life experience. I would begin as early as possible to create buy and hold properties that had good ROI's. Regardless of what we all WANT, real estate is truly a slow game. If you play it well and don't make mistakes you can become wealthy over a long period of time relatively easy. I have seen some investors make great deals due to market timing or simply being in the right place at the right time. This is not the rule by far.

Buy a SFH or Duplex with the 30K, get it operational with a proven track record, leverage it and buy another. Within 3 or 4 years I would turn the 30K into 6 to 10 houses. This would obviously take a lot of sweat equity and not be easy but based on the market that I buy and hold from I think it is reasonable.

Now since this is my story and what "I" would do. I have assumed that I have good market knowledge and understand real estate at the level I currently do. I also assumed I would benefit from a good credit rating and the entire 30K was for investing and not to live on. 

Interesting posts.  I think I would like to hear from a house hacking / life hacking perspective now.  Asked Paula Pant to comment.  I would like to keep this thread alive a little longer.

This is a great question, @Conway Churaman !

Let's start with a few disclaimers:

  • I'm assuming this $30K is purely for real estate investing. Your day-to-day personal expenses are covered; you're free from credit card debt and other personal / consumer debts; you're saving in traditional retirement accounts, like a workplace 401k, up to your full employer match; you have a comfortable emergency fund.
  • I'm assuming the real estate market, at this time, is "normal" (like 2014 or 2015). You have a sense that things will progress at a steady pace. You don't get the sense that the market is in some wild speculative bubble that's imminently headed for collapse. 
  • I'm assuming I qualify for conventional financing on the investments listed below.
  • I'm assuming the rent rises at a pace that's equal to inflation (so we'll call it even).

With that said, here's what I'd do if I were starting from scratch with $30K:

1) Buy two Class B or Class C+ houses in a low-cost-of-living area. I'll use metro Atlanta as an example, since I know this area so well: I'd buy 2 SFRs, each of which are worth $50k. I'd put a 30% downpayment on each ($15k on each, for a total of $30k). 

2) Assuming at least a 1.5% Rule, these would rent for $750 per month each, or $1,500 per month total. Assuming that half of this goes to operating costs/vacancies/etc., I pocket $750/month.  

3) I'd save the first 6 months of this income ($4,500) for cash reserves. Then I'd save the next 18 months of this income ($13,500) towards making a down payment on a third investment property. 

4) In the meantime, I'd have a 'day job' and save money from this to put towards future investments. Let's say that I can save a total of $1,000 per month -- that means after 2 years, I'd have another $24,000 to invest. So at this point, at the end of Year 2, I have $37,500 (which comes to $13,500 from the SFR's plus $24,000 from the day job).

5) Repeat. I'd use this $37,500 to repeat Steps 1-4.

6) At this point, at the end of Year 4, I'd have 4 properties generating $3000 per month in gross income and $1,500 per month in net income. I'd also more than $40k saved (including day job savings from the past 24 months). At this point, I probably wouldn't qualify for more conventional financing (since I'd be limited to 4 properties), so I'd use this $40k to pay off one of the houses. I'd have a little more than $5k leftover, which I'd apply towards paying off another house. Within 1 more year, by the end of Year 5, I'd have another house paid-in-full. (That's $1500 net income per month from SFRs + $1000 per month from day job = $2500 per month x 12 months = $30k in repayments, plus the extra $5k). 

At this point, it's the end of Year 5, and I own 4 houses, of which, 2 houses are free-and-clear. 

At this point, I'd re-evaluate my goals. Do I want to stay in the U.S.? If so, I probably need more money, so I'd repeat this process to buy more houses, until I've reached my financial goals. 

Do I want to retire ASAP to a tropical beach in Thailand or to a gorgeous mountaintop retreat in Colombia? If so, I probably don't need much more money, so I'd spend another year or two aggressively repaying the last two houses, and then retire in some warm tropical climate within a total of 6-7 years after this all started.

I am really interested in this topic since I will be graduating in June and starting my career soon. I planned out a saving budget that could get me to the $30k area in a little over a year so these responses are very helpful. 

As for my goals: I would hopefully find a (2-4) unit to rent out. My income and the rent would be put aside for the next multifamily when I find it. 

That was an excellent response, @paula pant. I will definitely be using that strategy up here in the Baltimore area. The only difference that I could suggest is possibly using HML or peer to peer loans for the purchase and then refinancing into a long term conventional loan if you want to grow faster. I bought 2 properties using mostly hard money loans so I only paid closing costs and the 10% down payment. The first one is rehabbed, rented and going through the refinance process. Now I can rehab the second while I start shopping for property number 3. The cash out refi from the first is the capital needed for paying off my HML and getting another rental. I would definitely start with 2-4 apt multi-units, if possible.

Some prefer to get free and clear properties but I'd rather use leverage to take advantage of the current market while I can. If I continue working then I can always apply cash flow from the multiple properties to pay down one mortgage faster. My goal is to have 10 units or $5000 monthly in passive income. At that point I can focus on larger multi units or perhaps rehabs. Thanks for starting this thread. Highly educational for me. 

Originally posted by @Tarik Larue :

That was an excellent response, @paula pant. I will definitely be using that strategy up here in the Baltimore area. The only difference that I could suggest is possibly using HML or peer to peer loans for the purchase and then refinancing into a long term conventional loan if you want to grow faster. I bought 2 properties using mostly hard money loans so I only paid closing costs and the 10% down payment. The first one is rehabbed, rented and going through the refinance process. Now I can rehab the second while I start shopping for property number 3. The cash out refi from the first is the capital needed for paying off my HML and getting another rental. I would definitely start with 2-4 apt multi-units, if possible.

Some prefer to get free and clear properties but I'd rather use leverage to take advantage of the current market while I can. If I continue working then I can always apply cash flow from the multiple properties to pay down one mortgage faster. My goal is to have 10 units or $5000 monthly in passive income. At that point I can focus on larger multi units or perhaps rehabs. Thanks for starting this thread. Highly educational for me. 

What rate do you pay the hard money lender, and how long do you use their money before the refinance? I'm assuming slightly above the rate of a conventional loan

Hey Nick. Hard Money Lenders can charge 12-16% and up to 5 points. I know that sounds high but remember these are fairly small loans. Also they don't require lots of paperwork or even great credit. I only use them for 6-8 months because the regulations require 6 months to do cash out refi loans. If I just wanted to refinance the mortgage then I would get out in 3 months. Conventional loans take longer to close and they won't consider fixer uppers. It's a great way to start and they can evaluate if you have a good deal or not. 

Great posts from everyone above...  I recently "stumbled through" this type of scenario.  Maybe my story can help Conway.

My wife and I got married last year (2nd marriage) - I came in with debt from a previous divorce, she came in with a savings account of about $30,000 drawing 1% interest / year.  I have been aggressively paying down my debt, but wanted to help her see the value of investing her $30,000.

We found a foreclosure property listed on an auction site that allowed for financing.  We won the bid at $54,000, secured with earnest money, obtained a 30yr conventional loan at 5%interest with 20% down.  At closing with fees and all, plus our 20% down we were out of pocket $16,000.  That left us with $14,000 in rehab costs.  We put in more than 200 hours of our own labor, hired out a contractor for the things that required license, permits or inspections and ended up with a total rehab of $12,000.  Total out of pocket $28,000.

I had posted the house up for rent with a sign out front, on Craigslist, and on Postlets and had numerous calls.  We showed the house 6 times and finally found the tenants that we now have.  Rent is $1000/m.  The Mortgage Pmt is $419.  Cash Flow = $581/m.  We offered to pay for garbage and the water bill up to $50 combined each month (which our tenants love that we do), so our total Cash Flow = $531/m.

We are now waiting the 6 months to hold before refinancing and looking to try to repeat the process with the equity that we pull out. ARV = $110,000 so we have a good $40-$45 k that we can pull from this property (though it will reduce our Cash Flow, and then buy another property and start again.

I am very impatient and it's driving me crazy to wait 6 months to refi, but outside of new debt, this seems like the safest option for now.

Originally posted by @Paula Pant :

This is a great question, @Conway Churaman!

Let's start with a few disclaimers:

  • I'm assuming this $30K is purely for real estate investing. Your day-to-day personal expenses are covered; you're free from credit card debt and other personal / consumer debts; you're saving in traditional retirement accounts, like a workplace 401k, up to your full employer match; you have a comfortable emergency fund.
  • I'm assuming the real estate market, at this time, is "normal" (like 2014 or 2015). You have a sense that things will progress at a steady pace. You don't get the sense that the market is in some wild speculative bubble that's imminently headed for collapse. 
  • I'm assuming I qualify for conventional financing on the investments listed below.
  • I'm assuming the rent rises at a pace that's equal to inflation (so we'll call it even).

With that said, here's what I'd do if I were starting from scratch with $30K:

1) Buy two Class B or Class C+ houses in a low-cost-of-living area. I'll use metro Atlanta as an example, since I know this area so well: I'd buy 2 SFRs, each of which are worth $50k. I'd put a 30% downpayment on each ($15k on each, for a total of $30k). 

2) Assuming at least a 1.5% Rule, these would rent for $750 per month each, or $1,500 per month total. Assuming that half of this goes to operating costs/vacancies/etc., I pocket $750/month.  

3) I'd save the first 6 months of this income ($4,500) for cash reserves. Then I'd save the next 18 months of this income ($13,500) towards making a down payment on a third investment property. 

4) In the meantime, I'd have a 'day job' and save money from this to put towards future investments. Let's say that I can save a total of $1,000 per month -- that means after 2 years, I'd have another $24,000 to invest. So at this point, at the end of Year 2, I have $37,500 (which comes to $13,500 from the SFR's plus $24,000 from the day job).

5) Repeat. I'd use this $37,500 to repeat Steps 1-4.

6) At this point, at the end of Year 4, I'd have 4 properties generating $3000 per month in gross income and $1,500 per month in net income. I'd also more than $40k saved (including day job savings from the past 24 months). At this point, I probably wouldn't qualify for more conventional financing (since I'd be limited to 4 properties), so I'd use this $40k to pay off one of the houses. I'd have a little more than $5k leftover, which I'd apply towards paying off another house. Within 1 more year, by the end of Year 5, I'd have another house paid-in-full. (That's $1500 net income per month from SFRs + $1000 per month from day job = $2500 per month x 12 months = $30k in repayments, plus the extra $5k). 

At this point, it's the end of Year 5, and I own 4 houses, of which, 2 houses are free-and-clear. 

At this point, I'd re-evaluate my goals. Do I want to stay in the U.S.? If so, I probably need more money, so I'd repeat this process to buy more houses, until I've reached my financial goals. 

Do I want to retire ASAP to a tropical beach in Thailand or to a gorgeous mountaintop retreat in Colombia? If so, I probably don't need much more money, so I'd spend another year or two aggressively repaying the last two houses, and then retire in some warm tropical climate within a total of 6-7 years after this all started.

 I really appreciate your response Paula thanks.

Here is my situation, for the past few months in between my long work schedule I have been wrestling with the question of whether or not I should seek financing to buy the triplex I currently rent from.  I've lived and rented here for 25 years but that doesn't mean I like the place or want to live here forever.

The owner suddenly wants to sell and is kicking all the tenants out to try to attract better offers from prospective buyers. The problem is he is asking too much money for it.  He's asking $699k which is in the neighborhood of the comps but it is in terrible condition.  He never reinvested capital back into the place to maintain it and now it needs a lot of work.  Plumbing, electrical, water damage, bathroom fixtures, kitchens, furnace needs replacing, question on if it's a legal 2 u it or 3 (only 2 con Ed meters), everything needs fixing or updating.  

I did not get a pro appraisal myself done or ran hard numbers yet but I am estimating it needs a minimum of 50k with costs quickly going beyond that for a renovation.  I would also need carrying costs till work is completed.  The work needs to be done to attract the right type of tenant and to be able to charge rents which would produce cash flow.  That was the owner's mistake. He charged low rents because he couldn't attract the right kind of tenant anymore.

I've come to the decision that financially speaking, this is not the right property for me to invest in at this time.  It is too risky for me.  It might be a good property for the prepared experienced local investor.  Just not a newbie with only 30k cash reserves.  This is brooklyn, NY.

So now my next move is to find a studio to rent in Brooklyn.  I don't want to buy a condo which will eat that 30k in a down payment.  I want to rent.  Does that make sense?  Someone tell me of this makes sense please!

Every little decision I'm making is going to affect my future and it's making me nervous.  

I'm not prepared to move out of NY at this time.  I need a solid plan that will work for me in the long term and I just do not have enough I formation yet.  I can't think clearly cause of the stress.  I'm going to find a place to rent locally, stabilize myself, then focus on my education from this forum and other sources and continue to save.

Is that a decent short term plan?

A newbie with $30k investing in Brooklyn... Just not feasible. It makes way more sense to invest in a turnkey property elsewhere. If you start out with $30 in most mid market cities you can start and grow a local portfolio but NYC is too expensive.

Originally posted by @Conway Churaman :

I would like to know what the aggressive investor might do as well as the passive.  Would you plan to turn that $30k into $30 million Donald Trump style, or would you go the life hacker style like Paula Pant from affordanything.com. 

Donald Trump started with $30 million, not $30 thousand.  My approach might be a bit different if I started with 1000 times as much cash.

Originally posted by @Vincent Crane :

A newbie with $30k investing in Brooklyn... Just not feasible. It makes way more sense to invest in a turnkey property elsewhere. If you start out with $30 in most mid market cities you can start and grow a local portfolio but NYC is too expensive.

 I'm telling myself that blowing the $30k on a down payment for a condo is a bad move for me financially if I want to build savings to start investing.  If I find someplace to rent, continue to build savings, then invest outside of NYC that should be the move?  I should not be looking for a local multifamily in the NYC area even for the purpose of househacking correct?  Can someone else concur?

Also, I still intend for this thread to not only be about me.  I would like to continue to hear from experienced investors on what they might do with $30k if they were forced to start over.

Thanks everyone!

I think if you live in a reasonable market, using the $30k to househack so you don't have to pay rent is absolutely the best first move. After that, using it to start the BRRR so you can repeatedly grow your portfolio without having to save up a new amount of $40k each time you want to make a purchase, but that works better for SFH, which has a trade off because multi's generally cashflow better and appreciate pretty well.

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