What would you do?

7 Replies

Hello BP,

I am just getting started in REI and looking for some advice. My strategy right now is to get into buy and hold to start and then expand as I learn more.

I own my home, have about 179K of equity as based on my last appraisal in 2013. My 401k and Roth IRA are maxed out each year, I also have the option to buy employee stock at a 10% discount, up to a maximum of 15K per year. Right now I am putting 5% of each paycheck into that vessel and can pull it at any time, the only issue would be potential capital gains taxes.

I estimate that I have about 10K of liquid money right now to get started, plus the options above. 

As I live in a highly priced market, my biggest issue right now is capital for a downpayment. What do you think would be the best plan to get started.

Thanks for any and all replies and advice.

First, if you live in a high cost market, don't invest in that market for Holds...it most likely won't cash flow.

2nd, you should start with flips to increase your cash position.  Once you reach a point where you have the cash to get into multiple deals at the same time. then you start buying holds, and refinance you cash out of them to reinvest in the next set of multiple properties.

That's where you start.

Originally posted by @Peter S. :

Hello BP,

I am just getting started in REI and looking for some advice. My strategy right now is to get into buy and hold to start and then expand as I learn more.

I own my home, have about 179K of equity as based on my last appraisal in 2013. My 401k and Roth IRA are maxed out each year, I also have the option to buy employee stock at a 10% discount, up to a maximum of 15K per year. Right now I am putting 5% of each paycheck into that vessel and can pull it at any time, the only issue would be potential capital gains taxes.

I estimate that I have about 10K of liquid money right now to get started, plus the options above. 

As I live in a highly priced market, my biggest issue right now is capital for a downpayment. What do you think would be the best plan to get started.

Thanks for any and all replies and advice.

I would do a home equity line of credit and use that for REI. In fact that is how I got started.

Peter, I like tapping of equity (also check tax deductible there up to 100K I think)... But then the key is a strategy that works for you. 

You might look a bit outside your higher priced market for a buy and hold that could be managed by someone else. Also, think about if it is sf, small multiplex, or against conventional wisdom but some do it, look at a low maintenance townhouse or even condo (forum on that this AM).

Originally posted by @Peter S. :

Hi @Cliff Harrison,

I was sort of thinking along those lines as well. Do you think that is a safer way to go versus a cash-out refinance?

Both are great options for you. LOC only incurs interest when you put it in play is a plus. Rate may be tad lower on refinance. I think risks are close enough not to be a determining factor and you have more than enough going for you to do either. A nice thing about being able to access your home equity in a big chunk is you can use the BRRR strategy without hard money. Get most of your cash back out and do it again or with a 125k warchest you can do more than one at a time. I burned up quite a bit in downpayments buying move in ready or minor repair when i started. They werent bad investments but now i better understand the power of buying distressed and fixing. I think of them as free properties since they end up costing nothing or very little out of pocket and you still have good equity if you bought right and rehabbed effectively. Good luck.