Hi everyone. I am brand new to the Bigger Pockets Community but love the info so far. I am selling my business and will have at least $100,000 cash to get me started, plus ongoing payouts over 4 years that cover my family's living expenses during the entire 4 years. I recognize many people would love to be in this situation and feel extremely blessed by it, but being new to investing I'm not sure how to maximize that lump sum. I don't want to simply throw my cash away at the first deal that comes my way. I am thinking it would be best to pay cash for a distressed property, fix it up, rent it, then refinance and start the process over again but want to do it right. Maybe there are other options that would move that investment faster...again, not exactly sure how to proceed. I am a good helper with projects but am not from a handyman family, and don't know any reliable contractors. We have a personal residence that we could move out of if something were to come up and it would cashflow about $300/month right now if we rented it out. Does anyone have any advice on turning that $100,000 into maximum passive cashflow within the next 4 years? Thanks for any insight.

Do not start with a flip. They are highly risky (I have done numerous flips) and based on your personal skill sets not at all advisable. Your only option would be to be a money partner with a experienced flipper until you learn the ropes.

I would suggest you start with a good solid positive cash flow multi plex. Put 20% down and learn the business of being a landlord. Manage it yourself, do all your own repairs and once confident do it again or maybe consider partnering with a flipper at that point in time.

Fast is not part of the formula for growing wealth.

5 Reply

Jack Slattery

Investor · Springfield , OH · Member since 2014 · 32 posts · 22 votes

10y

I agree with Greg S. Starting with a multi plex with cash flow is good advice. With a multi plex you won't be hurt as bad when a renter moves out.

100K is a fantastic number to start with, but keep cool. Be careful not to over extend yourself.

0 Reply

Tim Richardson

OP

Silverton, OR · Member since 2016 · 43 posts · 14 votes

10y

Greg and Jack, thank you for the pointers. I agree I don't want to jump the gun and get into a mess right out the gate. I assumed the multiplex was the end goal after getting some single family experience under my belt. Isn't there even more to learn to manage in multiplex ownership? Seems like a bigger learning curve there.

Do you guys own any multiplexes? What size would you recommend to start out with? What advice do you have getting started in multi family?

Can you refer me to a blog or article about starting out with multi?

Thanks a bunch! Beginning to see how this site can really help.

0 Reply

Thomas S.

Member since 2016 · 13k+ posts · 12k+ votes

10y

Single family rarely have positive cash flow and are very high risk due to the fact that the loss of one tenant is 100% of your business. A multi is simply a single building with more than one tenant. requires exactly the same learning curve but is far safer to start. The larger the better but start with a minimum 3 plex for security. For finance and insurance purposes check your area to determine where they draw the line on commercial classification.

0 Reply

Adam Bontrager

Investor Relations Manager · Cleveland, OH · Member since 2015 · 117 posts · 50 votes

10y

@Tim Richardson

Congrats, you're in a great position to get started in real estate. And you're doing better than many people by simply asking questions before diving in.

You have the option of buying a multiplex as some have mentioned or you could buy several SFRs. The nice thing about SFRs is that you can add them one at a time as you get comfortable and learn more. It's easier to scale up and down with SFRs than with a multiplex when you're just starting out. With multis, you have to add units in large chunks.

@Thomas S.

While your statement about SFRs rarely having positive cash may be true of your market, but I wouldn't make a blanket statement like that. In the Cleveland market where I'm at, cash flow of $200+ is fairly common on a SFR.

Feel free to contact me with any questions. I'm happy to help.

0 Reply

Tim Richardson

OP

Silverton, OR · Member since 2016 · 43 posts · 14 votes

10y

First question - how do you copy the @name into the reply? Very convenient.

Over here in western Oregon, renting SFR does not have great cash flow like what I've heard from other markets. We have a steady flow of Californians moving up to raise our home prices.

I was thinking of establishing a relationship and partnering with someone in markets with better cash flow, and Ohio has actually come up suite a bit, as well as Indianapolis, Memphis, Pittsburgh and Kansas City areas.

As a game plan I think it would be great to do flips close to home, then buy and hold in better cash flow markets (once I'm comfortable flipping of course, probably after I find a local experienced contractor).

But this multi family approach seems enticing too, maybe can get better cash flow as compared to SFR. Especially being able to get some experience under my belt.

Adam, do you know anyone helping people do cash purchases, fix ups, renting, then financing to get all the cash back out in your parts?

1 Reply

Andrea Castor

Investor · Dayton, OH · Member since 2015 · 73 posts · 25 votes

10y

My husband and I are starting out with about the same amount of cash. After doing our research we would like to pursue the BRRRR strategy slowly, buying 2 properties a year and one yr 5 we'll start selling 2 a year, thereby making a good $100kish income a year with fairly low risk. That way we can both work part time jobs and spend more time as a family.

Our first step was finding a great realtor, and getting an email set up so when anything hit the market within our search criteria we could look at it within the first day on the market. We would run the numbers and if it worked, we'd make an offer. We've lost out on a lot to higher bidders, but if its not meant to be, well, its not meant to be.

We are finally in the works on property #2. Lots of potential renter interest and even had a few interested in buying. We have talked with the small local bank on other prop is financed through and they said we could use the cash to close, then refinance starting on Day 1 based on our track record and credit history. We may just flip and sell. We'll see how the cards play out....

Meanwhile, we are keeping our eye out for the next deal. I'd love a multiplex and one where we can use a property manager, but so far haven't seen any deals in the A/B/C+ neighborhoods I search...

Best of luck to you!

0 Reply

James WachobBusiness Member

Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 888 votes

10y

@Tim Richardson I'd purchase a small package of homes in Memphis, TN that are professionally managed by an established provider!

1 Reply

Brian Smith

Rental Property Investor · Shreveport, LA · Member since 2015 · 36 posts · 18 votes

10y

I've started out in a similar situation and just closed on property number 2. I'm targeting SFR's in B/C neighborhoods that make at least 1.5% rent:purchase price. The first property was basically a turn key and gave me some experience being a landlord and the second property is a HUD foreclosure that will need 4-6k in renovations. After this second property I'll be in for around 34k, which still leaves plenty of flexibility for a possible flip or another buy and hold if the opportunity arises. I'm taking it slow and steady, but I can feel the momentum building already as the first property is cashflowing $400/month ($250 realistically if I'm putting back maintenace/vacancy etc). The second property will require some rehab conrtacting to be rentable and should cashflow around the same, BUT is in a better area. After the first property in a lC neighborhood I'm learning that I want to be on the fringe of better areas (something you won't know until you jump in!) I'd advise to make slow and deliberate moves to figure out your risk tolerance and long term strategy. Good luck and hope everything works out!

1 Reply

Donovan Castaneda

Kansas City, MO · Member since 2015 · 66 posts · 9 votes

10y

If you made your mind up you already started and for that I congratulate you now FIRST find out what type of investor you want to be buy and hold,buy and flip now or a combination

0 Reply

Julie Macd

Investor · Seattle, WA · Member since 2015 · 71 posts · 60 votes

10y

Hi @Tim Richardson

The first thing to decide is what are your long term goals and what to do you want to do. There are as many ways to get involved in real estate as there are people in it. Where do you want to be in 5 years? Are you more interested in wealth accumulation, cash flow, appreciation or some combination of both. Where do you want to be in 4 years when the payouts from the sell of your business run out. Real estate is a business. Treat it like one and you will be better off in the long run.

You say you are a good helper but not a handyman, but do you want to be a handyman? are you really interested in using the hammer or just directing other to do so. Do you want to be a landlord? or would you rather leave the day to day management to someone else. What do you bring to the table besides cash? what kind of partnerships might you be interested in or do you prefer to work in your own?

Once you answer some of these basic questions, then you can decide whether you want to focus on buy and holds or flipping, or perhaps you prefer to invest in loaning, or find a partner to work with, etc. With $100K you have lots of options but what works for others may not appeal to you.

Best of luck!

1 Reply

Brandon Battle

Real Estate Agent · Buena Park, CA · Member since 2016 · 743 posts · 424 votes

10y

Tim Richardson I am exactly in the same position as you are and have been active investing here in California for the last 30 days.When you already have money to invest,enough cash to entice the professionals into bringing you along into their business, it makes it a whole lot easier to get started investing. The first thing you must do is find people who are smarter than you are in real estate and go to them.Nothing beats meeting professional investors who are already making steady returns in real estate and can teach you the business the right way the first time without falling into the traps they probably did.They are willing to teach you if you are willing to listen and invest your money in their projects which will make you money while you learn to from them. There is so much to learn in these first few months it can make your head spin like mine did but,stick with it and take it one day at a time.Books you can read will give you an insight of how everything works but only actual experience doing it can help you achieve the confidence to make this your new career.You need to learn from them how to use hard money lenders to finance projects faster then you ever could have imagined.How to analyze properties the right way,learning how to see what needs to be repaired and for how much money.Learning to find good contractors in your area and a real estate agent to sell them when your project is ready to make you a profit. Find a good mentor by first finding an investors meeting in your area by using the bigger pockets forums and a website called Meet Up.The nearest one to you is probably in Salem and there are many in Portland you can attend once a month.There you will meet agents,hard money lenders,lawyers,accountants, all trying to sell their valuable services as well as experienced investors and new ones who will be looking for gap fund investors (that's you!!) looking to invest money into their flip projects in exchange for knowledge and coaching.Good luck to you.

0 Reply

Steve Moody

Portland, OR · Member since 2008 · 123 posts · 73 votes

10y

It seems like most people are on the same page here. If I had $100k I wouldn't be tying it up in real estate. I'd use it as leverage for purchasing real estate, but would be looking to get my money back out ASAP.

If you're into buy & hold then BRRRR would be ideal, and having cash will afford you the ability to buy deals that those of us with little cash can't. Getting your cash back out allows you to repeat over and over

0 Reply

Tim Richardson

OP

Silverton, OR · Member since 2016 · 43 posts · 14 votes

10y

Thanks for all the info everyone! Will definitely be looking to the BRRRR method. It was something I had been thinking about already but didn't know it had already been defined and laid out like that. I found an article Brandon Turner wrote about it last year that was very helpful. Just need to find the right markets to make the rental cashflow work. Wish me luck!

0 Reply

Cody Cox

Note Investor · Wilsonville, OR · Member since 2010 · 149 posts · 113 votes

10y

I'll through in my thoughts. From my perspective, I like investing in promissory notes secured by real estate. You become the bank. My model is to acquire non-performing notes at about $15,000 - $25,000, work to modify the loan in an attempt to keep the borrower in the house, then once the payments have seasoned, you can resell the note for a significant increase in value. Rinse and repeat. That way, you haven't tied up the entire $100k into one property, but perhaps 3 - 4.

Note investing is not a new thing, but many investors don't understand them. I've been in the mortgage industry for over 33 years, so this method of investing works perfect for me, especially since I maintain a day job.

2 Reply

Gary Swank

Real Estate Agent · Pittsburgh, PA · Member since 2014 · 821 posts · 255 votes

10y

Hi Tim, First welcome to Bigger Pockets. I agree with the Multi-family units as a good investment to start with. You want income guaranteed right from the get go. However there's a lot more information to gather from these properties to compare, such as how long the tenants have been there, what are the terms of their current leases, the condition of the building of which an inspection can determine, zoning violations, liens, etc. All of this is information I have been providing my clients who are interested in the Pittsburgh market for some time now. These clients are both local and remote, so if you ever want to talk further, let me know. My contact information is in my profile. Thanks, Gary

0 Reply

Jack Slattery

Investor · Springfield , OH · Member since 2014 · 32 posts · 22 votes

10y

Tim, I don't have any multiplex and I don't anticipate owning any at this time. I suggested a multiplex for you because you don't have anything at all right now. If you have a multiplex and lose one renter, you will at least be bringing something in from the other side.

I have enough SFHs that I can recover if one of my rentals become vacant. My vacancy rate is very low. I target my properties to the middle class tenants. They are starving for decent housing. I only purchase brick ranches and cape cods. I net between $250 to $400 on each of my homes.

2 Reply

Tim Richardson

OP

Silverton, OR · Member since 2016 · 43 posts · 14 votes

10y

Thanks Jack. I won't be dependent on my rentals coming through every month either, as I have good income (although I would like to minimize vacancies). I'm just trying to maximize returns.

0 Reply

Jay Raught

Investor · Newark, DE · Member since 2015 · 248 posts · 178 votes

10y

@Tim Richardson what Cody said is a great idea. Since you have 100,000k you could buy a few mortgage notes and you become the 1st National bank of Tim. Why deal with Tenants and toilets when you can just collect the payments like the bank does? Of course you can buy paying notes, non-paying notes in either the first or second position. Good luck and welcome to BP.

0 Reply

Isaac Blocher

Property Manager · Orlando, FL · Member since 2015 · 257 posts · 58 votes

10y

@Tim Richardson and @Andrea Castor This is what I refer to as the big picture of the wealthy.

Every time you do a deal, figure out which column it belongs in. The Appreciation column is for building your equity that eventually gets moved into the Cash Flow column. The Appreciation column is where most of your net worth comes from. The Cash Flow column is where your passive income comes from. The Cash Influx column might be transactions with one-time income. For example, buying a property that needs work, fixing it, and selling it for a one-time profit is Cash Influx. You get paid once.

0 Reply

Tim Richardson

OP

Silverton, OR · Member since 2016 · 43 posts · 14 votes

10y

@Jack Slattery

Jack, are you buying and rehabbing yourself or are you able to get that cash flow using other peoples' expertise as part of the process?

0 Reply

Jared SawyerPro Member

The Dalles, OR · Member since 2016 · 27 posts · 6 votes

10y

Great thoughts, I have been reading books and listening to podcasts over the last couple of months in order to learn about the real estate investing business and not treat it as a hobby. I know enough about the big picture now that I feel confident in becoming more focused and delving deeper on a particular niche. I think the same strategy would be good for you. You are either green and growing or ripe and dying on the vine, start reading!

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Starting out with $100,000 cash - what do I do?

Starting out with $100,000 cash - what do I do?

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