Commercial Property Manager/Facilities Manager · Boston, MA · Member since 2015 · 187 posts · 41 votes
Hi BP,
I have a question for you all: If you had $20k what
would be your first move with it? I've been saving up capital since I
graduated college and can't help but think how much time I am wasting. I
would like to get in the game now. I've been able to save
around $20k (+/-) and have been wondering if I should use that as a
downpayment on a duplex or triplex or use it as a marketing budget and
begin wholesaling. I'm not sure which direction to go in, but I do have a
goal of buying two multi-families next year. It's been enough saving,
now time to tackle some risks. Any advice?
Everyone writing on here so far is VERY optimistic. 20k is not a lot of money for real estate investing, even in rural midwestern areas, let alone Boston. One thing I'll agree with is that your only option at the moment is an FHA loan. I saw some suggestions that you could get away with a total cost of 5k which would give you 15k for repairs, which is not realistic. Expect to spend every penny (or more if you can find a way to get more) and then try to scrounge around for money for repairs in the months after. Many of us have done it when we started out.
I don't know what your day job pays, but if you make a decent living, try to buy the nicest fourplex you can that's under a half million (that's the max you can afford on 20k, and even that's stretching it). If you have a job that pays less than 50k or so, you'll probably need to settle for a duplex and get some roomates. I like the AirBnB idea, although you may have to wait until current leases expire before you can do that.
As far as those people who are suggesting you invest out of town, unless you're willing to relocate, you can't afford it. Conventional loans (and you should go conventional when starting out, unless you have a great mentor who can help guide you) for non-owner-occupied properties will run you 25% down, not including closing costs, which means you'd be looking at a shack that sells for well under 100k. Even if you could flip it for a 30% profit, that's barely worth your time. Once you factor in risk, you're better off just picking up a second job or overtime hours.
Now that I've vented my negativity, allow me to get off my high horse and give you actionable advice. First thing, get in contact with a lender. Feel free to contact a few, but in my experience the rates tend to be very close, so there's less of a benefit to shopping around than most people on BP seem to think. Next, find a realtor and have them set up an automated search that fits your preferred investment criteria. Once again, there's very little difference between them, so don't spend too much time trying to find the best one. Once you see how crazy expensive your initial criteria are, adjust your expectations and have them adjust the search to a more realistic one. Also, go to REI meet ups and reach out to wholesalers. The combination of all those things should give you enough info to make an educated decision on how to proceed.
If after that you're still unsure of how to proceed, PM me and we can have a Skype or phone conversation to see what your options are. Or, if you hate my advice, reach out to someone else and have them talk you through it.
Craig Moore I think you hit the nail on the head. I'd get an FHA loan on a 2,3, or 4 unit. Live in one of those units while renting the others. Then you still have plenty of money to play with. For example, you only need to put down 3500 on a 100k duplex. After closing costs you'll have about 15k left to do your marketing thing or buy something else smaller. FHA on a multifamily is the ultimate life hack.
Craig Moore I think you hit the nail on the head. I'd get an FHA loan on a 2,3, or 4 unit. Live in one of those units while renting the others. Then you still have plenty of money to play with. For example, you only need to put down 3500 on a 100k duplex. After closing costs you'll have about 15k left to do your marketing thing or buy something else smaller. FHA on a multifamily is the ultimate life hack.
Zak,
I appreciate the response! However, I am not quite sure that I'll be able to get anything here in Boston, MA. $20k is chump change out here :/
Ok then could probably still try for a 300-400k property and then you will have 9,500-6,600 of reserves. Ask seller to pay closing costs. You could also look at other markets. Otherwise 20k is enough to buy a decent house with cash in many parts of the country. May be about to find something within 1-2 hour drive. You could borrow against the home later for more than you paid after it's fixed up and buy another.
@Craig Moore FYI: 1 and 2 unit properties don't require reserves for FHA. 3 and 4 units do. Second Jassem; wrap closing costs into the loan to keep more money in your pocket.
u could at markets outside the northeast or west coast. The Midwest and parts of the south. Atlanta shot up in price so I started investing in the Midwest
u could at markets outside the northeast or west coast. The Midwest and parts of the south. Atlanta shot up in price so I started investing in the Midwest
You invested outside of where you live? How do you feel about that, though?
I suggest that you grow your money (appreciation deals like flips or trading notes) first until you accumulate enough cash that, when you invest that cash in cash flowing investments like buy and hold properties, you generate enough monthly cash flow to replace your income.
Know the rules of the game and play to win. Stay blessed!
Boston is one of the top markets for airbnb in the US. I invest in airbnb in atlanta and have made a wopping 25k over the course of three months. I can give you my systems and strategies for you to build your capital up to invest in to a multi unit. Atlanta also havs under 20 unit commercial properties available in Atlanta that will give you some great returns. Let me know if this helps. Also my company invest in airbnb worldwide let me know if you would be interested in making some money together.
I suggest that you grow your money (appreciation deals like flips or trading notes) first until you accumulate enough cash that, when you invest that cash in cash flowing investments like buy and hold properties, you generate enough monthly cash flow to replace your income.
Know the rules of the game and play to win. Stay blessed!
How do you flip a property with only $20k? I'm assuming you'd look for outside investors?
Boston is one of the top markets for airbnb in the US. I invest in airbnb in atlanta and have made a wopping 25k over the course of three months. I can give you my systems and strategies for you to build your capital up to invest in to a multi unit. Atlanta also havs under 20 unit commercial properties available in Atlanta that will give you some great returns. Let me know if this helps. Also my company invest in airbnb worldwide let me know if you would be interested in making some money together.
Anyone interested in trading notes should first learn how to buy and trade more through LendingClub.com. Though these are not mortgage notes, the concepts are the same. You can open an account for as little as $100 and you can buy notes for as little $25. They also have a very rigorous trading platform. PM me for more information.
You are right about that I have been following the laws in the New York. I currently invest in Miami, Atlanta, and San Diego, and currently looking at a few units in Rincone Peurto Rico. Send me a pm when you get the moment !
Keep saving up and go the small multi family route you were thinking about. I bought a duplex and now my tenants and roommate pay my mortage and expenses and I cash flow on it. With interest rates still low and FHA letting you put 3.5% down (that's an owner occupy loan btw) it's a great opportunity to take advantage. You will need more than 20k though IMO. Even if you put 20k down, there's rehab costs, maintenance, vacancies, and you'll want a cash reserve so you don't over extend yourself on your first deal.
Keep saving up and go the small multi family route you were thinking about. I bought a duplex and now my tenants and roommate pay my mortage and expenses and I cash flow on it. With interest rates still low and FHA letting you put 3.5% down (that's an owner occupy loan btw) it's a great opportunity to take advantage. You will need more than 20k though IMO. Even if you put 20k down, there's rehab costs, maintenance, vacancies, and you'll want a cash reserve so you don't over extend yourself on your first deal.
Best of luck!
Ciro,
This is sound advice. I appreciate it. The thing is: I would not like to keep waiting. I would like to find a way to make this 20k work and get in the game.
Everyone writing on here so far is VERY optimistic. 20k is not a lot of money for real estate investing, even in rural midwestern areas, let alone Boston. One thing I'll agree with is that your only option at the moment is an FHA loan. I saw some suggestions that you could get away with a total cost of 5k which would give you 15k for repairs, which is not realistic. Expect to spend every penny (or more if you can find a way to get more) and then try to scrounge around for money for repairs in the months after. Many of us have done it when we started out.
I don't know what your day job pays, but if you make a decent living, try to buy the nicest fourplex you can that's under a half million (that's the max you can afford on 20k, and even that's stretching it). If you have a job that pays less than 50k or so, you'll probably need to settle for a duplex and get some roomates. I like the AirBnB idea, although you may have to wait until current leases expire before you can do that.
As far as those people who are suggesting you invest out of town, unless you're willing to relocate, you can't afford it. Conventional loans (and you should go conventional when starting out, unless you have a great mentor who can help guide you) for non-owner-occupied properties will run you 25% down, not including closing costs, which means you'd be looking at a shack that sells for well under 100k. Even if you could flip it for a 30% profit, that's barely worth your time. Once you factor in risk, you're better off just picking up a second job or overtime hours.
Now that I've vented my negativity, allow me to get off my high horse and give you actionable advice. First thing, get in contact with a lender. Feel free to contact a few, but in my experience the rates tend to be very close, so there's less of a benefit to shopping around than most people on BP seem to think. Next, find a realtor and have them set up an automated search that fits your preferred investment criteria. Once again, there's very little difference between them, so don't spend too much time trying to find the best one. Once you see how crazy expensive your initial criteria are, adjust your expectations and have them adjust the search to a more realistic one. Also, go to REI meet ups and reach out to wholesalers. The combination of all those things should give you enough info to make an educated decision on how to proceed.
If after that you're still unsure of how to proceed, PM me and we can have a Skype or phone conversation to see what your options are. Or, if you hate my advice, reach out to someone else and have them talk you through it.
Hello Craig. I don't agree that $20K isn't enough to get started. I live and invest in Cleveland, Ohio. You could very easily buy a duplex here for $100K, put $10K down and use $10K for rehabs, reserves etc. I know a ton of investors here in town that had less than $20K and now own cash flowing properties.
Additionally, I have contacts for a conventional lender here in Cleveland who only requires 10% down for non owner occupied single family homes and duplexes. It's pretty hard to find that anywhere else, especially since his rates are competitive...
Reach out to me if I can be of assistance to you. Definitely move forward with multifamily. Forget about wholesaling.
@Craig Moore, I have to agree with @Cary F. and disagree mostly with @Jacob Pereira . While I don't know your local market, I can tell you that I went FHA with only 3.5% down for my first property and I was "all in" including closing costs for well under $5,000. I did a 203k loan which allows owner occupants to roll rehab costs into the cost of the mortgage so that was a big benefit to my out of pocket expenses. Now that property brings in $1150 per month in rent. After mortgage and expenses, it easily cash flows $200-$300 per month.
I do think @Jacob Pereira had it right that you really should be looking at FHA route as an owner occupant because $20k on a traditional financing will be tough but it's not impossible in some markets. Sounds like it may be in Boston though.
I can also say that the lender that @Cary F. will refer you to seems to be very professional and efficient. I was referred to him as well and while I have not yet closed on a loan, I have begun the process of obtaining financing and all seems very above board and straight forward.
I have a question for you all: If you had $20k what
would be your first move with it? I've been saving up capital since I
graduated college and can't help but think how much time I am wasting. I
would like to get in the game now. I've been able to save
around $20k (+/-) and have been wondering if I should use that as a
downpayment on a duplex or triplex or use it as a marketing budget and
begin wholesaling. I'm not sure which direction to go in, but I do have a
goal of buying two multi-families next year. It's been enough saving,
now time to tackle some risks. Any advice?
Sounds like you have a few options. Which ever you pick, I'd like to wish you the best of luck!
@Craig Moore, I have to agree with @Cary F. and disagree mostly with @Jacob Pereira . While I don't know your local market, I can tell you that I went FHA with only 3.5% down for my first property and I was "all in" including closing costs for well under $5,000. I did a 203k loan which allows owner occupants to roll rehab costs into the cost of the mortgage so that was a big benefit to my out of pocket expenses. Now that property brings in $1150 per month in rent. After mortgage and expenses, it easily cash flows $200-$300 per month.
I do think @Jacob Pereira had it right that you really should be looking at FHA route as an owner occupant because $20k on a traditional financing will be tough but it's not impossible in some markets. Sounds like it may be in Boston though.
I can also say that the lender that @Cary F. will refer you to seems to be very professional and efficient. I was referred to him as well and while I have not yet closed on a loan, I have begun the process of obtaining financing and all seems very above board and straight forward.
I agree with Jacob just a bit, it is extremely hard to do anything with $20K here in the Boston area. I may look into the 203k loan and go from there. My question for you is, is only $200-$300 per month worth the stress of being a landlord in the long run?