Maple Valley, WA · Member since 2017 · 45 posts · 12 votes
In November I expect to have a small amount of cash to invest. Due to this limited amount I'm thinking about the following options:
- Partner w/ another investor (I provide the cash for rehab?)
- Use it to be a private lender in order to build reserve up over time (I assume this would need to be with investors outside of WA state where there's more affordable housing)
What is the average $ home in your area? Depending on where you live, you could use that money as a downpayment for an FHA 3.5% down load, or USDA 0% down loan. You can also roll in your closing costs as a concession if the purchase price is over 100k~. If you go the FHA route, you can bundle it with a 203k construction loan, which you can use to help you rehab a property. Then you can use the BRRR method to pull your money out and do it again,,,and again..........and again.
@Taj Hayden Hi there, and nice to meet person with a very similar financial situation.
Looks like Joe Villeneuve already asked all that i was planning to.
Here is my situation that might give you an extra option.
Not sure about you, but i'm on w2 and saving up around 2-2.5k every month.
So far my plan is:
1. Partner up with 2 friends who also have about 20k of savings and try to flip something affordable in the midwest.
2. Another option that i keep in my mind is to move to more affordable city like Salt Lake/Philadelphia etc and buy and hack MFH (multi family house) for beginning. This option is little more secured as i will be living in it and taking care of most upcoming
Best of luck to you! Hope to hear a successful story about you soon!
What is your overall reason for getting into real estate?
I'm just starting out also, and trying to slowly accumulate as many cash flowing rentals as possible while I keep my full time job. For that reason flipping seems a little more daunting to me.
Are you looking to do this full time? Or at least be more directly active in the investments?
That's awesome and If so, I think all of your ideas are really good, @Sergii Khromchenko's as well.
If you have a full time job and are just looking to put some money to work passively. 20k is enough to get into a rental too. You won't get rich quick going that route though that's for sure. But it is time tested and allows you to get some experience. As an example my first rental which I just recently bought was 18k all in with a 25% down payment and it had a 1.5% RV ratio. I bought it retail on the MLS and it was recently renovated. Not sue if you want to leave yourself with so little reserves, but I'm sure you could find a cheaper house or save a little more.
Good luck to you! I'm curious what you end up doing, let me know!
What is the average $ home in your area? Depending on where you live, you could use that money as a downpayment for an FHA 3.5% down load, or USDA 0% down loan. You can also roll in your closing costs as a concession if the purchase price is over 100k~. If you go the FHA route, you can bundle it with a 203k construction loan, which you can use to help you rehab a property. Then you can use the BRRR method to pull your money out and do it again,,,and again..........and again.
OK @Taj Hayden You've gotten a number of suggestions, warnings, etc... of what some think you can/can't do with 15-20k in cash. The answer you're looking for goes right back to my original questions. Every option mentioned here, and the ones I have for you, are completely dependant on the answer to those 3 questions...which I will repeat now:
Q1: What is/was the source of these funds?
Q2: Is there a one time cost, an on going cost, or both, attached to these funds?
Q3: Is this a one time thing, or will these funds be regenerated...and if yes, over what period of time?
@Sergii Khromchenko Thanks for the input. I wish my REI clock started earlier as I would have absolutely gone the MFH/hack route. I do want a partner but my most likely source may be from networking to find one.
You might consider the Spokane market for picking up your first deal. Vacancies are at an all time low, rents are rising and the market is looking better and better there. You could get into a lower end home maybe even with a conventional loan just to get your feet wet.
1st reason is to produce $2K/month by 2019 (son will be a freshman in college. 2nd reason is to produce $6K/month by 2024 (daughter's turn in college). I realize these probably sound like conservative goals but given what I'm starting with (and my anticipated learning curve) I would rather err on the side of caution.
I do have a FT job and have no problem with the slow & steady approach. I agree with you on the flipping scenario; I feel like that's a lot to bite off for me. It's hard in Western WA to find homes with a purchase price of $90 - $100K (most of what I've seen so far is vacant land). The BP Podcasts frequently mention having investments w/in a 2 hour drive and that may be something I need to explore. I'll keep you posted.
The median price in my zip code is around $450K and I'm 20 - 25 miles south of downtown Seattle. I love your suggestion but I thought FHA loans had to be owner-occupied (at least initially)? The BRRRR strategy is ultimately what I want to do so if I can use FHA like you've described that looks very promising!
@Chase Harris I will definitely look at Spokane, thank you for the recommendation. That also sparked an idea to ping a friend who lives there (owns a successful business). Maybe he'll partner with me if I found the right property. Thanks!
@Taj Hayden A business partner can be great for starting out. If I can make a recommendation I would set aside 5-10 % of the purchase price towards unexpected expenses.
If you're going to be the active investor (looking for properties, overseeing rehab, etc.) you would do the work and the other would bring the money (or most of it) in a partnership. Or you could go 50/50 too, but I wouldn't do that unless your partner is also doing the work or paying you for your time.
You could also use that money as a down payment on a house if you're in a less expensive market. Or if you're willing to move, buy an fourplex with an FHA loan (96.5% financing) and you live in one unit while renting out the rest.
I'm in a very similar situation! I haven't decided what I want to do yet either but here are two options I've gathered as moving and house hacking a multi isn't an option for me.
1- Use money for a down payment on one house that cash flows and then regenerate the 15K-20K and repeat. (Too slow for my goal)
2- Use hard money to purchase a distressed house and use the money to rehab, rent, and then refinance which would then return either most or more capital than you stated with to then go and repeat, repeat, repeat. (Brrrr)
I'm not very scared of leverage and am willing to leverage myself as much as I can as I also have a decent paying W-2. Which is why I'm leaning towards option 2.
The problem is I'm having trouble figuring out how many times I can pull off a Brrrr because from what I understand my credit score will take a hit every time I do this and eventually won't be able to qualify for a loan due to credit score! So do keep this in mind.
I hope you figure something out! Please share what you decide to do as I'm suffering from analysis paralysis right now and hearing from someone in the same situation with the same starting capital would be encouraging!
Wait a second. Am I understanding this correctly? You have kids who are almost off to college, no savings, no safety cushion and you are going to finance an investment when we're at a market high with a 15 - 20K cash-out-refi?
I say "NO". There are costs which come along with a cash-out refi and if anything goes wrong - which is a risk you take if you partner up with a stranger - you have nothing to fall back on.
What you should do is review your finances, come up with a budget and then work hard at saving a down payment.
It was cash-out-refis and HELOCs which got everyone into trouble the last time. I see it happening all over again.
I disagree with the above poster. You can't will your credit score to your kids so you might as well use it while you are alive. Nothing ventured, nothing gained. If I had 20k in my bank account before I caught the real estate bug I would squander it, I've wasted a lot of money in my short life. That being said, I like @Trevor Lohman and his advice. I bought a house all in for less than 20k this year. People try to scare you out of buying affordable properties because they fear you'll buy in a war zone. We live in one of if not the richest country in the history of the world, if these are war zones, war ain't so bad. Happy investing.
The original poster does not live in a cheap area like you do where you can buy a house all-in for 20 grand. Investing out of state is going to increase his cost basis significantly over yours even if it's a cheaper market. Plus he is at an age where he should have significant savings in the bank. If he doesn't, he needs to analyze the bigger picture as to why that is. For most people it's because they lack the ability or the discipline to differentiate between wants and needs.
His goal is to generate 6K/month by the time his daughter is in college. You have to have a significant amount invested to produce 6K/month of cash flow.
I'm not going to "yeah, yeah, yeah" you and blow smoke up your ***. It's not a popularity contest.
@Michelle R. That's not an accurate picture. I do have savings but that's "family" money, not REI money. The income goals I previously mentioned are for when they call home asking for money, plus I want something left over.
I somehow transposed two numbers when telling my lender the amount owed on my house (I listed my mortgage at X75 instead of X57) so there's an $18K swing in my favor (I've probably been staying up too late researching everything). Anyhow there's definitely more of a cushion now that I have my numbers in the right order. My wife and I also decided to not go the partner route so I'm fine with a slower, cautious approach.