What would you do with 20k?

12 Replies

If all you had was 20k, and only 20k to pay for everything (DP, closing, etc)... how would you invest it in real estate?

Use it as DP for multiple 50k apartments? 

DP for a single family home?

Or find somewhere else other than RE?

If all I had was $20K, I would buy a SFH and get housemates to fully or partially pay the mortgage. That is what I did. I lucked out with market appreciation, which then allowed me to refi or get a HELOC to purchase another property as an investment.

If all you actually have is $20k, I don’t know if you should be buying investment real estate, unless it’s also for you to live in. I think that’s just risky.

1. Your first scenario of “DP for multiple 50k apartments.” Judging from some of the podcast guests’ stories on BP, I guess it’s possible. I’ve never done it. And I am presuming that you mean apartment buildings, rather than multiple properties that would be SFRs - different financing options.

2. “DP for a single family home.” If I were to do anything RE related in your shoes, this would be it (from your own options.) But you’d probably have to look out of state.

3. Since you also asked for suggestions: I’d suggest looking at “house hacking,” where you buy a 1-4 unit property in which you’d live as your primary residence and either: (a) get tenant-roommate(s) if it’s an SFR or (b) “real” tenants if it’s a duplex, triplex or quad.

This option may allow you to use a low DP, lower interest rate than for an investment property, and - depending on your income-to-debt ratio - may help you qualify for the loan by using 75% of the current/existing rental income from the subject property. I believe there would be PMI payments, though. But, depending on the specifics of all details, you should still be able to cash flow (positively) - otherwise, I’d still advise against this.

The reason I said that it’s risky if $20k is “all” you have is that you have to make sure that you can come up with funds for unexpected repairs in a hurry.

That’s just my take. Others certainly have different risk tolerance.

I’d buy a house. That’s what I did.

House Hacking is your best option with $20k

i concur with everyone who said HOUSE HACK. That is the best option. 

Hmmm maybe my best bet is to rent my empty rooms in my house for now until I can save up more cash. Thanks everyone for responding. I was thinking of getting more cash from a home equity loan but that might be too risky for me on my first investment. 

@Meldeine Sipes I would hold on to it until I had more. If it's your last $20K, then you cannot afford to lose it. Believe it or not, people sometimes lose money on an investment. Sometimes things don't work out the way we plan. You need to have more, especially in CA and you need to have money that if you lost it, it would not be the end of the world. 

You could look into out of state investing in a market where 20k could actually be put to use on a SFH investment. Take Memphis for example, there are distressed properties here that you could find for less than 15k in low C areas that you could turn around and sell for 20-25k just by doing simple touch ups like having someone do landscaping and trim the bushes.

If you don't mind long term investing, you could also put tax liens on properties in out of state counties. The owner has a one year redemption period to pay off your lien plus interest or the property becomes yours. 

You could also search REO, pre-foreclosures and more. Just make sure to do the homework on the investment and make sure it is in an area where you'll get a decent return!

Wish you the best in your success!

So this 20k is a number I am willing to risk. It will hurt if I lose it but I won’t be homeless or be in a bind. Anything more than that will require me to dip into risks I’m not willing to take yet. I’m definitely looking outside California. So far I’ve only been looking at Las Vegas... but I am open to other locations.

@meldene i have been looking at areas in detroit and seen some pretty cheap prices. Maybe check that out? Im new so dont take my word for it. 

#cheers

Originally posted by @Meldeine Sipes :

If all you had was 20k, and only 20k to pay for everything (DP, closing, etc)... how would you invest it in real estate?

Use it as DP for multiple 50k apartments? 

DP for a single family home?

Or find somewhere else other than RE?

I’m a buy and hold guys so...

(A) partner with someone who has more funds and experience in B&H

(B) use your funds as due diligence on a mid-sized MFR (which you'll be reimbursed at closing)

(C) Both A and B. 

COREECT ANSWER: C

House hack if you need a place to live otherwise think bigger. Find a few friends or family to invest alongside your money and hard work to buy a multi family or commercial property. 

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