$50,000 - What to do?

Question

Hello ladies and gentleman,

I have been following this message board for a few months and have read the ebook from biggerpockets, but wanted to hear some first hand opinions on what you believe would be the best route to generate a profit and continue to grow my portfolio.

I have easy access to $50,000 cash. I can get a loan for another ~$200,000. I have a close realtor/broker friend and also a few local general contractors, but I do not expect these guys to give out any great discounts to me. I may be able to work a deal with them after the first transaction.

Time is not a concern, but I would like to generate more profit than if I was to invest it in CD or stock market. I live in the outskirts of the Charlotte, NC area and have access to both rural and populated areas.

What investment would you recommend taking when starting out with $50,000?

Joe Villeneuve · Answer

What you're asking amounts to the same question as "what car should I buy".  There is no right answer, there may be many wrong answers, but I'm sure there is a "best" answer.  What that is depends on a number of factors not mentioned here.

What are the terms of the loan?

What is your risk tolerance?

What kind of time do you have...specifically?

What is the extent of your knowledge in the following areas:

1 - How Money Works?2 - Entrance and Exit Strategies3 - Market (not property) Analysis4 - Do you have a set of financial goals based on your current financial position as a starting point, and desired future financial position?5 - The difference between Spending and using Money6 - ...that's the basic list

Brett Hearn · Answer

@Alex Smith

This question depends on so many elements.  I feel like one has to pick something, study the heck out of it, and jump in.  A lot of your question depends on what market you are in as well.

If you want to compound money overtime, I think the classic BRRRR that everyone talks about so much on these forums, will accomplish that if you buy right, and understand each step in the process and what has to happen for you to hit the numbers you are looking for.

I personally think the auction idea would be a nice option, you having a high risk tolerance and all.  Buy something for cheap with cash, make sure rents will make the 2% rule (or whatever #'s your looking for), and over budget for the rehab just to be safe.  Then Cash-out refi as much as possible of what you put into the property, and roll that over into something else, or payback where ever you got the money.

That is simply one idea, and it can be done in a number of ways.  The $50k could be used as a down payment on a distressed multi-family, for example.  If you have some experience this might be a better option.

I tend to think the market, in general, will be stabilizing soon but markets are so localized.  A lot, I think, depends on what your market is offering you.  Kind of like if you were a quarterback and you had to audible in the middle of a snap count, in order to read the defense and call the play to match what they were giving you.  Real estate is much the same way.  Maybe a flip is in your sites.  Buy a cheap, in distress, property with cash and budget a rehab that makes sense with comps in the area for an ARV, make the profit on the sell and roll it into another.

Basically you have options it all depends on your game.

Alex Smith · Answer

I understand. I will give a bit more information and maybe I can get a clearer direction:

Strategies I am debating are the following:

• Buy small lot and have a local contractor build a 3ba/2ba basic/value house so I can resell.
• Buy a manufactured home, place it on a lot, then re-list it.
• Rentals, but it is difficult to find any house less than 120k in my area that isn't slums. Typically houses are going for 200k.
• Try auction.com in hopes to find a decent priced foreclosure???

I have a high risk tolerance. I am a bit worried that the houseing market is nearing it's cost 
peak. I am a bit hesitant to buy in a rental knowing that the value of 
homes may stabalize or begin to go back down soon.

I would be willing to wait on a new construction to complete. Typically it takes new constructions about 6 months in my area.

I currently am living in a 180k property with 70k equity. I do not want to sell this now.

I do understand the way money works, but would like to get a general idea of what a "go to" strategy would be for compoundable returns.

What are your thoughts?