$20k Cash Ready to Invest. Now What?

Starting Out
7yFollow

$20k Cash Ready to Invest. Now What?

Alex Mendoza
Rental Property Investor · Plano, TX · Member since 2015 · 38 posts · 24 votes

Hello BiggerPockets! I’m trying to get started with my first deal. Right now, I have $20k in cash and ready to get started. I’m writing this with a little frustration and slightly demotivated ... but it NO WAY am I stopping!! I’m just ready to get started and want to put that $20k to work.

I've been looking for my first SFH deal (to hold for a rental) in Texas (north of Dallas). I've tried different strategies - driven around, searched MLS (I'm actually working on RE License now), looked at inventory from a few local wholesalers, and mention my interest to invest to a few people I've met. But that 1st deal is still beyond my grasp.

Is $20k just not enough to get started? I’ve analyzed many deals using the Rental Calculator, and they would cash flow, but those deals are snatched up quickly (assuming all-cash buyers). I’m afraid that it will take me a considerable amount of time to come up with enough capital for all-cash deals ... but if that’s what it takes, I’ll keep the course and wait a little bit longer.

9Reply
72 views

Most Popular Reply

Kevin Dean
Rental Property Investor · Chantilly, VA · Member since 2017 · 104 posts · 149 votes
7y

Hey @Alex Mendoza, don't be discouraged, my first deal was with $15K, and I live in the DC area which is a very high cost area. 

After looking for properties in my area for a few months I realized that it was simply not realistic to buy a SFH on my own in the area at that point. So I did three things.

1. I re-evaluated my strategy - There are so many strategies out there that you can make work with different amounts of money. The key is to evaluate where you are right NOW, where you want to be, and then make the best decision based on your current situation and where you are hoping to head long term. 

2. I chose a lower cost market within driving distance (Baltimore, MD) - this was within driving distance, however, now I invest in a market which is not in driving distance, and it still works well. For my first deal, I was more comfortable with a market nearby.

3. I found a partner - this is where I messed up. I wish I would have spent more time really evaluating this partner and searching for someone with values more closely aligned to my own. I did know him for 6 months, talked to a number of his previous partners, but my gut told me that our values were not in line. 

Some people have trouble ever pulling the trigger. If you're like me you may be the opposite, in which case your enthusiasm can get the best of you. Despite the less than ideal partnership, this first deal gave me the confidence to really get after it, and my second deal ended up being much larger. So with all of that said, it's definitely a powerful thing to get into your first deal and get that snowball rolling. Just have to be creative and possibly pursue a less optimal strategy than you may be hoping for in the long term. 

11Reply
See this reply in the discussion

54 Replies

Jump to latestLatest
  • Kevin Dean
    Rental Property Investor · Chantilly, VA · Member since 2017 · 104 posts · 149 votes
    7y

    Hey @Alex Mendoza, don't be discouraged, my first deal was with $15K, and I live in the DC area which is a very high cost area. 

    After looking for properties in my area for a few months I realized that it was simply not realistic to buy a SFH on my own in the area at that point. So I did three things.

    1. I re-evaluated my strategy - There are so many strategies out there that you can make work with different amounts of money. The key is to evaluate where you are right NOW, where you want to be, and then make the best decision based on your current situation and where you are hoping to head long term. 

    2. I chose a lower cost market within driving distance (Baltimore, MD) - this was within driving distance, however, now I invest in a market which is not in driving distance, and it still works well. For my first deal, I was more comfortable with a market nearby.

    3. I found a partner - this is where I messed up. I wish I would have spent more time really evaluating this partner and searching for someone with values more closely aligned to my own. I did know him for 6 months, talked to a number of his previous partners, but my gut told me that our values were not in line. 

    Some people have trouble ever pulling the trigger. If you're like me you may be the opposite, in which case your enthusiasm can get the best of you. Despite the less than ideal partnership, this first deal gave me the confidence to really get after it, and my second deal ended up being much larger. So with all of that said, it's definitely a powerful thing to get into your first deal and get that snowball rolling. Just have to be creative and possibly pursue a less optimal strategy than you may be hoping for in the long term. 

    11Reply
  • Alex Mendoza
    OP
    Rental Property Investor · Plano, TX · Member since 2015 · 38 posts · 24 votes
    7y

    @Kevin Dean Thanks for the thoughtful post. Great information!

    0Reply
  • Michael Ablan
    Real Estate Broker · Watertown, NY · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Alex Mendoza Are you able to qualify for a bank loan? Are there any 2-4 unit properties that you could use an FHA 3.5% down loan on and house hack?

    You can also use the FHA 203k construction loan and buy one that needs rehab and have the rehab funded by the loan.

    Consider switching up your strategy. Find where you can compete and focus there. It sounds like you're not in the right position yet to compete for the REO's in your area where all the cash buyers are hanging out

    Good luck!

    3Reply
  • Tchaka Owen
    Real Estate Agent · Merritt Island, FL · Member since 2017 · 986 posts · 1k+ votes
    7y

    @Alex Mendoza - $20k is enough to get started. Building on what others have already said, I'm recommending 2 things:

    1. Speak with several hard money lenders in your area and get their criteria for lending. Have their numbers immediately accessible.

    2. Find an investing partner (or 2) and discuss what it would take to do a deal together. 

    Once you have that down, you will be able to hop on the next good deal that comes your way. It's likely that the reason you're getting beat out isn't because you only have $20k, it's because you aren't set up to snatch the deal. Love that you're eager to make it happen and if you keep with that attitude, it will happen! Good luck.

    3Reply
  • Dante Pirouz
    Investor · Almont, MI · Member since 2015 · 361 posts · 302 votes
    7y

    @Alex Mendoza Look for listings in the MLS that have been reduced multiple times or have been for sale for a many months or years. Don't judge the listing by the pics or listing text initially. I have found that listing errors (bad pics, scary language) makes properties no go for regular buyers but often is not a big deal to an investor. If there is mold, sewage, need new roof, etc. those are all rehab items that have doable fixes (I speak from "hands on" experience, yuck :)). I do avoid buildings that have been jerryrigged by a "handyman" with weird rooms in the wrong place, crooked floors, bad roof lines because that means you will probably have to rehab to the studs. I also try to stay away from Victorian age or older buildings because their bathrooms are always wrong (pre indoor toilet days). But even those issues could be fixable. In my area (Michigan), we still can get a decent SFR with good bones for $20K or less cash although it is getting rarer with time.

    Another option is to use the $20K to buy a larger 2-4 units using hard money, fix it up and then refi it in 6 months to cash out. I did that with a triplex we own paying 10% down on a $47,500 purchase price and $40,000 in reno costs which the HML lender financed as a package. Then we refid with our business bank in 6 months for $100K.

    7Reply
  • Ria Banerjee
    Member since 2019 · 2 posts · 0 votes
    7y
    @Jeffrey H. Hi. Is there any specific reason you are trying to get out of this? Also, can you please suggest some good property management out there who can do the property management part? Thanks, Ria
    0Reply
  • Justin B.
    Rental Property Investor · Franklin Lakes, NJ · Member since 2018 · 38 posts · 13 votes
    7y

    @Jeffrey H. Hey I invest in the northern New Jersey region . Can I pm you about out of state investing ?

    0Reply
  • Jeffrey H.
    Baltimore, MD · Member since 2018 · 169 posts · 82 votes
    7y

    @Justin B. i dont see why not. Feel free

    0Reply
  • Greg Markoski
    Member since 2019 · 1 post · 0 votes
    7y

    I'm new at this adventure and good tips for 1st timers? :)

    0Reply
  • Alex Mendoza
    OP
    Rental Property Investor · Plano, TX · Member since 2015 · 38 posts · 24 votes
    7y

    @Michael Ablan I am able to qualify for a loan. Will need to speak with the bank specifically about the FHA loan program. This is great!! Thank you Michael.

    0Reply
  • Alex Mendoza
    OP
    Rental Property Investor · Plano, TX · Member since 2015 · 38 posts · 24 votes
    7y

    @Tchaka Owen Thank you so much for responding ... I needed the encouragement and the actionable steps you laid out are ones I’m going to take right away! I appreciate it.

    1Reply
  • Zach CumminsPro Member
    Real Estate Agent · Carlsbad, CA · Member since 2017 · 53 posts · 68 votes
    7y

    What a great position to be in, with $20k to invest. Have you considered putting the money in a REIT in the interim or something that will earn a little more than silly bank interest at .000000001% (exaggerated)? This is something that I have thought about with our own investments as we wait for it to be invested into real estate.

    0Reply
  • Alex Mendoza
    OP
    Rental Property Investor · Plano, TX · Member since 2015 · 38 posts · 24 votes
    7y

    @Dante Pirouz This is awesome information! I've had a couple of investors to stay away from the MLS; however, it seems that if I consider the criteria you outlined, there may be some options. I will definitely look through MLS with more of a "investors eye".

    The strategy to buy using HML, rehab, refi, cashout ... is that a strategy you regularly use or was that only for that deal?

    0Reply
  • Alex Mendoza
    OP
    Rental Property Investor · Plano, TX · Member since 2015 · 38 posts · 24 votes
    7y

    @Zach Cummins I have not considered that. I’ll have to take a look at it and find out more. Thanks for the tip.

    0Reply
  • Dante Pirouz
    Investor · Almont, MI · Member since 2015 · 361 posts · 302 votes
    7y

    @Alex Mendoza I've only used HML for that deal but would consider it again. I didn't love the pressure to turn it around in a short time frame but it keeps you motivated. With a cash purchase you have less pressure because there are no financing carrying costs and that's what I'm used to.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jeffrey H.:

    @Dante Pirouz yes, that one. And other more expensive ones. 

     you should put them on the market place.. not on the open forum

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    1Reply
  • Andrew Zannotti
    Killeen, TX · Member since 2017 · 127 posts · 91 votes
    7y

    @Alex Mendoza thanks for the posting because its good to see someone else that is very similar to you working through the same things. I have set 25K to the side for my first true attempt at REI and its been frustrating at times.

    I'm in Lawton, Oklahoma and I've been looking for my first property to try and flip or BRRRR but I'm hoping to move back to Texas this summer after I finish school. I want my first attempt to be within two hours of my current location so I can be close enough to see some of the issues that arise up close so I can learn from them. I've called a few hard money lenders in the last few days and am working towards finding a place that I can get a pre-approval from so I have another tool in my tool kit. I've also joined pretty much all of the REI FB pages for the OKC and San Antonio (where I am hoping to go to next) ones so I can see the deals they post.

    Wish you the best of luck and hopefully we both get there.

    Andrew

    1Reply
  • Odie Ayaga
    Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
    7y

    @Alex Mendoza think of property acquisition strategies as a ladder. At the bottom is the low-hanging fruit, MLS for instance, where everyone is looking. A little further down is driving for dollars, but is only a little less competitive. Aaaall the way at the top are tactics like door-knocking, because people are afraid to do it, and SEO, because people don't want to take the time to learn it. If you're in a competitive market and you're at the bottom of the ladder it will be difficult, though not necessarily impossible to find a property. But, if you want to increase your success rate you'll want to consider using less common or known acquisition strategies. Best of luck!

    1Reply
  • Alex Buxo
    Accountant · New York NY (brooklyn, ny) · Member since 2019 · 5 posts · 2 votes
    7y

    @Justin Bilardello hi Justin, I’m in New York and is thinking about out of state investing. I would love to talk to you about it and your strategies.

    0Reply
  • Mark Overton
    Henderson, NV · Member since 2018 · 3 posts · 0 votes
    7y

    @Alex MendozaStand by I’ll send a message shortly my battery needs a lil charge

    0Reply
  • Josue Vargas
    Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes
    7y

    Marketplace is the way to go. 

    As far as I can tell, you are young, and you may have room to keep saving for your OWN investing property.  Be careful with who you team up.  20K is not a lot, but definitely something you can start with especially in Texas where properties are affordable.  You may be overwhelm with all kind of people trying to team-up with you.  

    Do you have a primary house mortgage?  Keep in mind banks/lenders will ask you to put down 20% plus at least good credit score for investment properties, and  6 month for backup.  20K will be short of these requirements, better to team-up, as you said, save, or be careful.  

    I'm in San Antonio and market is good, slow but good, need to wait until near summer time before going crazy and submit a bunch offers at the time to buy a property.  If your RE realtor is good, he will tell you the classic statement  offer vs demand.  More offer, less demand, better prices = summer when people move out (schools etc).  

    If you are new, eve with a RE agent, take a look at the availability, daily, in your market, learn the trends, learn what areas are hot, learn what will rent,sell, for what, size, upcoming areas/appreciation, what have they paid in the past in taxes is a good indication per sqft, condition, etc.  You will become very familiar with your area, then when you see a house, you know the feel right away... This is it, lets run the numbers!  

    Good luck!

    1Reply
  • Rob Hoffman
    Oakland, CA · Member since 2016 · 104 posts · 47 votes
    7y
    @Alex Mendoza as mentioned before, i would say the best way to go would be to house hack a duplex/triplex. You can get in with a lower down payment and benefit from lower interest rate. Especially since you are in a more affordable area than some of us. Here in the Bay Area our market is slowing down a bit and from what I understand the Dallas area is similar. It seems like its becoming agood time to be a buyer. Stayvin tuned to the mls. You will see houses sitting on market for longer and more price reductions. Be patient then pounce when you find the property that is right for you!!! Just my 2 cents.
    1Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    7y

    Pretend you don't have that money.  Learn to make it with out money or very little money.  Learn your market and learn to market.

    0Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    7y

    @Alex Mendoza

    I'm in north Texas too. Competitive market out here with lots of real estate investors snapping up properties with cash. I bought a flipped 3-1 SFH in Arlington off the MLS that was reduced two times a year ago for 100k with 20k down. Rent is $1,050 and that's about as good as I could find in the Dfw area. I also bought an old beater in ft worth for 48k in sept. Had to pay cash for that though. Both of these properties had tenants in place so that's what I go for. Less hassle of trying to get rehabs done quick. You still have rent coming in and somebody else is paying the utilities. Then I fix them up if needed. The one in ft worth I'm raising the rent to $1,200/month after I put in an HVAC system this week.

    1Reply
  • Keith N.
    Investor · Raleigh, NC · Member since 2015 · 189 posts · 102 votes
    7y

    @Alex Mendoza $20K is plenty to get started. Ofcourse any “good deal” is also going to be perused by dozens of other investors. Just 1) be patient and 2) be ready to take action as fast as possible when you see something you like

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free