How do I get started with $20k?

8 Replies

I've been a handyman all my life. I dream of becoming a real estate investor. I would like to start with single family flips and then move on to owning rentals. I have $20k to get started in Florida. What would be the best direction for me to get the ball rolling?

I thought about partnering with someone if I can find someone willing.

Or maybe a hard money investor.

I can do and manage most of the repairs myself so that would save some cash.

Thank you for any advice.

I prefer rental properties over flipping but I understand the attraction of raising capital by flipping. I think a local Real Estate Investment Group is a good place to start. This will help with both advice and finding a partner if you so choose. You might also reach out to other BP members in your area. You can setup a search or keyword alert on your BP account. Put in your city name and you'll see who's active.

20K for a new investor will let you buy an 80K property using conventional funding. Depending on your market you might not have enough to buy a buy and hold. Keep in mind you'll need more than 20K because of the financing costs etc. 2-5K extra. 

Hard money could work but make sure you will be able to finance out of a 12% hard money loan into a conventional and get all your money back. 

Best, 

Andrew

@Lance Conyers $20k is tough in my area but may work in yours. Keep in mind It's not just the down payment and closing costs when you buy. You also need to pay generally 1% of what you borrowed as an interest only payment each month and 2 -4 points up front. AND you need to front the payments for labor, subs and materials. Hard money is a reimbursement model, they dont pay you until you show them a receipt.

With all that in mind you have 2 choices. 1) keep saving up money. 2) partner with another investor who can help pay these bills. It's worth giving up equity to get started - I did it on my 1st deal, worked great. On my 2nd deal with the same contractor. I help pay the bills, he does all the work. Find someone to partner with; no reason to wait.

I would start by learning your local market and building out my team. Relationships with a investor friendly real estate agent and a lender is the key to the castle. 

Originally posted by @Lance Conyers :

@Roni Elias

What about starting with mobile homes? In Florida there are a ton of mobile home parks, 55 and older, and are very cheap to buy. Not sure if there is a huge market for it.

You could invest in mobile home parks and they are strong cash on cash returns.  If you are going to buy a single unit which might be hard really you just have become a bank and charge very high interest. Also, your asset which is the mobile home park is a depreciating asset and that is all you own. Usually, the land belongs to the mobile home park. So for the first couple of years the money coming in I would mentally classify that as I am paying back my principal. The asset I would say is not appreciating as it is a physical asset of a mobile home park. 

Whether 20k is enough depends on your market. Low cost housing market it could get you into something. Live in it and rehab. Sell for profit. Benefit of this is that you can qualify for FHA lower down loan as your primary residence. Be aware that low down loans generally require the house be decent already so you are looking for something in good repair but dated and ugly.