20k in saving. Go all out or save?

Question

Hello all

I am fairly new to the whole idea of real estate investing. I graduated from grad school last year and have been working for a year. I have saved 25k since I stated working. However I am not sure if I should invest the money in real estate as the mortgage rates are so low or save the money for emergency with the whole COVID situation. I am looking to invest either in Denver CO or Austin TX.

What are your thoughts?

Sean M. · Answer

@Kavya Wadhawan

I am new to RE. If I had the opportunity to start straight out of school I would house hack. My understanding is that there are incentive programs(insanely low interest rates), in some started, for 1st time buyers. If you go this route perhaps look at a reliable house without rehab.  Study your market. Also listen to BP podcast 392 with Todd Baldwin. It’s insane to hear his story.  But, there some awesome gems. Keep in touch. Would love hear how things go for you.

Sean

Craig Anderson · Answer

I think the 3-6 months of living expenses is too risky, as an emergency fund, when considering the shaky condition of the U.S. in 2020, & will continue into 2021. And it might be wiser to have 1 year to 2 years saved up, in living expenses.

Brian G. · Answer

@Kavya Wadhawan my advice is to be debt free with an emergency fund of 3-6 months of living expenses prior to investing. Buy a condo, townhouse or house and rent to some room mates, ie house hack! Read the book “Set for Life” asap for a great roadmap to success. Congrats on your savings rate. That is critical to success. Keep it up!

Matt M. · Answer

Six months to a 1 year in reserves at a minimum. I'd pickup a condo/townhome and get a roommate or two. See how you like it. After a year, rinse and repeat.

Aaron Zimmerman · Answer

I 100% agree with Darius. I would make sure you have adequate reserves (3-6 months expenses) plus purchase price and rehab costs. Based on the markets you described, you may want to save a bit more. Reserves keep you in the game. By starting out young, you're already ahead. Best of luck and let me know if I can be a resource in any way. I just purchased my first house hack in December.

Darius Ogloza · Answer

The easiest way to flame out is to to try to do a deal for which you are undercapitalized.  I would focus on doubling my savings through continued employment and conservative investment before making the jump to rentals.  However, there is no harm in engaging a mortgage broker to discuss your financial situation, determine what you are eligible to buy and to continue to kick the tires by getting to know your market.    If somethign crazy good comes up, you will be rady to pounce on it.  Good luck.

Sean M. · Answer

@Sean Myers

Error. In some states....

Diamond Bland · Answer

Following! I hope you get some advice. My situation is quite similar to yours. Great credit, money saved, student debt low, no bills, etc... My father suggests I go all out. He said debt is money, but of course he is living well. I never thought of student debt in terms of bad money and doing something like this in terms of good, until I started doing research. Good luck!

20k in saving. Go all out or save?

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