New investor with liquid cash.
New to Real Estate · Lancaster, PA · Member since 2017 · 15 posts · 17 votes
Hi All!
I've been in the bigger pockets community for a while now but havent been very active. I have a full time job but my wife and I are looking to get into the lucrative business of real estate to hopefully leave our jobs in the future!
I'm now looking to connect with many others on this site as well as grab as much as advice from you all as possible!
Basically, I have about $450,000 liquid cash to start my investment journey. We're looking to get into multifamily rentals anywhere from 2-5 units and above. Starting smaller would probably be a better goal to get to know the process a little easier and "safer".
I'm looking for advice as to how I should go about starting my journey with this amount of cash. I'm also looking to connect with people in my area / near my area. I'm located in Lancaster, Pennsylvania and only 1.5 hr from Philly, Baltimore, etc.
Looking forward to hearing from you all!
Austin,
You are in a great place! When I got started in RE, I had 0$ to spend. So I partnered my way into deals with sweat equity and acquiring/managing the deals. What I would recommend is connect with someone that is currently doing multifamily deals in your market. Partner with them for your first deal; I'm sure you can work something out where you bring most the capital, they find the deal and work with you through the entire process. Investors are always looking for other investors with cash. I'm sure they would be more than willing to partner and then you will learn it first hand from someone already doing it successfully. This will put you in an amazing position to start doing it on your own after just one deal and take a lot of the risk and fear out of it.
@Austin Smucker I'm from Lancaster and I'de be glad to get a coffee sometime and discuss real estate! Let me know.
@Austin Smucker you're in an incredible position! There's many great people here willing to help you! Good luck and have fun.
@Brian Alfaro
I’m in Baltimore and made the mistake of not building a repeatable business model. My first multi unit had appreciated to 350k and I owed 65k did a cash out refi for 140k and invested into another triplex. Unfortunately I spent all 140k on the rehab and 20% down.
I’m not in the worst situation as i now have 2 triplex cash cows that crank cash flow and have 20% +++ equity in both but now I don’t have the cash to buy more.
I’ve decided to change my business model and now focusing on row houses in Baltimore. Purchasing for 60k distressed pumping 40k in cash out refi for arv at $150 and rinse and repeat. Little money out of pocket and a repeatable strategy to financial independence.
BRRRR
I’m also an agent in Maryland if you want to tour any properties. Best of luck
@Austin Smucker
Be patient. There’s always a deal out there...sometimes you need to dig harder then others.
Good luck
I agree with what @Nick Robinson said: the bank is very watchdoggish about commercial loans so if a decent, medium-sized set of MFU is available that you like the numbers on in your area it may be a good jumping-off point. They won't really let you take on a terrible deal and as long as you understand the numbers going in and have a solid investor agent working with you, they should keep you pretty safe. With starting capital like that, I just don't see the point in getting a few SFRs unless it really works into your goals and what you would like from your portfolio but again, this is just an option.
1. Determine what the end goal is first. What do you and your wife want most, cashflow, appreciation, high returns with headache tenants, lower returns with tenants who almost never call you, the speed of retirement, etc.
2. After you determine what you want, either buy 2-3 books around it, buy a course/hire coach, and or watch a few youtube videos on that topic.
***3. Contact Matt Faircloth. He wrote the book "Raising Private Capital" which is published by biggerpockets. He is not far from you. You can lend him your money and basically get paid to learn from him. Since you would be lending him money, he would answer all questions you have + you get a hands on, first hand look into what a multimillionaire full time investor does regularly.****
Personally, I would invest into nicer single family homes in B+ areas with expanding populations and close proximity to grocery stores and 5+ (5 on a scale from 1-10) school, looking for cash on cash returns of at least 8%. Those areas are primed for consistent appreciation (typically 3% per year in Atlanta, GA) AND the tenants are less of a headache. ***I would contact 5 agents and have each one make 2 offers 30k below list price per week for houses on the MLS. I do this now, but I make, on average, 50 offers per months (works excellent!).*** I would not buy any of these houses cash - i would use loans (from small local banks and credit unions bc they will finance all of your properties, most likely) and partners. I'm 26 with zero responsibilities to add context as to why I would invest 450k like this.
Julian,
This is awesome advice, thanks so much! I will definitely contact Matt. Do you know what his preferred method of contact is? I actually have his book on raising private capital! I'll be taking your advice. thanks again!
@Austin Smucker
$450k? Awesome job getting to that point. I'm just curious, what did you do to obtain that? I'm trying to get to that level!
Hey Thomas,
Thanks!! This year has been a very fortunate one for my family and I. My wife has a job with a medical manufacturing company in our area who recently sold to a company over seas. She was the main person behind the sale so we were fortunate to get a pretty large bonus from them for helping the transaction go through with ease! We both have been at our jobs for a while now as well so we make a good salary working our regular jobs.
Nothing but best wishes for you, my man!
@Austin Smucker , I’m from Lancaster as well. I’ve been in the game for 11 years now. I have decent connections here. I started with a $60k home equity loan . Fast forward 11 years , we now own 80 apartments, 20 parking spaces, 15 garages all in Lancaster. Lancaster has treated me well!! We should chat
Carlos, congrats on all your success! I would love to talk. I'll shoot you a message right now.
thank you for reaching out!
@Austin Smucker
Austin I think that is a misconception on starting smaller is safer. The bigger you go the safer it is. Economies of scale, more streams of income(units), loans based on the property not on the borrower, financing, and barrier to entry. Biggest thing for me is that if you buy a house and your tenant moves out your at 100% vacancy but if you buy 20 units and one person moves out you only have a 5% and the other units help cover the cost of the vacant unit. What you need to get a loan is capital and a building that cash flows. The bank is also your friend when you get a commercial loan. The bank will not loan on a bad deal, but if you are getting a residential loan as long as your DTI looks good they will loan on it. Even if its a terrible deal.
Nick,
I love your ideas and advice, man, thank you so much! Our DTI is very low. Technically, our only debt right now is our home and we only have about $200k left on that which should be paid in the next few years quite honestly. I actually totally agree with you on the "bigger route". The more I research and talk to people the more I feel buying a larger complex might be my way to go. Especially because I would love to make this a full time thing as soon as possible.
Any advice on reaching out to banks? Should I start talking to my main bank which houses our checking and savings account as well as our HELOC? Or do you advice reaching out to multiple banks in the area?
@Austin Smucker
Good Evening Austin,
Which market are you trying to invest in? What is you're primary goal, cash flow or equity?
Hi Wes!
I'm still doing my research to narrow down to my submarkets...primarily I would say cash flow is the game right now.
@Carlos M. and @Austin Smucker
Gentlemen! If there is any interest in a meeting to discuss options in the Lancaster area please consider me in, if you'll have me. I live in Harrisburg but have worked here in Lancaster for the past 17 years. I am a Short Term Vacation rental owner now but I am interested in doing something local.
Doug! Lets connect - I will shoot you a message right now.
@Austin Smucker I invest in Harrisburg. Finishing up rehabbing my 2nd triplex this week, while flipping a SFH and wholesaling another. Hit me up. I'm always down to talk Real Estate
Dylan, awesome man, I am shooting you a message right now!
@Austin Smucker I would definitely reach out to your bank. Some banks like Chase don’t lend on commercial multifamily. I would probably reach out to a loan broker for my first deal and they should be able to find you a bank or credit union that will loan to you. You need to find a property first before you get financing but in general I would plan on putting down 30%. Since it is your first deal they may also want you to leave money in their account or see you have money set aside for maintenance. Which you should do any way. For my first commercial loan I went to CommLoan, Loan Broker, and ended up getting the loan from US bank.
@Austin Smucker I'm from Lancaster and I'de be glad to get a coffee sometime and discuss real estate! Let me know.
Kris! Awesome, I would love to connect over some coffee and discuss some real estate in the area! Could you shoot me a message? For some reason, I'm having trouble adding you as a connection on my side.
Lets see what we can do!
Hello @Austin Smucker. You're fortunate to be in a good area that has some great REIA meetups within an hr drive of you. Checkout www.meetup.com but you'll find there are some meetups in Lancaster, Harrisburg, York and Lebanon and they are all good and not sales pitchy at all. My friend @Kyle McCorkel also has a small RE meetup we used to meet a local breweries (pre covid) but recently have been meeting at a persons house to discuss real estate over a few beers. Feel free to reach out if you have any interest in joining or had any questions about real estate investing. I invest in Harrisburg/surrounding areas about 45 mins from you.
@Tyler Lynn
Great advice. I would say this too. Who best learn from but a successful multi family investor.
@Steve Vaughan
True. Use others cash first.
Since nobody else has said it I'll go ahead and be the one to.
You should never disclose having $450k cash on a public forum especially when you mention that you are new. Be prepared to get a lot of colleague requests and inbox messages from people looking to sell you what they specialize in or people telling you how to spend your money on what's best for them rather than how to invest it in what's best for you. With that being said my advice would be to first ignore those colleague requests and messages and second to listen to all of the podcasts here on BP, read through all of the forum posts, attend some of the webinars and really learn about the various ways to invest in real estate. There is a wealth of knowledge here and virtually anything you can think of has already been addressed and discussed.
Good luck and congrats on deciding to start your investing journey!
If I had that kind of money, I would find one of these hungry guys on here who is in the saving and learning phase, and have them bring you deals for equity splits and such.
@Austin Smucker I am also new to investing and have $650k in liquid cash to invest in multi- family units as well. Perhaps we can partner on the right opportunity.
Hi @Austin Smucker,
Read Profit First to make sure you and the people you lend to know what the goal is and to make sure your money is managed.
Also, I'd find someone you really trusted in the space you're looking to get into who has done the deals you're looking to do and learn from them and maybe partner on a deal before investing the full amount.
Good luck on your journey!
@Austin Smucker Congrats on the decision to jump into the arena. My first bit of advice is view it all as investing, purely and simply, no different on how one would evaluate a position into a dividend earning stock because end of day the two are very similar.
In that same vein some of the key aspects for success are highlighted such as actively managing ones own portfolio vs utilizing an experienced professional portfolio manager; yes it will take a diminish potential profits a bit but it's an offset as you gain a lot more security, certainty of performance, and time, so much more time and so much less stress.
A next important bit of advice, go where the performance is. Imagine if you invested into stocks solely determined by the companies that are within an 1hr drive of your residence.... everyone would says that's a totally crazy idea, which i agree it is especially to do such and expect to get good profitable acquisitions, yet why do so many do the exact same "crazy" thing with Real Estate investments and act as if it's opposite-world and a sure fire recipe for success? You will have the same problems as with a stock investment, severely limiting ones option of assets, by about 99.9985% limited.
Look, when you have a whole $20k to invest it's different, that's not investing that's grinding, consider that just like options trading, trying to leverage up to get to a point of investable capital. But that's not you, your entering with actual investable capital, so follow sound investing practices and tenants, go where the performance is, and it's NOT the bi-coastal areas, it's the midwest handsdown. The coasts are in midst of a lot of change and X-factors right now, that means risk, we don't like risk. Yes, midwest has some of those factors but nothing like the coasts AND historically the midwest is the solid earner markets, steady and reliable, and data in covid reflects this still especially the Scandinavian populated upper midwest.
If you were my client Austin, I'd first connect you with the local commercial and portfolio lenders in the opportunity markets so you could get that ball rolling to leverage your best cheapest leveraged capital. Next I'd source 4(four) good structure, good area Quads, I'd probably go to my contacts and direct source these via retiring landlords. I'd focus on markets within growing/ developing markets of B/C class (ideally c-class that has potential to ascend/ reclass to B). Utilizing $350-$400k on acquisitions, keeping $50-$100k in capital reserves, structuring closings in such a way of getting rent payments and deposits on closing day to lesson capital outflow. Now your sitting on 16 performing units, market value of $1.6m-$2m in real estate. Ideally where we can re-class to B-class tenancy on tenant turns via strategic renovations, tapping local improvement deferred 0% or low interest loans, again keeping capital outflow to a minimum, to than get to a 20% equitable gains or better in 24-36 months (post renovation expenses). Than order a new appraisal and tap some of that equity, combined with additional capital, to "rinse & repeat" for another Quad.
That is what I would do.... Putting you into a cycle where we are ideally picking up 1 good performing Quad-plex every 18'ish months, until we hit the pre-determined net free cash flow rate wanted to make you financially free (match working income). From there we go into a cycle of equity accrue, plan a future liquidation of properties, tapping such gains, 1031 profits (if no Biden) into a singular Class B/A commercial residential complex, say around 200 units. Than, plan which beaches you'd like to spend the year sitting on.
@Austin Smucker Welcome! I’m also starting out and pretty new here! I’m just down rt 30 from you in Philly, and just closed on my first deal (a Triplex) with my wife. Over the course of the year I spent finding this first deal I was blessed to meet a great agent who has several off-market deals I am now working on making #s 2, 3 and 4! The smallest of these is a duplex. Let me know if you are interested in touching base!
@Austin Smucker
May be the wrong forum to say you have a lot of cash, you will receive a lot of friends lol. Only kidding, that’s great for you and I am sure a lot of people on here are very jealous. You are in an excellent spot right now for potential financial independence. Even though you have so much liquid I would still try and spread that as far as you can!
I'm afraid my first thought was "oh, why not just hang a raw steak around your neck and wander through a wolf-infested forest at night?". Look, most of the folks on BP are great, but there are plenty of predators cruising around here too. Inexperienced people willing to spend large amounts of cash trying to get-rich-quick based on something they have seen on TV. What could possibly go wrong!
I usually get a collegue request that goes along the lines of "HI! I'm a Newbie. Do you want to Mentor me?
I know less-than nothing about RE. Do you want to give me money invest in the GREAT DEAL I found? It doesn't cash flow, but we should make lots of money on appreciation 'cause I used the tools on BP". Basically a Nigerian scam/catfishing hybrid. You're bigger potatoes, so you'll probably be attracting more of the Bernie Madoff level cons and maybe some retirement/investment fund/SEP IRA, etc. types --"Please give us all of your personal information, pay us $1,200...no, make that $600, and we will set up an investment checking account for you to put all your money in. We will have all of your personal information and all of your account information. . We have no licensing or bonding of any sort. Again, what could go wrong.
I would make sure that you have a really GREAT tax person, but that's sort of a given.