Can I get started in real estate investing with $15k?

Question

I currently have $15k cash in my savings and I’d like to get started investing with real estate as soon as I’m capable of doing so. I currently work a full time job in college making $40k a year so I’m pretty able and willing to save money from my paychecks as I’ve been doing until I find the right opportunity.

I’m still living with my parents so I’m able to save a good bit of the money I’m making.

Main thing for me is knowing whether I should just keep saving money to buy a rental property or if I should get an FHA loan and “house hack” or where I should start

David Greene · Answer

@James Melby house hacking is almost always the better option in my opinion

Evan Polaski · Answer

@James Melby, you can get an FHA loan on up to a 4 unit property.  I would recommend this route, personally.  Now, is $15k enough to get started?  That will be a question only you can answer, but will depend greatly on the property.  An FHA loan will require the property to have very little in terms of immediate needs, but generally, you can get an FHA loan with 10-15 year old furnace or 20 yr old roof.  If your Furnace and roof both need replaced shortly after you buy a property, that easily be $10k in cap ex needs right off the bat.  Of course, a thorough inspection will mitigate the likelihood of these unexpected capital items coming up.

Beyond the capital needs of the property, $15k does not go a long way in terms of buying a property.  You will have down payment, appraisal fees, underwriting and application fees, etc.  But the big cash items to close tend to be establishing your escrows.  Depending the property and date of closing, this could be several thousand dollars or more, in addition to your down payment.

Mike Cojocari · Answer

With FHA you have to occupy the property for at least 1 year.   House Hacking is not easy.  A lot of areas don't allow it due to zoning ordinances.

You're in a very good position.  Keep storing away money.  You have plenty of time to find that rental property.

Corey Hawkinson · Answer

@James Melby You’re off to a great start with that amount saved up while you’re still in college. I agree with David that house hacking is the best way to start. If I could start again at age 20 I would follow the path laid out in Set For Life by Scott Trench.

With that said, you can afford to be very picky since you’re in a great position living with your parents and saving money. Take your time to find the best house hacking property.

Allen Wu · Answer

@James Melby

Maybe house hacking or just invest in a reit if you want more passive way to invest

Kyle Reece · Answer

Just to add my 0.02 since no one has mentioned it yet. You can ask for seller concessions with FHA up to 6% to help with closing costs. I've done this twice when house hacking. If the deal is thin, it may not be worth it. But if you have strong cashflow it will work great.

Steve Schulman · Answer

Hey James - congrats on taking the next steps! I agree with @David Greene & @Evan Polaski. But would like to add to what was said.

I started my real estate journey by house-hacking a 1920s built two-family with an FHA 203k construction loan. Swung for the fences with a full-gut rehab; gained a whole lot of experience and forced some good equity while doing so, all with 3.5% down and the banks money for the rehab. I highly recommend this route to new investors just starting out and would definitely look into it and/or speak with a lender, preferably one whose done a bunch of them. Underutilized tool if you ask me.

Can I get started in real estate investing with $15k?

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