If the below was representative of you & your position what would you do to take full advantage of the inherited capital and launch your REI business? • - Recently inherited roughly $250k • - Long-term goal: Passive cash flow of $5k per month from buy and hold investments. With a balanced portfolio of high cash flowing properties & high appreciation properties that also cash flow) • - Primary residence is in Austin Tx • - Very attracted to the BRRRR model • - More than willing to invest out of state. Will not invest out of country (yet :)) • - Capable of and would enjoy doing the majority of the rehab work if the property were in or close to Austin • - Obtaining a mortgage likely not an issue given W2 income, credit score & DTI • - The only market with applicable relationships (to help until a reliable team is established) is in Jacksonville, FL • - Have 20 - 30 business hours and 10 - 20 outside of business hours per week to dedicate to this effort(s) • - Have been learning REI like a machine for the last 6 months and ready to move on 1st deal now • • Thanks in advance! •

@JD Martin 2%? I think you calculated the $5K as an annual return. To get to $5K per month she needs a 24% cash on cash return, so REITS are out. @Carissa Holmes Austin is a tough market right now since prices are high, but not sure why you would immediately go out of state. Texas has many great markets for both single family and multi family investing. I own property from Temple to Sherman.

@Carissa Holmes ok before you target 20% growth realize the first priority is not to lose the investment, which you stand a good chance of doing if you are chasing high returns: high reward=higher risk. 250k investable is a lot of money but it’s not a LOT of money. I can see a couple of different approaches that could work well: Commercial real Eatate with fixed NNN lease or established in-market multi to grow the money: you could lever up to maybe 1M fairly safely and target a spread of 3-5%. Won’t grow on trees but acheivable. That could grow your investment by 30k+ a year. Reinvest that money at a higher return. Or start smaller, learn the ropes with A- to B+ property locations and use those to get paid to learn. If you have a five year plan to reach your goal from that starting point I think you can, trying to do it in a year is very, very risky. Target 5 years I bet it happens earlier, target one year and go broke

one thing I think folks just starting out always need to realize before they invest is that if 20%+ ROI was possible everyone would be doing it.... but its not.... Usually folks get 5 to maybe 10% ROI... so to make 5k/mo you would need $1 million invested at about 6% return to get 5/k month cash flow. In the city I invest in the cap rate is more like 4-5%.... not sure where Austin is... IMO, the OP needs to get real about the possibilities and the number one goal should be preservation of capital not large returns. why? because if you lose your capital you are out of the game. So IMO buy something safe and learn the ropes.... trade up and over time you can get to your 5k/mo but target 5 years not 1 year. Also remember that many (most?) of the folks on BP are selling something so keep that in mind.

@Carissa Holmes If you try investing 250k in Austin right now you'd be better off going to a casino and putting it all on black. Lol. But take a look at syndications if you qualify. You could spread your 250k over 5 different ones to diversify to other markets. And its truly passive.

@Carissa Holmes You’ve got a great start, you have capital and drive. You won’t be getting 5k/mo from your initial investment of 250k. So I would focus on using that 250k to force appreciation in properties and trade up. San Antonio, small growing town in TX, or another growing Midwest market will likely work for you. Protect your downside and go for it!

Austin is super duper hot right now. It's going to be tough to get the returns you want in basic BRRRRs/turnkey long term rentals. I would look into the short term rental market and maybe do a few Airbnbs as Austin is such a hot spot. The STR returns are usually 3x++ what a longterm rental produces so it should still pencil out! Also, I know out of state investing might be daunting at first but I'd look into finding a market you like that meets your criteria for returns/growth etc. and build a solid team of lenders, contractors, property managers and agents out there that you trust. No better place to meet your team than right here on BiggerPockets.

If it were me, I'd create a Joint Venture or partnership with a builder/developer. 250k is enough to help you with multiple down payments....or purchasing single property outright. If you JV with a builder they handle the work/repairs and you split the earnings and just rinse, recycle, repeat and you're the cash provider. Inventory is low all around, it's competitive as heck in the 250k range, so I'd recommend creating inventory, cashing out, doing it again and again until you can focus on your long-term buy and hold strategy in a slightly less competitive price range.

I would partner up with somebody and buy 24+ units in secondary city. Rehab and roll Be a shark like uncle GC 😬 @Carissa Holmes

Hi @Carissa Holmes There's some great advice above. @Andy V., you're spot on: the market is ultra competitive in the lower price range. A friend of mine made an offer on a home in San Antonio that had 19 offers within 24 hours... all sight unseen. Carissa, any thoughts on checking out the smaller towns outside of Austin? Your $ can go a lot further driving down I-35 between San Antonio and Austin. Especially on the East side of I-35. I'd be curious to see if you can find what your looking for if you explore the small MFHs in that area. My first investment property was in the same city I lived in simply because of my own comfort level, but it's all personal preference. Good luck!

If this were you, what would you do?

Olga Daisel

Member since 2020 · 69 posts · 25 votes

5y

@Mary M. Austin is like 3% now

2 Reply

Dan Hunter

Rental Property Investor · Austin, TX · Member since 2020 · 43 posts · 41 votes

5y

@Olga Daisel

If you find a 3% deal in Austin, I’m all ears. It’s more like 0% or negative cash flow.

0 Reply

Tyler Williams

Dentist · Taylorsville, UT · Member since 2013 · 102 posts · 68 votes

5y

@Carissa Holmes

Sounds like you are ready to go!

Texas seems like a great place to invest.

Is this your first real estate investment?

0 Reply

David Dachtera

Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes

5y

Originally posted by @Carissa Holmes:

If the below was representative of you & your position what would you do to take full advantage of the inherited capital and launch your REI business?

- Recently inherited roughly $250k
- Long-term goal: Passive cash flow of $5k per month from buy and hold investments. With a balanced portfolio of high cash flowing properties & high appreciation properties that also cash flow)
- Primary residence is in Austin Tx
- Very attracted to the BRRRR model
- More than willing to invest out of state. Will not invest out of country (yet :))
- Capable of and would enjoy doing the majority of the rehab work if the property were in or close to Austin
- Obtaining a mortgage likely not an issue given W2 income, credit score & DTI
- The only market with applicable relationships (to help until a reliable team is established) is in Jacksonville, FL
- Have 20 - 30 business hours and 10 - 20 outside of business hours per week to dedicate to this effort(s)
- Have been learning REI like a machine for the last 6 months and ready to move on 1st deal now
Thanks in advance!

1. Move out of TX - utility infrastructure is dangerously fragile (life threatening).

2. Mortgage? Start learning about business credit and asset protection. "Control everything, own nothing". Also, learn about self-directed retirement accounts so you can tap otherwise idle funding sources and - for your family and friends - provide opportunities for more stable investments and better returns with less risk.

3. Start with what you have - relationships in FL, and build from there.

My $0.02 ...

0 Reply

Barbara Chaney

Investor · Hollywood/Ft Lauderdale, FL · Member since 2021 · 29 posts · 11 votes

5y

Hi @Carissa Holmes, I'm in the same position with a similar goal of cash flowing 5k/month on rentals. Hoping to do this in 5 to 8 years. I've started looking in South Florida. May have to start with an STR to make it work, but we'll see. I'd love to connect and compare notes though.

0 Reply

Justin Hammond

Investor/Developer · Salt Lake City, UT · Member since 2015 · 207 posts · 106 votes

5y

@Carissa Holmes I would look at private lending until you have figured out your acquisition strategy. You could make $2,000-$2,500/month in short term, low risk private loans for the time being, and then roll over your capital into acquisitions as they come up. That's what I do. And it allows me to be a little more patient and not chase acquisitions. I just lend my money out, and when I want to buy something I buy it.

0 Reply

Paul MoorePro Member

Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes

5y

@Carissa Holmes congrats and I hope condolences are not needed. With that much time on your hands you might want to consider doing an Airbnb arbitrage/furnished corporate rental. These can be very profitable and if it works you could scale up and still have a lot of money left to invest elsewhere, perhaps in a syndication. You can learn all about this from my friend @Al Williamson. Good luck!

Podcast Guest on Show #533

0 Reply

Nick Robinson

Rental Property Investor · Murrieta, CA · Member since 2020 · 338 posts · 343 votes

5y

@Carissa Holmes

I think the advice of buying something to fix and flip into a bigger property to build up your equity is the best course of action. Like someone said in an earlier post $250k is a lot of money but it also isn't. I would look to get something with as many units as possible and get the rehab financed through a local bank/credit union. If you have never owned an investment property that may hurt you but the lenders I know in PHX will go 75% LTC. Once you renovate the property you should have really boosted the NOI (which is how you value commercial properties). With the higher value you can sell and do a 1031 exchange to go to a bigger building. If you like the building or the 1031 exchange is eliminated then you can refinance pull out a good chunk of your money out and use that for the next investment. If it were me and I am investing in a highly desired market where rents are increasing I would go for agency debt and put long term debt on the asset with as many years of I/O as possible.

CASH FLOW IS KING

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