How would you invest your first $100K?

Question

Very simple question from someone who doesn't know how to start...how would you invest your first $100K?

Any feedback, idea or advice is more than welcome. Thank you!

George Despotopoulos · Answer

Just an FYI, I think most hard money lenders would like to be @ 15% - 20% for a first time investor. There's also typically a liquid reserves requirement of 3-6 months of loan payments and that you have 10% of the rehab costs. This may be on the more conservative side of hard money but it's just something to factor in when trying to see what you can do w/ $100k.

Another thing, if you're getting 10% down, that doesn't factor in closing costs and any other costs associated with financing (processing fee, underwriting fee, origination fee, appraisal fee, etc). This will vary lender by lender but most will have some sort of fees attached to their loans, so it's not just 10% of purchase price that you'll need to account for.

Eric Siegfried · Answer

@George Despotopoulos

You’re definitely right on the money with fees, down payments, reserves, but no one has mentioned that HML allows you to finance up to about 70% of rehabbed value so you still aren’t paying for the reno out of pocket.

Mike Schorah · Answer

@Luca Burato

I don't see why you couldn't flip anywhere with $100K. If you're putting 10% down (which seems to be the minimum with hard money loans) on a home that would have a $300K ARV (The median home value across the United States is $287K (https://www.cnbc.com/2021/06/1...)), then that would be 5 homes that you could flip at once (at $20K down per home). It'd be tight, but could work. I think it's a better idea to start with 1 home, though, so less money is risked and learning is easier since learning from 1 would be hard enough compared to learning from 5 at the same time and getting burned out.

Taylor L. · Answer

It depends 110% on your goals. Someone who wants to build wealth and cash flow for retirement will pursue a different strategy than someone who wants to build a business.

So, what are your goals?

Davis Stoner · Answer

I also live in NYC. In April I purchased my first property out in NE PA. I think that is a very good market with a good price point.

The problem is, one of the units needs minor rehab. I find myself driving out there a decent amount and spending a lot more time than I wanted. Luckily the rehab is coming to an end and I've learned what I do not want to do. Either buy a property close to you, or go long distance. Do not go right in the middle because you will spend too much time in the car (hour 30 each way).

It is nice being able to view properties in person, especially if you dedicate an entire day to it, it is definitely worth your time. Like anything, wherever you go will have pros and cons.

Regardless, I like that market and plan to continue investing there. From this point on I will be much more hands off. Hope this provides some direction.

Eric Siegfried · Answer

@Luca Burato

I’d go straight HML and buy what I could.  Flip it into an easy $200k.  Do it again, now it’s $400k.  Then buy a few homes that I could hold onto with some of it and keep flipping the rest.  HMLs have so many benefits and provide so much flexibility that you can’t find elsewhere!

Luca Burato · Answer

You made a good point George. Thank you for your response!

Sincerely,

Luca

Luca Burato · Answer

Mike, thank you very much for your answer.

Unfortunately, in New York City the median price for a home is substantially higher than the US average. I think there are more accessible markets close by (Upstate New York, New Jersey, Pennsylvania etc.), although it will be harder to follow the progress of the rehab on a daily basis.

Sinerely,

Luca

Michael Plante · Answer

I do it in Central FL

Sorry I don’t know about other markets

Luca Burato · Answer

Thank you, Michael.

Do you have any recommendation on markets where you can flip with approximately $100K? I live in New York City and the entry level for anything here is way above my possibilities.

Sincerely,

How would you invest your first $100K?

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