$45k saved at 25! Should I buy multi?

51 Replies

Hello All! Looking for some advice!! 

My girlfriend and I are both 25 years old, we have a little over $45k saved up together, It’s been a dream of mine to invest into Real Estate. We want to get engaged and get married In 2 years then buy a house. If it was up to me, I’d really like to find a duplex or 4+ multi family unit and start our portfolio now.. But we’re not sure if we should start it now or wait till the big events happen first. I just don’t wanna keep pushing real estate off, I want to dive In already..

Also, is $45k even enough to invest? Thanks y’all!

@Michael Cavitolo , I'm glad you're posing this question! I'm in the same place as you are except I'm not engaged and not seeing anyone,,,so there's that. But I have a small nest egg that I'm ready to use now to invest in *preferably* a quadruplex that I can be an owner occupant at least for a year or two.

But I'm here in Atlanta and I can forget about investing my less than $100k in a quad only because there doesn't seem to be any for sale that cheap. If there are some, they'd need probably $80k or more in rehab!

Most replies I've gotten from my posts (I'm new to BiggerPockets) suggest that I jv with someone or keep hunting for a HML who can work with the money I have presently.

I'll be very interested to read what the experienced REI's suggest to you. Either way, good luck on getting your REI career started and your engagement!

@Michael Cavitolo I applaud you for wanting to get started. $45K is enough to invest but it may not be enough for the type of property you're thinking about. You may need to focus on a less expensive single family of maybe a duplex in an affordable market but a decent 4 plex will be out of your price range. Assume you're going to have to put 25% down.

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I would highly suggest purchasing a duplex to live in and you could use FHA loan. Live in the duplex for a couple years for "free" while your tenant pays the mortgage. Then try and jump right into the bigger multi's that could pay for yours house mortgage!

@Michael Cavitolo , not sure if you're only wanting to be a landlord or a fix & flip investor but maybe you should consider starting out as an owner occupant.

With a good credit score, FHA will give you a loan on a property that has up to 4 units (a quad) but you'd need to live in it for at least a year and BEST of all, you'd only need to pay 3.5% down!

Going the owner occupant route, you can get an FHA 203k loan which would give you up to $50k (I think it's that much..check into it) just for rehabbing the property you'd be an owner-occupant in. This is the route I'm *most likely* gonna take since hard money lenders that I've contacted have too many extra upfront fees in addition to extremely high interest rates. If I had $150k of cash on hand I'd probably do hard money but I don't.

I hope this is "news you can use" :-)  

Only if you are planning to move out of NY and into Ohio, Indiana, South Carolina, etc. This is the most expensive market in history, so $45K doesn't go very far. If you were my younger brother, I would say get married, move to a more affordable market, learn that market, and by then we should be deep into a depression, so deals will be more available. Otherwise, go get another $45K and keep grinding in Long Island.

@Michael Cavitolo Yes, great to hear that you want to start investing. I will echo what others in this thread have said: Try to house hack a duplex farther away from where you currently live if your 45k will be enough for a down payment on a duplex or buy a fixer-upper FHA with your $45k, live in it a year, find a new one, rent out the old one. The other option would be to find properties in markets like Ohio, where here in Toledo you can get a nice duplex that cash flows well for $100k.

But the other thing that concerns me is you and your girlfriend have $45k saved. Before you two buy anything, she needs to be The One and fully committed with you in this investment journey. The last thing you want to do is have the courts decide who has to pay out who if you guys split. If you insist on proceeding, I would set up an LLC that clearly outlines how you two would exit the partnership if things don't work out. Not trying to be Debbie Downer, but I've seen it happen before.

You're on the right track though, I wish I was doing this at 25! Good luck!

Hey @Michael Cavitolo , welcome to the BP community!

Like most things in life that require flexibility and lack of other priorities/responsibilities, real estate investing is best done sooner rather than later. The longer you wait for this reason or that, the more of those reasons you'll find to continue pushing it off. Plus, the earlier you start, the wealthier you will likely be in the end due to compounding interest.

Now, this doesn't mean you need to put your entire life on hold to invest but it might be smart to push out some of those big life events until you've reached a certain goal. This can make it exciting and motivate both of you, which is so important in this (and any) business. 

Getting clear on your goals is huge in the beginning so that you have that big WHY whenever you feel like giving up. It's also important to understand your criteria and what strategy is right for you all starting off. Purchasing a duplex vs. a 4+ multi family are very different strategies. In fact, 4 vs. anything over 4 is quite different. Due to your location, you will also want to think about where you're going to invest. Often times getting started in your own backyard with a house hack is recommended but this may not be realistic where you are.. So, can you all move to a new market with more opportunity and house hack there? Or, will you need to invest remotely? This can be a difficult and slow process with limited capital so start it sooner, rather than later. 

But, to answer your question: Yes, $45k is enough to invest in RE. However, it depends on where and what strategy. Get those goals set up and keep educating yourself. Once you have a market and strategy picked out, the real fun begins. 

Hope this helps a bit! Please, feel free to reach out anytime if you have any questions or ever want to chat!

@Steven Harris hope this advice helps you too but feel free to reach out anytime if you want to chat more about the Atlanta market and opportunities that suite your current goals and capital.

@Michael Cavitolo

Use the FHA loan to buy the best 3-4 Plex you can and live in it.

An example I recently saw someone do.

Price

280k

Concessions

2% of closing costs

Various small repairs $700

Roof repairs $1650

Cash to close $4500

Renovation costs estimate $9000 (if you do the labor yourself) ($23000 if you pay a contractor)

Setup

4 1 bed 1 bath units

Current rents $500 ea unit

Market 750-950 depending on renovation level

Interest rate 2.325%!!!!

Returns

COCROI upto 55% after moving out

Cost to live there (after vacancy and maintenance) $341 a month

Use your FHA, you'll want some cash in your back pocket to buy stuff you'll need to improve and maintain the property.

@Michael Cavitolo You won't know what's best until you start to analyze deals and see what is possible. After you start finding deals your question changes from "should I start investing in real estate or wait 2 years," to "should I buy this duplex cash-flowing $400/mo with a 18% cash-on-cash return or continue to wait..." 

It's a lot easier to answer this question. If you find deals like this I imagine you'd want to get started ASAP. 2 years is a long time. 

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@Michael Cavitolo I wish I would have started when I was 25!!!!! I bought my 1st duplex that I'm currently still occupied for 12000 down 3.5 % FHA I live in North Idaho Prices were cheap but the market blew up just recently , Which helped Me get even more for rent... We renovated the site where currently live and in our plan is to move to the other side and renovate the other and then Purchase another and move out and rent both sides you could do the same thing.

@Brenden Mitchum , thanks for your experienced perspectives on all of this! Mike & I are in very similar stages. I move here from SF with hopes that my "nest egg" will allow me to get into REI, nabbing an easy, relatively inexpensive property that only requires cosmetic touch ups that can be completed in under 14 days and less than $20k. But this is Atlanta and you already know that this market is pretty pricey too. I see things are substantially less expensive in Macon, but I'm guessing it's because it's far as hell away from all that attracts people to Georgia. I mean, just this morning I saw this newly renovated 4bd 3.5 ba on about 1/2 acre with all new everything and a huge unfinished basement only asking $170k!!!

That example tempted the buyer in me but the investor felt like I would not want to be forced to sell such a large and beautiful SFR for that cheap. So I'm keeping an eye on College Park & East Point, areas that haven't be completely gentrified yet thus more fixer-upper options are available. I've also decided to look for tenant occupied quads and go the house hacker route. Excellent credit (and my future job hopefully soon!!!) will allow me to pay a small 3.5% downpayment.

I'll continue posting my journey here on BP as I continue reading and learning from you & the wide variety of other experienced REI's.

Thanks Brenden!

@Michael Cavitolo It will depend on where you want to invest. Not just because of the prices of the properties, but also the loans available. Some locations have credit unions or small local banks that can offer lower down payments. I used a 10% down on my first property in Idaho and later 15% down on two fourplexes in Arkansas. Given that, here in Idaho anyway, currently most good fourplexes are going to be at least $500k. I assume that you are trying to stay local to where you are located. If you are willing to commute a bit to get started you can look outside your immediate area, up to maybe 1 hour drive, to find something that you can house hack to get in with little down and start building your portfolio to save more. Then after a year possibly do it again. You can house hack several times while you still don't have a family, it becomes more difficult as you eventually need more space. But that is an option.

Or you can also invest in a syndication and be completely passive. I'm currently invested in a new development deal that is going to almost double my invested funds in just 2 years. Or, as mentioned, you can also partner with some other people to get involved in other deals. I have a few partnerships myself, cases where I brought the deals and the other partners brought the funds. There is always someone that can use more funds that will be happy to partner. I've got a couple right now I'm looking into. The point is to not feel like you can't find any deals. You have some money, enough to get started, you just now need to find something that works for you and gets the returns you need. Don't make the mistake of just buying anything and get yourself into a bad deal.

Originally posted by @Steven Harris :

@Brenden Mitchum , thanks for your experienced perspectives on all of this! Mike & I are in very similar stages. I move here from SF with hopes that my "nest egg" will allow me to get into REI, nabbing an easy, relatively inexpensive property that only requires cosmetic touch ups that can be completed in under 14 days and less than $20k. But this is Atlanta and you already know that this market is pretty pricey too. I see things are substantially less expensive in Macon, but I'm guessing it's because it's far as hell away from all that attracts people to Georgia. I mean, just this morning I saw this newly renovated 4bd 3.5 ba on about 1/2 acre with all new everything and a huge unfinished basement only asking $170k!!!

That example tempted the buyer in me but the investor felt like I would not want to be forced to sell such a large and beautiful SFR for that cheap. So I'm keeping an eye on College Park & East Point, areas that haven't be completely gentrified yet thus more fixer-upper options are available. I've also decided to look for tenant occupied quads and go the house hacker route. Excellent credit (and my future job hopefully soon!!!) will allow me to pay a small 3.5% downpayment.

I'll continue posting my journey here on BP as I continue reading and learning from you & the wide variety of other experienced REI's.

Thanks Brenden!

 Your post popped up in my keyword alert.  I will point out that Macon is a cash flow market, but appreciation is almost non-existent.  I recently purchased a property for $45k that the previous owner purchased for $40k 10 years ago.  But, I can rent that property for $750/month with no issues.  I see investors trying to flip in Macon and that can be hit-or-miss.  Flipping in Macon (only in certain neighborhoods) will mean holding the property longer and yielding less profits.  That is my observation on Macon the last 6 years.  

@Philip Joseph , thanks for confirming that my instinctive reservations about Macon are mostly accurate. The last thing I want to do is make a move on a property that's in a market that barely sees any appreciation AND only generates small rents-no matter how brand new everything inside the house maybe.

I'm new to Atlanta. I moved here from SF just minutes before covid messed everything up. But it's the East Point and College Park areas that actually attracted me as potential places to dive into REI. Both of these cities are still "up and coming" and so with the right financing and a great crew, BRRRR or just buy, rehab, rent & hold for like 5 years (my original plan) could prove to be a smart & profitable strategy. That's my focus for now.

Thanks for your experienced insight Philip!