Best advice for someone who wants to invest in RE and needs to build retirement and get cash flow

34 Replies

I'm starting my RE portfolio, and I'm very excited but I'm also overwhelmed. 

I currently have a 250,000 loan which I am going to invest in Nashville-this summer.  Very soon.  I'm moving to Nashville this fall, and I'm so torn on how to work this magic and try to think as a investor. 

I will need to live in one of the of the places I buy, maybe rent a room for extra income.  

So, this is why I'm torn---emotional versus investment, old vs more expensive and new etc.

$250,000 - I have options there.  In SoCal, I don't. 

You can buy homes and decent condos for $125,000.  You can even buy older homes that may need some work for $60,000 in areas that demand about $750-$850 in rent--and they are located near downtown which is going through major transition from low income -- up.  Or you can buy a brand new home 2 minutes from downtown in a transitional neighborhood (but that uses my whole lump sum) or buy a beautiful home in the country 15 minutes from the city with $250,000.. 

Right outside of downtown Nashville--in an area of transition--there's a new baseball stadium going in.  That seems to me that it will attract great crowds, music, concerts...and I feel like the growth will continue to grow and get nice in that area with that kind of numbers flowing through there.  It just makes sense to me, but I could be wrong...

Here's the info...

I'm overwhelmed by "options"  and I also feel like maybe I should just buy one property--because it seems crazy but also smart to buy more if I can=now.  But, considering I only own 1 condo---I feel I shouldn't get too ahead of myself. 

Can someone help after sorting through my rambling and if you had the same scenario - what would you do?  Also, near downtown or suburbia?

Thank you for listening and reading!

if you have $250,000. I would use it to buy 10 $50,000 homes. $250,000 + another $250,000 borrowed.  Ten rentals should easily pay off the $250,000 loan in ten years and the houses should appreciate maybe 50-100 % over 10 years and then you will own 10 rentals worth close to $1,000,000 free and clear. All paid for by the tenants. That is if you stop at 10 rentals. 

Hi @Juliette V.  

A great way to figure this out is to consider how other cities changed.  Baseball parks are not drivers of appreciation so I'd scratch that one right away unless you're a huge Nashville Sounds fan.  

Downtown Nashville is pretty cool and is getting better.  It's not likely to reverse but good places will become increasingly scarce.  

Older houses in the transitional areas are good investments especially if you can live in it for a bit.  That will help you learn and recover from any mistakes (we all make 'em).  

I'd pick buying a cheaper house in a transitional area so you have more options after you get some experience to do another, go bigger, etc.

Enjoy Nashville!


I would not spend all my wad on one property, and I would not buy condos.  Sounds like you have several options in neighborhoods that are on the cusp of positive changes, which is a great time and place to buy.  I would target a neighborhood that is big enough for you to concentrate on that one area - get really really great at one square mile, for example.

I would spend enough time in the neighborhoods to determine where I wanted to live and where there is the best opportunity for appreciation and clustering properties.  If possible, I'd buy  a duplex to live in one side, or buy something I could slowly fix up as I lived in it.  Then I'd start strategically expanding in that area.  Maybe buy cash, fix up, then mortgage to get seed money for the next one.  But keep plenty of liquid reserves to not get in over my head.

Sounds like fun!

Originally posted by @Arlan Potter:

if you have $250,000. I would use it to buy 10 $50,000 homes. $250,000 + another $250,000 borrowed.

She stated that the $250,000 she had to invest was a loan.  Your scenario has her borrowing an additional $250,000.

then half it.  Then after she gets the loan paid off she has close to a half million in rental properties. 5 free and clear houses would gross $3750-5000 per month.  After a few years, she could then leverage her properties and buy more. Either way is the same. Keep building and within a few years her tenants will buy the houses for her.  Once she starts buying, other deals will come along. Before long her portfolio will grow to 50 houses. Or not. She might decide after one that it is not worth the trouble. 

Arlan, I want to think like YOU!  Come to Nashville!  

There really are so many options.  My problem too is getting out of my head.  I think to myself--"Juliette, don't go too fast--you're not an investor yet.  Juliette, take it real real slow because that's the smart thing to do and you're not 'there' yet."  So, in a way I'm not letting myself think big- I'm limiting myself with my thoughts but also trying to be over cautious.   And I think "Who I am to think like Arlan"  - for example. And, I feel I need hand-holding because --fear. 

I'll be honest this really all fascinates me, and I love learning it and talking about it-and can't wait to be incredibly savvy one day!

Thanks for carrying on the conversation here

@Juliette V.  but those numbers he used are very irrational and not the kind of numbers that are part of a sound strategy to build wealth and cash flow for retirement like your original post mentioned.  The biggest part of what's wrong with what he said is the part about "50-100% appreciation in 10 years."  Without a working crystal ball, nobody can predict that.  Appreciation is a bonus ESPECIALLY when investing in 50k properties.

You said you have a 250k loan to use?  I would make my buying decision for my personal residence based on the property that offers you the most of what you want (for personal reasons) while still living BELOW your means.  That will leave some of your credit/cash available for investing. 

Beyond that, you will need to decide on a strategy that fits your goals/preferences.  The more you learn, you will be drawn to a niche that you can focus on to work toward your retirement goals.  The key to success in retirement planning is starting early.  So hit the books, so you can be ready to hit the bricks and start investing!

A few pointers, I would avoid new construction/newer properties, because there is usually no reason to expect to pay significantly less than retail.  You can find preexisting housing that is distressed (foreclosures or property condition) or undervalued properties that are below market value.  Always have a "plan B" for any property you invest in.  If something happened and you suddenly needed to sell a property that you originally planned to hold, can you sell it quickly at a price that will still allow you to make money?  Stick to properties that are high demand, like 3 or 4 BR and 2BA, whatever is the "bread and butter" type houses that are always in demand.  There's a whole lot more to consider, but those are some of the kind of things to put in your buying strategy. 

Thanks @Robert Leonard I do appreciate it.  I already own a condo in San Diego, and I'm moving to Nashville-and will be renting my condo in San Diego.  I was really hoping to split up my loan so I could rent one for some cash flow.  I don't have a job that's steady, so I need to use my loan now.  Once I leave SD, I lose it.  I'm a journalist-and getting loans isn't the easiest, that's why I am more stressed about using this loan-right-this time.  I'm not really sure how to get money later in the long run.  I have money for down payments.  But, I'm not sure how to be creative with getting money when not fully employed.  Hence, why I'm trying to have some of my properties work for me-as supplemental income.  I really need that right now.  So, it just didn't make sense to me to buy 1 home, but maybe I should reconsider that-but that means I'd have to really dip into savings to get through monthly bills.  Even if I rented out a room or two, that would just maybe cover the mortgage, perhaps on 1 property.  I figured if I could at least split the loan---I would rent one place out completely...get some cash flow.  Then have another place for myself --rent a room or two out which would completely cover the mortgage--essentially I live for free--until I can get more settled, etc. 

I'm trying hard not to use my money that I have saved for future down payments, etc on living right now--because it'll be gone in a blink of an eye--If I do that.

But, I'm also moving to Nashville for better opportunities both in RE and in my own profession because San Diego-isn't the right spot for either.   And, I have to go now.  

Ah, I see @Juliette V.  , that is a tough situation.  Are you sticking with journalism or is there music interest that you are pursuing?  Nashville is a music town, country music!  I don't mean that to sound negative, I am a fan.  Memphis is the town that has several corporate HQs (lots of jobs) and a strong rental market.

Your first priority has to be getting a steady job. If you stay in journalism, that may help with creditworthiness by staying in the same field. If you are open to other fields, you may want to get something related to REI that's not commissioned based. It's tough to start as an agent and get a business off the ground to establish a steady income.

The other concern is the condo in SD. Is that going to positive cash flow? Do you have a good property management solution? I've seen SD prices and unless you made a really good buy, it can be tough to make a rental work there. Holding on to that property will also weigh heavy against your DTI ratios too. Once again, I'm not trying to be a buzz kill, just looking at the facts at hand. I hope it all works out for you.

Hey Juliette, sounds like you should consider a 2 or 3 unit place in an up and coming neighborhood to get you started. Learn to run the numbers to predict how renting the other units , aside from one that you'll occupy, will pay your bills,  which will help you avoid spending much of your savings. Also, try to get the best deal where you can get cash flow to add to your current savings for later investing.... Good LUCK

Hey @Robert Leonard yup hear you about the SD REI. That's why I'm not investing here. Does not make sense at all--prices to high and rents not high enough.

As for journalism and country music, I'm a HUGE fan of country music-since I was kid.  I host a country music radio show out here in san diego, I freelance for Country Weekly magazine, interview celebs all the time, go to red carpets, yeah.   I've been going to NASH for 5 years straight-that's why I know the area well.  I really want to invest in Middle TN...I love it there. 

But, I really need to come up with a strat and stick with it!  

Hey Juliette! If it was myself in your shoes I would really study the market there ...ask around, Internet search, talk to property managers etc. to find the best neighborhoods for both appreciation & cash flow. I would start with a smaller property (if make mistake then not as big of deal & learning ) that you can buy under market value and fix it up a little for instant appreciation & then rent out. I like Arlen's suggestion about buying 5 properties. Maybe live in each until renovations done and then get next property. After you have a few of these & cash flow coming in then it should be easier for you to get loans & continue with your investing career. Being self employed you will probably still have hard time getting conventional loan but at this point you could probably get a portfolio loan from a local investor friendly bank cause if you bought right you would have equity & cash flow.
Once you have some good cash flow then I would look for a nice place for yourself. You'll probably be able to get something a lot nicer than what you would get now & you might find it better & cheaper to rent at this point ... Maybe one of the nice new constructions in a great area that doesn't cash flow well for investment purposes.

Thanks my thought. :) good luck with your investing :)

@Juliette V.  

Good luck with your investing Nashville is a GREAT city to invest in.. The Country Music Capital of the world!!! Great appreciation in house values in that market, you should be able to buy 2 possibly 3 solid homes with the $250k. 

@Juliette V.  My gut tells me if you get an older unit that may need a little work and one that has a rental in the basement or a duplex for a hundred-ish and try to find three at 50k.  The one you live in, if bought right, should pay for itself and allow you to live rent free.  The three units plus your SD rental should provide you a few thousand per month, that will allow you to build up more and pay off the 250k loan, use for living or allow to buy more rentals.  Best to you in finding a good direction!

Hi Juliette,

I'm with @Robert Leonard   all the way! Especially as you explain wanting to grab this $250K while you can with the knowledge that finances are likely to get a bit dry through your move. I commend you for thinking forward but caution you in following Arlan's road-map too closely too fast.

Now that we know the loan will go away once you move, it is imperative that you utilize the opportunity wisely and NOT recklessly by maximizing the loan. You don't have to take it all.

There are several nice suggestions here for buying a multi-unit property you can live in and have the tenants pay the bills for you. I think that is a great and solid first step along with your job searching efforts. 

Now let's look at reality...Since you don't already have a job, you will need money to live while you are either rehabbing your place or job hunting. Even if your place is move-in ready, you have to take the time to vet and find GOOD tenants to maximize the possibility of having the positive cash flow your property should yield. 

If things don't go according to your best plans, the last thing you need is having a hefty loan payment due while you have no income. The savings you are trying to protect will vanish! Better to eat from you savings than to pay debt with them because the amounts are vastly different.

You have a lot on your plate with a wonderful and exciting move ahead of you. Be a turtle! Take it slow and steady while keeping yourself as well protected as you can. Do not overexpose yourself through taking on too much debt! 

Read @Brandon Turner's latest blog post.

Not to scare you but to help keep you grounded. You will get to the destination @Arlan Potter   has plotted for you but not with this loan at this moment. It will take time to do that safely.

Best wishes for success!


@Juliette V.  

I am relatively new to the site and have yet to start investing in real estate, so I am definitely not qualified to offer you advice.  That being said, what I have learned from another online forum is the more information you provide the better advice you will receive.  I personally would be suspect of any response that didn't include some questions for you. 

One of the things I am curious about is this loan you mentioned.  Is it a pre-approval for $250,000 or do you already have the money? 

If I were you (and I'm actually in a pretty similar situation as you currently) I would look for a 2-4 unit property up to $150k so you could live rent free, then take the remainder and invest in a few $50k properties that will meet the 2% rule. In a few years after saving some more and, hopefully, having some appreciation in the properties you can then find a nice house for yourself.

I'm curious about the $250k loan. It isn't a conventional mortgage that needs to be backed by the properties? I haven't heard of someone being able to get multiple properties with one mortgage. What interest rate are you paying for that and who is the lender if you don't mind me asking?

Am I crazy to think that it is irresponsible to recommend her to borrow $250K when she is planning on quitting her job and moving to a new state where she does not have a new job lined up? Plus she wants to keep her condo in SD as a rental? My recommendation would be to sell your condo in SD (hopefully you have some equity). Take the cash and put it with your existing cash. You're gonna need it starting out new in Nashville. Rent for a year, learn the market, educate yourself in different investing strategies. Keep your expenses low until you find a good paying job. Then start looking into investing. I know you will lose the opportunity to borrow the $250K. But it just doesn't make sense to borrow when you don't have any income. Your plan is very risky. 

Good luck

Juliette, take it real real slow because that's the smart thing to do and you're not 'there' yet.  when you gain much, much more knowledge then increase your investment volocity about 10%.

Arlen has the best strategy in a strong market and the worst one if the market turns down.  Investing whilst considering risk is intelligent, even when it's incorrect.  Investing being oblivious or willfully ignorant of risk is foolish.

Me thinks most folks thinks too much.  If I was investing in the stock market I would think a lot more. Analyzing trends, profits, losses, balance sheets, market caps, competition. 

When I find a property that is cheap(well below retail), and is in my local area,  I don't wonder if the sky is going to fall, I buy it and make it a rental.  

 I guess if I was buying million dollar homes, highly leveraged I might worry about the local market conditions, but I buy inexpensive properties for the regular guys to rent.

Go find a house to buy


Nuhan Demirkan just completely nailed it. Very sound thinking, not crazy at all. If you have equity to access through a loan on your property in SD then you could access it by selling instead. Why turn it into negative cash flow and hold on to it? Most likely the debt to income ratio you incur will put your ability to invest in better properties to a halt if you hold on to it.

Nuhan and Brant nailed it. You are thinking correctly but letting the emotion of money and action get the best of you. This is not a race, there is a lot of money and variables involved. The paragraph in your OP that starts "I'm overwhelmed by "options" says it all right there. If you're already overwhelmed by options, just wait until you move, are struggling to find a job and income, and trying to balance one or more properties, decide to become a Nashville party animal and don't have time anymore, who knows what else. You need 6-12 months to move, settle, find steady income, get to know the market, get to know realtors and contractors, etc. Then make a calculated move. Unless you have significant cash reserves to handle mistakes, no income, bad investments, bad contractors, "surprises" on a fixer home you find, etc, you are making a big rush mistake. The buying / renovation / maintenance / carrying costs of every property must be accounted for. Unless you're not telling us something, you don't have the cash reserve nor future steady income to handle any mistakes, your margin for error sounds thin. GL

Very interesting responses here!! There is so much to this equation, some not given, that it would be difficult for anyone to answer but I will add food for thought. Managing your condo from afar wont be easy or free so I would sell it before you move. If the funds are a $250K loan as you said I would be sure to plan wisely how to repay!! I don't see any lender letting you buy houses below $50K, $30K at best b/c they just don't lend very often below that so your somewhat limited there. Also if you do buy a couple of those $50K houses the bank might slow you down by reducing your loan availability amount, and they do it!!! Sometimes they quote you for a single purchase, not several investments properties. I would get to know the Nashville market very well before investing there since its new to you. I am unsure of your knowledge of real estate so I would say take in as much as possible about crunching your #'s before investing in rentals "on the fly"...b/c you can. I am unsure of your profession so I don't know how easily you could get a job there to repay the loan, area's income for your profession, and your capabilities of owning/managing rentals. These are all things YOU must ask yourself to be able to answer this question. 

It all sounds very risky to me but IF I were to do anything of this nature I would:

1. Keep your current job, without it there is no loan

2. Sell the condo before moving, stick back that cash -your gonna need it

3. Be learning the Nashville market as much as possible (starting today) before moving, along with rental info there (rent comps, taxes, etc) and laws in that state/county

4. Study rental property real estate all you can before making a purchase

5. Dont buy anything you cant get out of rather fast b/c once you buy it, "ITS YOUR BABY" until you sell it. Go too big or too small you may get stuck with it!!! Make sure you can pay the payments without a job for several months with that condo sale & savings!!

6. Renting for a year there to learn the market and make sure you want to stay as suggested in the previous comments is a great idea!!!

7. Get opinions on the area for rentals and homes from several brokers/agents, especially the ballpark development area you discussed-could be good or bad? 

8. Play it safe enough that you don't destroy that credit limit b/c once its gone, its gone for a long time! You can always buy more property later.

9. Apply to several positions there starting now. You can always turn them down but at least they will have your resume on file for when you can relocate.

10. If it were me (in your shoes) I would probably buy a nice fully finished basement home (you coould afford without any help from tenants) close to hospitals, factories, etc (separate the two) and live in one half and rent out the other half to medical professionals, manufacturing coordinators, and other professionals who may need a year or so lease that will pay well. Make sure the area you buy allows doing this first. Make sure rents would well support the expenses of the property (yours and theirs) and extra left over to live on, for repairs, etc. If this works out for you buy another one and do the same thing. If it doesn't work out for you it can easily be sold as a duplex or converted back to a home for resale.

There are many ways you could invest in rentals but which one is for you is the question? Big multiunits, small multiunits, single family homes,  and much more! The risk is all on your ability to repay the loan, you owning/managing properties, and making a good purchasing decision in a new area. I hope it works out well for you!

I wish you the best and applaud your initiative but be careful in your decisions!!  

Originally posted by @Arlan Potter:

Me thinks most folks thinks too much.  If I was investing in the stock market I would think a lot more. Analyzing trends, profits, losses, balance sheets, market caps, competition. 

When I find a property that is cheap(well below retail), and is in my local area,  I don't wonder if the sky is going to fall, I buy it and make it a rental.  

 I guess if I was buying million dollar homes, highly leveraged I might worry about the local market conditions, but I buy inexpensive properties for the regular guys to rent.

Go find a house to buy


 "Me thinks" you're an idiot who does not know the Nashville market, has never lived or invested here and knows very little about RE investing. Just because you googled real estate investing, found BP and signed up, does that make you a seasoned investor? No.

I was born and raised in Middle TN. I live in Nashville proper. I'm an agent/wholesaler. I have worked retail, new construction, leasing, property management and working for investors. I also purchase properties for my own investment strategy in the Nashville area. The problem with Nashville right now is that only those with good marketing, connections and/or negotiations skills are the ones finding the good deals. I do my own marketing and I work with wholesalers. Most wholesalers are going to see your situation and will throw you "deals" that will end up eating your funds away just to get them in rentable condition.

By the way, Arian, how many rentals do you own? If it's two or more, posts the address so we can cross reference it with the tax records...

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