250k to invest

19 Replies

 The question I have is how would you invest 250k cash? Paid off low income homes, use as leverage to purchase as many properties as possible or use as a down payment on a small apartment complex/trailer park. I personally think it would be best to purchase as many low income homes as possible. 15k to 25k homes renting for 500 to 650 per month. Please when you answer I would also like to hear way you would invest that way.

Thanks   

What kind of homes/apartments/MH experience do you have? That's an amount of money which can do a lot if deployed properly. Once we know what you're comfortable with doing, then talking about how to use it would make more sense.

I currently own a duplex and two single family homes. 1 home is paid off, duplex is owner financed and other home has a traditional mortgage on it. All are currently cash flowing. 

@Jerry M.  What are your goals? What is your age? What is your experience? What niche are you interested in? Do you have experience dealing with tenants, properties? What is the market like in the area? Demand, etc.? Local economy? 

There's so much that goes in to making a decision on real estate. If you have that amount of money, and aren't sure what to do with it, I advise you to put it in an interest bearing account, and educate yourself first, beginning here. 

Have you read Beginner's Guide to Investing and listened to the podcasts? There's an enormous amount of information here for the taking. Once you have a few more specifics, you can post more questions. 

Also, just doing a search on the words "if you had to invest" you'll find many other threads identical to yours, read those answers. If you had to invest, what would you do?

There's so many different things and ways to invest. From properties (new, fix/flip, buy/hold) apartments, hotels, notes, making loans, buying parking lots, marinas, car washes, office buildings, condos ... you name it and there's someone on BP doing it! HAVE FUN! 

I would buy 5-10 $25,000-50,000 homes. Get them rented and them get a $250,000 line of credit with them as collateral. Then I would buy 5 to 10 more. Get them rented and then term out the first $250,000 borrowed and get another $250,000 Line of credit to buy 5-10 more. Before you know it you will have 20-30 rentals. And an empire in the making.

My goals are to create cash flow using buy and hold. I am 33 years old and I invest in the RDU area of North Carolina.  I bought my first property in 2006 and I have dealt with tenant issues and have had to evict tenants. I currently use property manages to handle the process for me now.

I have never been a big fan of debt so my idea of real estate investing maybe different then some since I see alot about using leverage or opm to buy homes. My plan is below, but always open to any ideas. Thanks

1: purchase homes with cash

2: rent homes

3: sometime in the future 1031 exchange them and increase the amount of paid off homes I own. 

I that 1 house in 8 years?  If you have 250,000 buy a bunch of cheap houses.

I bought a primary residence in 2004 and in 2006 made it a rental. Sorry for the confusion. The other home I bought 2012 and the duplex this year.  

You can't 1031 the houses as you will be classified as a business, not an investment... Active RE business is taxed like any other non-RE business. Multiple homes purchased for rentals won't be classified as "investment" to the USA IRS.

I would also buy houses in the $50k~ area. I would not go lower as then you are dealing with way to low class of tenants, city areas (and all the associated costs of dealing within this group), and repair costs.

Is your current rental property low income? Even with a property manager low income is a different beast, so make sure you go into it it prepared. Given your conservative view of debt, which is just fine, I'd target two or three working to middle class SFR in an area with at least some appreciation opportunity.

@ Arlan Potter

Do you have a lender that has done these kinds lines of credit? I would appreciate it if you could send me their contact info....

Currently duplex is section 8 and one property is working class area other is middle.

Chris G

Question how is it considered a business if I am not repairing or managing the properties. Cant you just be a active investor and not a business. What  makes you running a business and not just investing in the eyes of the irs?   

@Jerry M.  I would buy the cheaper homes and rent them out. I am in NC and I am buying them for $25,000 to $30,000 all in and renting them out for $500 to $700 a month. You could also do some private lending as well.

You should be able to 1031 your rental properties. I don't see why what you described would bar you from utilizing 1031s. 

if your able to buy 25-30k homes and rent them out at 2%+ of purchase price, that's awesome cash flow. Buy as many as you can!

I have found that Local banks will do asset based lines of credit and term loans on rental portfolios. Probably not national chain banks

@Jerry M.  

Consider a few. 8-10 units.  Easier to outsource property management and I think you get more economy of scale per door.   Looking at the same strategy myself right now 

I am in the same situation - $250k to invest. I ended up buying two single family homes and they will chew up $170k of my cash. I am still not sure that this strategy was the right one but so much of the advice out there is to just start and get some experience under your belt. I was having a lot of trouble finding information on how to invest such a wad of cash. It's a blessing but it can also cause you to spend more freely than if you had much less cash. I listened to nearly every podcast and asked lots of questions to the BP community but never found a good route. I still feel like I could have done more with the $ that I had. The trouble is that finding cheap houses in Denver right now requires mad real estate skills. I am hoping that I will find that golden piece of advice that will make the light bulb go on. 


With 250k I would pay off any high-interest debt and slowly buy houses within a 1-hour drive from me that are in the 5k-20k price range which need no more than about 5k in materials to repair.  I would do most of the work myself on weekends and also manage them myself to save money and for exercise.  This way you could have maybe 10-20 houses paid for with cash.  I would aim for rents in the range of 600-900/mo for all the properties and expect a cash flow of at least 4k to 5k a month after expenses.  Once there's stable and long-term tenants in most of the properties then I would consider expanding.

My story is that I started out with 30k in cash, bought two houses using that then took out a couple equity lines and bought four more.  My debt is pretty high now though so if I had that kind of money up front then I'd be in better shape and could probably quit my job if I wanted to.

Originally posted by @Arlan Potter:

I would buy 5-10 $25,000-50,000 homes. Get them rented and them get a $250,000 line of credit with them as collateral. Then I would buy 5 to 10 more. Get them rented and then term out the first $250,000 borrowed and get another $250,000 Line of credit to buy 5-10 more. Before you know it you will have 20-30 rentals. And an empire in the making.

 What do you mean by term out? Are you meaning to pay the balance owed?? If this is correct, wouldn't that mean your 250k will already be spent? 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here