How's it going everyone!
I am looking to invest in a buy and hold rental property in or around Dallas Texas with upfront expenses for repairs to be below $5,000. Being extremely new to REI, I am wondering what the ideal amount of cash in hand would be for my first investment.
I know that the answer to this question is all circumstantial. But, for those of you who are seasoned in this type of real estate investing, in this market, what have you found to be an ideal median amount of cash in hand to be?
Currently, I only have between $10K and $14K, but I feel like I need at least double that to even have a chance.
Thank you and hopefully I'll get to meet you at the upcoming meetup in Irving!
It's entirely dependent on the ARV range of the properties you're looking for and how you plan to finance them. Example: $100,000 ARV, $5,000 rehab costs on a 20% down conventional mortgage. You would be looking at $25k, plus closing costs. So, it depends on what your deal & financing look like.
20 to 25K in cash will get you a 20-25 percent down payment and closing costs for something in the 80-100K range. It may take some time to find something that makes a profitable rental if you need something move-in ready (considering only 5K in up front costs would realistically only cover flooring, paint, miniblinds, etc.), but you can make it happen, especially with current interest rates.
It depends on what you're going after, but I try to play a fairly conservative game, so I would definitely suggest saving up and making sure that even when you pay your 20% down + expected rehab, never get below 10-15k cash on hand. The rehab will cost more than you think. The AC will go out, the water heater will leak and everything will feel like it's happening at the same time. Don't go in light or you risk getting yourself in a position where someone on this forum will be buying it from you in a pinch.
It all depends on your strategy. If you're targeting the purchase of a SFR priced at $100k, yes double that...and you'll have a chance.
With $14k, I would target properties in the $50,000 range... but keep in mind these properties will generally be in more rough neighborhoods and require more aggressive property management.
Im bumping this post because I think it has a lot of merit. I realize that it depends on how many properties you own, whats your investment model, and what you access to funds such as lines of credit are... either way, I would love to hear more about how yall evaluate where to out the dry powder & recycle it to do it again all while not getting to lean to cover the unexpected.
All you need to get started is enough for the required down payment on the property you want to buy, then enough income to offset / absorb unexpected expenses.
If you have enough income from a job coming in to fix or replace a water heater or a bad fridge every couple months (and pray against a major repair like roof or furnace) you're good to go.
Regardless of the numbers, get a 30 year mortgage today to lock in your force monthly gain in equity and start the timing to increased cashflow from inflation.
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