$65k to invest!! Ideas?!

22 Replies

My in-laws are gifting my wife and I $65000 to invest in buy and hold real estate. I'd like to hear your ideas on how to best use this amazing opportunity.

You can buy a nice 3-4bdr/2bth CBS house in the Melbourne / Vero Beach area for that price and it rents out for around $900/month

i'd leverage that. 65k can be the 20% of 325k or 10% of 650k. 

The access to some capital is nice. But real estate is a game of big numbers. Everyone eventually runs out of cash. The key to scale your business is to learn how to raise capital. But before you consider any investment, determine what your goals are.

I invest every day, full-time in multiple markets. I rarely put my own cash unless the deal is exceptional. Most other deals that generate 25%-30% returns are strong enough to proceed with other peoples money.

Finally, get educated on how to make money. I really want to emphasize this point. You'll get lots if people recommending deals. They'll want you to co-invest with them. Get educated first.

Originally posted by @Wesley Nye:

i'd leverage that. 65k can be the 20% of 325k or 10% of 650k. 

 I second this.. on a minimum 10 unit building..

The key is the speed of money...and having a system that is both repeatable and self sustaining.  Here's mine applied to this $65,000:

1 - Buy/rehab 1st property.
2 - Rehab increases ARV, on property already bought under market value.
3 - Place tenant
4 - Refinance all of your cash back out (75% ARV/LTV here)
5 - Cash flow property
6 - Use funds from refi to buy/rehab next property.
7 - Repeat steps #1 - 6 until you can't get any more loans, then...
8 - Get a credit partner and split the returns with them
9 - Repeat steps #7 - 8 until you run out of Credit Partners
10 - After last refi, just keep the money...that you never actually spend, since no matter how hard you try, you keep getting it back at each refi.

Joe Villeneuve
REcapSystems

A2REIC 

@Chris G.  I live in Vero Beach, and you aren't finding many 3BR/2BA homes for $65k, especially not ones that are CBS.  Market has changed a ton around here in the last year, which means if you are getting those kind of deals, you are looking for older wood frame houses on the far outskirts of town. 

@Brandon Forshaw  from speaking as a fellow new investor, my first piece of advice is to invest in a place that you wouldn't hesitate to drive to after work (like within 20 minutes from your home).  Chances are, if you are looking to expand into a number of rentals, your first investment is where you are going to make the majority of your mistakes.  I can say that easily from experience.   For that reason, I'd stack the deck in your favor, and 

1) invest in the area you know the best (your area)

and/or

2) invest in an asset that you can swing by casually.  That way if you have any sorts of issues (or you just want to see the condition of the property), it is not a nuisance to stop by. 

I used to work for an investment management firm that lent money to private developers in NYC, and that was the central belief of the developers at the time.  They didn't want to invest/build in a place that took them longer than 10 minutes to get to.  They didn't want to be put in a position where short term inconveniences (like travelling to a property during a snow storm) would get in the way of properly running their project.    

All of the other posters definitely know their businesses, and once you get a couple of investments under your belts, you can venture out into riskier (potentially more profitable) areas.  But in the short term I'd just keep it simple.  Leverage the $65k, into a few rental properties in an area you know best, that you have no problem swinging by in a moments notice.

Education, plan, then proceed.

Hi,

A lot of people mention getting educated. What do you mean by that? How can one get educated in real estate investment, except by going and investing gradually and using common sense?

Also how can one learn how to get capital?

Any practical examples would be great. While education sounds like a good idea, it does not seem to me this is something you learn in school/books

Thanks!

Irina

 Why not seminars and gurus...and mentors

JV

Because the vast majority (almost the entirety) of what seminars and gurus teach in exchange for large amounts of money is available elsewhere for free. There is no "special sauce", this has all been done before. A couple of decent books and a hundred or so hours on BiggerPockets, CreditBoards, HUD.gov, and her state's housing finance authority's website will result in a far more complete education for a tiny fraction of the cost.

@Richard C.  It sounds like you've had bad experiences.  I find the difference between the sources you stated, and the ones I did, is the ability to think outside the box.  The standard educational resources you stated give great info, and many investors can be very good using only those resources.  I have found the additional methods and combination of methods found by my attending many gurus, seminars and mentorships has expanded my knowledge base and has allowed me to take advantage of many deals I never would have been able to do otherwise.

Having said all of that, I highly recommend all new, and experienced, investors start out with a lot of reading, and websites, and her local REI's to get a base.

Joe Villeneuve
REcapSystem
A2REIC

Use Hard-Money financing and leverage to buy properties.  Then do a rate & term refinance after you have it rented out to get a better Rate.  Cash-Flow all day every day after that. Should be able to get 2-3 rentals with that $65,000 that way.

Good luck on your investing.

Leon

Originally posted by @Joe Villeneuve:

@Richard C. It sounds like you've had bad experiences.  I find the difference between the sources you stated, and the ones I did, is the ability to think outside the box.  The standard educational resources you stated give great info, and many investors can be very good using only those resources.  I have found the additional methods and combination of methods found by my attending many gurus, seminars and mentorships has expanded my knowledge base and has allowed me to take advantage of many deals I never would have been able to do otherwise.

Having said all of that, I highly recommend all new, and experienced, investors start out with a lot of reading, and websites, and her local REI's to get a base.

Joe Villeneuve
REcapSystem
A2REIC

 Not bad experiences myself, I don't buy snake oil.  But I see many people online and more than a few in real life who are paying stupid amounts of money for "mentoring" from people teaching basic stuff with a top-coat of unadulterated BS.  We have had people on here ask if they should sign up for a mentor program that costs as much as an MBA at a mid-tier state university.  Or, at the other end, a couple hundred for a 2 hour class in some hotel conference room, that there is just a limit to how much meaningful information can be transmitted verbally and with visual aids in any given time period.

Also, by going to "gurus" who are selling their own super-dooper snake oil, new people are never going to learn enough about the basics to recognize upselling and false claims for what they are.  For example, it is good to know what Net Cash Flow actually means before attending any seminars.

@Richard C.  By saying you've never had a bad experience, have actually ever attended any of these sessions to form this opinion?

Joe Villeneuve
REcapSystem
A2REIC

Can someone please explain a cash-out refinance to me?

Thanks for all the help by the way…

@Brandon Forshaw  Sure Brandon.  It's pretty simple.

1 - Buy Property. Property has value ARV/LTV
2 - Refinance same property for whatever % lender will give you based on LTV (i.e. 75%)
3 - Cash received from Refinance loan greater than money owed in mortgages/liens
4 - The difference between cash received at closing and money owed is...
...........the "Cash Out" of the "cash out refinance".

Joe Villeneuve
REcapSystem
A2REIC

A cash out refinance is a just like a regular mortgage however they let you borrow against the equity regardless of the the loan amount.for example.

Apraised value of home 100k

Balance of mortgage 40k

Cash out refi will allow you to borrow 80k - 80/20 LTV

you get 40k out of the house 

As far as I know theese loans are hard to get for non owner occ real estate.

If any one knows how to get one in Colorado let me know

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