one of my friends turned me onto this website and said you guys could help. so here is my situation. what should i do and how should i do it?
I recently did a cash out refinance on my home. in which i paid off majority of my debt lowering my min payment by 1000 dollars a month leaving only my home, 2 car payments and 1 rental property (which was my first home). and $32,000 cash in hand. the rental property nets me about 250 in profits every month for 3 years now. the LTV on that house is about 75% so no extra cash there. Also I bought and installed my own solar panels this year which i will receive about 10,000 dollar rebate on my taxes that i would also like to put towards the investments come the beginning of the year.
I would like to keep my work income as my money for my wife and i to do as we would have with out investing. My idea right now would be to use that 32,000 along with rental income and tax return as the initial start of my investment life. in hopes of a snowball effect to secure financial freedom later in life with out sacrificing my everyday life. Either by; buy and flip or buy and hold properties. i am not looking to reap the rewards for at least 10 years.( i am 29 now). my location is in Bakersfield Ca. i currently work on a land based oil rig. i have a construction background and there is nothing i cant fix/build myself when it comes to rehabing a house.
i am open to all sorts of ideas so i can then narrow down my path of action. in your guys experiences what would be my best bet. any advice / input would be greatly appreciated. i just dont want to get discouraged, go out and buy a boat or something and then regret not seizing this opportunity when i had the chance.
Welcome to BP man. I live in Bakersfield as well and before you spend any money try and learn as much as you can about this business. Listen to the podcasts and read the blogs.
That 30k can be used in many ways but my best bet is to partner with someone who is in the business and is experienced. 30k is enough for a down payment or to rehab a property. So partnering up is a good idea. Define your niche and go for it.
You can also try and find the deal yourself by marketing to distressed owners. It'll take time but there's deals out there to be made. But that's a whole different topic.
There's so much to learn and do feel free to message me.
I have not posted on here for sometime. $30,000.00 is nothing to sneeze at and you should be very careful how you invest. It would be my recommendation for your to buy something which has a little less risk than a rehab to start with. I would take the $30,000.00 and purchase a performing note and deed of trust or even a defaulted piece of paper. This means you know the property already has a value for you not to lose. Plus performing paper is going to show a monthly yield. Just a thought...
@Cory P. -- Jonathan hit the nail on the head... when of the best things you can do as a novice investor is partner with an experienced investor. This will reduce your risk & will surely provide an amazing learning opportunity while you make some money.
@Jonathan Guerrero really spelled it out the situation nicely. You've got enough for a down payment or a great rehab, but not really both if you plan to put 20% down in Bakersfield, where the median home value is 200K.
If you fix and flip, you're likely going to require a partner with capital. It's also going to take up a lot more of your time and has a lot more potential to backfire. I have no experience with fix and flip, so maybe someone else can provide insight. By the way you write, it just sounds like you might be biting off more than you'll want to chew.
What about finding a deal on an ALMOST rent ready home that needs some minor repairs, or just needs some updating. You've got the skills, but it doesn't mean you should commit 40 hours a week to your new property. Maybe just rehab the siding, the windows and the kitchen and see what you're comfortable with. You've also got experience renting, so it's not like you're new to this world.
The advantage you have over other people is that you already understand the criteria for your investment.
To summarize your criteria:
- Investment should be self contained, not requiring money earned from labor wages
- Investment should be profitable in 10+ years
On a scale of passive to full time job, @Ty Kirkpatrick 's advice on investing in the paper side of things is the most passive, "buy and hold" would be somewhere in the middle, and full fix and flip would be the most time consumptive. If you don't need the money for 10 years though, ignore the fix and flip until you're fully comitted. Why not look into the "buy and hold" strategy or examine the paper side of investing in real estate?
Or, just get an education here on Bigger Pockets and learn to evaluate deals. Then, become the silent investor type. There's many people out there that need your down payment in order to act on what you have confirmed through your Bigger Pockets education as "a great deal." It happens all the time, just make sure you know how to recognize a bad deal just as well as a good deal when you have 15 people showing you.
Join a real estate investor club in your area and tell them you can fix anything, and you have some capital. They'll accept you with open arms, and you'll pick up a ton of contacts on the way!
32k honestly is hard to flip with in CA. If you partner with someone (I know a few folks in Bakersfield) it might stretch your money.
Putting down on a 95k rental might work but has to be rent ready and that should leave you with some extra money to work with as a cushion.
If I were you and looking to invest full time, I'd use some money on finding deals and building a business.
Otherwise best bet is find partners.
Personally, I would purchase another rental. If you can find a seller who will carry back, you might be able to structure some really good financing options. Buying discounted notes will create cash flow and return, but no appreciation (to speak of). No one ever got rich off of cash flow, they got wealthy from appreciation.
Lots of good information here. There's many ways you can invest and it can be overwhelming.
It sounds like you enjoy fixing and building things so you would really enjoy rehabbing. The key here is to have a good team to manage your project since you will be at work. @Josh Justiniano made a good point, you should look into investing full-time and build a good business when you can.
I'd reccomend reading Rich Dad Poor Dad if you haven't already. It will change the way you view everything. And definitely don't get discouraged and buy a boat or a new car. There's successful people in this business and there's a lot of money to be made.
@Account Closed -- Welcome to BiggerPockets!
You have an interesting, but good, situation. The fact that you have your debt under control and have $32,000 of investable capital is a great position to be in at 29 years of age.
If you work full-time and have family then it may be difficult for you to run a buy, fix, flip operation. If you have enough free time you can probably manage it, but start by looking at what your goals are.
If your primary goal is to build your real estate portfolio to increase your cash flow, and of course building equity over time, then you may want to focus on buying more properties.
Joey has given you some good advice, however I would probably suggest financing two properties in the $50,000-$70,000 range and leave the remaining capital on the side in a reserve account for turnovers, maintenance and repairs. These properties will typically be in bread-and-butter "B" neighborhoods, however you can also take the same capital and pick up one property in a higher end neighborhood.
Bottom line: you have enough to jumpstart your investing. Start by deciding on what you want to do, then decide on the market that makes the most sense.
Feel free to post any other questions you have.
I think there is still is potential for good deals in Bakersfield and Kern County. Many buyers I work with in Bakersfield are from out of the area (usually So. Cal and the Bay Area).
Investing from afar has many disadvantages which can be expensive. It can be profitable but I would not be quick to write off local investing, with all of its advantages, considering you are in one of the most affordable communities in CA which has major growth potential.
As far as temptation of spending this money on toys vs investing, if you have not already done so, consider reading "Rich Dad Poor Dad". A good decision here could make a huge change in your financial future. Commit to your future.
Originally posted by @Account Closed :
Cory P. Marco Santarelli told me once "live where you want and invest where it makes sense". With $30k Bakersfield does not make sense. I would buy and hold out of state and get 3 $50k cash flowing properties using the 30k as your down payments. That will get your snowball rolling. I would also suggest you talk to Marco on here and check out his company Noradarealestate.com. Turnkey and out of state investing can be risky but the trick is finding a good company to help you. And with a great website like BP it's easy to cross off the bad ones out there.
The owner of Norada is on here?
I've been viewing his properties for a while now.
@Gene Hacker Bakersfield is one of the most affordable markets in California. But still not affordable nationwide. And with only $30k his options are limited. However if he got some more "other people's money" then Flipping in Bakersfield may work for some short term gains. But like Marco said it takes a lot of time to do that stuff especially if you got a full time job. I guess the decision to be made is invest into flipping or invest for cash flow.
@Cory P. ....ever thought of being the lender, not the borrower? Just a thought.
@Account Closed , I work with investors that are buying cash flow rentals in rural Kern County, less than a hour from Bakersfield for under 50K which rent for around $600/month. These homes were prices 2X to 3X more during the past bubble, so they are not flat markets. These markets tend to be "boom and bust" like most of California, but they are typically "late to the party".
The issue with inexpensive "cashflow rentals" has been hashed out on this forum many times lately. Repairs and maintenance are not all that different for worthless houses and more expensive houses. As a percentage of potential income, the cost of repairs can really dig into profits of lower end properties.
Higher end units or low end...There is no "one right way" to invest. The good thing is Kern County offers both of these strategies without the need to travel far.
thank you all for the replies. Any and all information is greatly appreciated. Lot of good ideas here. I would definitely like to stay local with my investments. My goal is to achieve a steady and reliable income. I would like to have a net income of 4,000 a month. In my line of work the annual pay can go from 100k one year to 50k the next. When oil is up pay is up when oil is down pay is down. My bills are currently set on the 50k wage. If I could buy 1 house a year and get 400 profit a month from each one in 10 years I will be there. But is 400 a month from each one practical? If I do the BRRR method how soon am I able to refinance? and use that as a new down payment on the next one. I would like to do it on my own but not opposed to a partner. Something I will have to look into. How would I find a reliable/responsible person to invest with?.
Originally posted by @Ryan Fischer :
Originally posted by @Joey Noel:
Cory P. Marco Santarelli told me once "live where you want and invest where it makes sense". With $30k Bakersfield does not make sense. I would buy and hold out of state and get 3 $50k cash flowing properties using the 30k as your down payments. That will get your snowball rolling. I would also suggest you talk to Marco on here and check out his company www.NoradaRealEstate.com. Turnkey and out of state investing can be risky but the trick is finding a good company to help you. And with a great website like BP it's easy to cross off the bad ones out there.
The owner of Norada is on here?
I've been viewing his properties for a while now.
Mr. Fischer -- yes, I'm on here too. :-)
Feel free to reach out, and see you around the forums.
Buying 3 $50k homes would probably be the worst thing you could do with your money. You might as well donate it to a charity as it will get better use then buying junk!!!
It will also be very unlikely in most cases to get $400 per month in cash flow. If you are including vacancy and maintenance reserves you might realize on average $200 - $250 on average in monthly cash flow.
Invest on your own, you dont need a partner. It might just take you a little longer to save up for the down payment.
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