$50k to Start Real Estate Investing
Irvine, CA · Member since 2016 · 27 posts · 3 votes
$50k to Start Real Estate Investing
Most Popular Reply
Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes@Nick McCandless - You need to hold onto your money for now and find a local or even close-by mentor to learn from. Reach out to @Bill Manassero and see if you can buy him a cup of coffee and pick his brain. Read up on everything posted by @Aaron Mazrillo who is close by to you. He is proof that you can use that money right there close by like the inland empire instead of going out of town. Neither of these people will tell you that buying 2 or 3 cheap pieces of crap in the midwest are a good investment. Read up on @Ben Leybovich to understand how quickly that $50,000 investment can go south when you try and spread it into too many deals. You are much better off spending that many on the highest quality deal you can find and you should be able to find a deal close by. If you don't want to be hands-on then listen to the advice of Bill and remember what lessons Ben teaches before you buy.
Look for high-powered real estate events such as the one in the San Fran area later this year being put on by @J. Martin . These are the places where you are going to meet the right people and get a chance to spend your $50,000 wisely and according to a plan. I hate that you are getting hit up with sales pitches, but it is going to happen more and more as you tell people you have money, but you probably expected that.
Your best bet right now it to stop researching and start taking a few actions to get yourself surrounded by smart mentors or experienced investors who are willing to be a sounding board as you get started. I did like what @Alex Craig suggested that you either lend or come up with another way to build your initial capital. You definitely want a way to keep growing your capital.
Best of luck -
25 Replies
- Kansas City, MO · Member since 2015 · 609 posts · 321 votes10y
You may generate more responses if you're specific in what you want.
My advice, newbie to newbie, is try and nail down a location and type of home. So maybe you want a duplex in City X. Go from there. Or SFH in City Z.
- Investor · El Paso/Socorro, TX · Member since 2012 · 365 posts · 75 votes10y
Don't give up on Orange county but it may take time and effort. Best opportunity: get a partner.
Out of state is hard but not impossible.
1. Turnkey gives you all that but takes due diligence to find the right company, a couple of Bigger Pockets users have written blogs on turnkey.
2. Relatives who live out of state can be good lead generators.
3. Pick an area you would like to visit often and join a real estate group there.
4. More other possibilities than I feel like typing right now :-)
- Irvine, CA · Member since 2016 · 27 posts · 3 votes10y
I will do research on the Turnkey options out there, my only concern there is the lack of leverage of being able to get a loan so I can have an investment property worth 3-4x the amount I put in.
I grew up in North Carolina and have family there, so considering that area.
- Investor · Mount Pleasant, SC · Member since 2016 · 12 posts · 7 votes10y
Hi Nick, welcome to BP!
I grew up in Southern California (Thousand Oaks), so I know how expensive property is out there. OC is even worse.
It's a tough call. On one hand, if you want to manage a project such as a flip, you'd probably want to be nearby so you can be there to manage - at least until you've developed enough solid relationships with contractors and such.
But, if you want to do turnkeys, you probably won't be able to finance anything in So Cal that would cash flow. But there are many, many other areas in the country where you could generate a significant profit starting with $50k. Given the situation, I'd look into the NC option, as you already have family out there. A visit out there, and you can establish some relationships with realtors.
I did something similar a couple years ago in Charleston, SC. My brother-in-law is a realtor out there, and I went to visit and bought a turnkey rental property while there. We did the paperwork, inspections, closing - all remotely, and the property management company handled the placing of tenants.
To give you an idea of what the numbers looked like in my experience, here's what I got. Keep in mind this was turnkey, so it's a little high, but I didn't put any money into it once I purchased. Now that I know what I know, I think I can do a bit better, but this wasn't bad for my first property.
Purchase price: $117,000
Down: $29,000
Taxes: $183
Ins: $106
Princ and Int: $406
Total monthly payment: $695
Monthly Rent: $1175
- Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes10y
Originally posted by @Nick McCandless:
I have $50k in cash set for investing in real estate. I want to get into the world of real estate investing to use leverage to not only generate cashflow, but also have others paying my mortgage building equity, but also allowing me to generate profits off a larger amount than I have due to loans that are also paid off by the renters. I have been doing a lot of research, but wanted to ask the BiggerPockets community how you would get started with $50k in cash ready to invest. I currently live in Orange County so its not possible currently to get a place around here, but am open to hearing suggestions.
Nick stay close to home. Forget turnkey for right now. Focus on education in this business. Find some local meeting. Start searching for a partner at one of the local meeting. Promise you can find some one close to home to start out with. Plenty of investors who are still doing things in your market.
Most folks try to jump out of state when it is much easier to be hands on locally for a bit.
Just my cents
Alex
- Apex, NC · Member since 2016 · 13 posts · 7 votes10y
Hi Nick,
I was born in orange county (mission viejo to be exact). I didn't stay so I don't know the area. However, I am in North Carolina and putting a list of potential I investment properties together. I'm not at the point where I'm ready to pull the trigger but if you give me your criteria I can do some research for you on properties in wake county. I'll even share the list I have currently compiled.
Welcome to BP and good luck.
- Rental Property Investor · Mission Viejo, CA · Member since 2014 · 230 posts · 113 votes10y
I'm in OC (Mission Viejo) and have only purchased out-of-state properties (Memphis, Atlanta & Indianapolis). I've purchased turn-key and non-turn-key, from SFRs to 22-units. If I can be on any assistance just let me know.
- Realtor · Charleston, SC · Member since 2016 · 229 posts · 159 votes10y
25000 Power Ball Tickets.....
My advice would be to come up with a plan that you believe would work based on sound research and planning. Combine that with some ability to extrapolate possibilities of future results based on decisions you think would be good and have many exit strategies. THEN pull that trigger.
- 10yAlex CraigBusiness MemberReal Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
A good start to build on that $50,000 is to be a short term lender with terms of no more then 120 days and rate of 2 to 3% loan points with 10 to 12% interest rate. If you can flip that 3 times in one year you would have $60,500. Do that until you have enough to buy at least able to buy 3 quality B class or better rental homes. I am thinking with 20% down financing. I am thinking three $85,000 homes with rents of $975 or better can be bought with $66,000 out of pocket. The reason you want at least 3 homes is to reduce your risk of a vacant home dipping into your personal funds instead of your investment profits. If you go the route of short term lender, make 100% sure the person you lend to knows what they are doing and I would only lend on the purchase price and closing cost, not the rehab. Turkey providers in the Midwest would be a good start and I would only work with Turnkey providers who look and feel like a real business, not a small outfit that does a few a year in their spare time while they punch the clock during the week. You want people who are doing this full time. A legit TK provider will be ok with funding only the purchase price as they will have the capital to fund the rehab. You take on too much risk as an out of state investor to fund 100% of a deal. A lot of lenders are really expensive; if you were to charge 3% and 11%, I do think that would be a good term. When I go to the bank, there cost ends up being 2% loan points after they charge me for an appraisal, doc fee and their loan origination. So 3% points is a tad cheaper then closing with a bank for a short term lender and the difference would be in the rate of 5% of what they charge and your 11%. Borrowing from a private lender would cost about $750 more on a 120 day loan, which is worth it to be able to close quicker to do more deals.
Sort of a complex answer, you can PM me and I can answer any more questions you would like.
- 10yJames WachobBusiness MemberReal Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 887 votes
@Nick McCandless I have a lender who will finance up to 6 properties for you with only 20% down. We currently have 50 fully renovated and tenanted properties that sell for an average of $83,000, in Memphis, TN.
$83,000 x 20% = $16,600 + closing cost you are roughly out of pocket $20,000
With $50,000 you could get into 2 maybe 3 properties right away and start collecting your returns, right away.
We manage nearly 2,000 homes in the area, so you would be taken care of on the back end as well.
James
- 10yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
@Nick McCandless - You need to hold onto your money for now and find a local or even close-by mentor to learn from. Reach out to @Bill Manassero and see if you can buy him a cup of coffee and pick his brain. Read up on everything posted by @Aaron Mazrillo who is close by to you. He is proof that you can use that money right there close by like the inland empire instead of going out of town. Neither of these people will tell you that buying 2 or 3 cheap pieces of crap in the midwest are a good investment. Read up on @Ben Leybovich to understand how quickly that $50,000 investment can go south when you try and spread it into too many deals. You are much better off spending that many on the highest quality deal you can find and you should be able to find a deal close by. If you don't want to be hands-on then listen to the advice of Bill and remember what lessons Ben teaches before you buy.
Look for high-powered real estate events such as the one in the San Fran area later this year being put on by @J. Martin . These are the places where you are going to meet the right people and get a chance to spend your $50,000 wisely and according to a plan. I hate that you are getting hit up with sales pitches, but it is going to happen more and more as you tell people you have money, but you probably expected that.
Your best bet right now it to stop researching and start taking a few actions to get yourself surrounded by smart mentors or experienced investors who are willing to be a sounding board as you get started. I did like what @Alex Craig suggested that you either lend or come up with another way to build your initial capital. You definitely want a way to keep growing your capital.
Best of luck -
- Logistics Manager · Cordova, TN · Member since 2014 · 157 posts · 32 votes10y
@Chris Clothier @Nick McCandless Chis I could not agree with you more... The good thing about investing in real estate is that its typically not a "Right or Wrong" answer. What may work for me may be a horrible situation for you. Its best to decide exactly what direction, what niche of investing that you are most interested in and start talking to your local professionals. Lenders, referred contractors, investor friendly realtors... Start getting to know people that are already doing these things full time. Rather Locally or if you decide to invest out of state, start networking and asking more specific questions.
It's much easier to invest with confidence when you have a support system that you can utilize.
I wish you the absolute best on your journey.
:-)
- Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes10y
I agree 100% with @Chris Clothier!
But, I'll take it one step further, Nick. Follow me on this:
You have $50,000 to allocate to RE, which tells me that you have achieved a fair amount of success in your life - you've found a certain competitive advantage...
At the same time, we happen to be in a very difficult market today. A market in which, I believe, you must be better than the average. You are not - you are just starting to learn...
Put those two together, and what we have is that you want to risk the money you've generated via your competitive advantage by deploying in the arena in which you have no advantage at all - put this way, does that sound like a good idea, Nick?
I agree with Chris - hold on to your cash until you've learned much more. And then, once you've learned, you won't need to ask BP the question you asked :)
Good luck, man!
- Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes10y
I agree with @Chris Clothier as well.
Educate yourself first.
Don't listen to the sales pitches. To add to what Chris said...
1. Learn @Brandon Turner's House Hacking strategies and definitely read his book on Investing with Little to No Money Down
2. Learn BRRRR strategy (Buy- Renovate-Rent-Refinance-Repeat). By doing this, with limited capital such as $50,000, you can, with the right deals and good lenders, buy 50 properties!
3. Learn how to find GOOD DEALS. I wrote a 6-part series here on BP called "The Science of Finding Deals". Finding good deals is the ONE skill that you need to learn because the process (and therefore the profit) starts with a good deal.
4. Learn about FINANCING or where to get the money to supplement your limited capital. If you have great credit and good W2 income, you can get a business line of credit (usually $50K-$100K) to add to your limited capital. You can then combine that with getting a hard money loan so you need access to a good hard money lender.
5. Learn RENT TO OWN. It's a way to further grow your capital base. Where can you find a strategy where you can make $50K profit on a $150K (ARV) house? In today's market, you usually don't make that profit on a fix-n-flip (for a comparable house). You do that a few times, and you convert your $50K to $100K in a year or two.
- Irvine, CA · Member since 2016 · 27 posts · 3 votes10y
All of you guys are awesome! What an amazing community to be a part of! I look forward to connecting with the locals here and learning the industry inside and out. If I wanted to spend the next year or two really learning the business and then get into it, is short term lending the way to go so it's not just sitting in a bank account rotting?
- Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes10y
Originally posted by @Chris Armstrong:
25000 Power Ball Tickets.....
My advice would be to come up with a plan that you believe would work based on sound research and planning. Combine that with some ability to extrapolate possibilities of future results based on decisions you think would be good and have many exit strategies. THEN pull that trigger.
Lottery tickets sound good
Love it always good to have a sense of humor in this business.
Alex
- 10yMike D'ArrigoPro MemberTurn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
@Nick McCandless If you're ok with going out of state, you can pick up a couple of properties in the Midwest with $50K down. Personally, I like Indianapolis and Kansas City. They are both strong cash flow markets but also have solid economic and demographic fundamentals. We sell turn keys in both those markets. I'd be happy to share my insights on the markets if you'd like.
- Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes10y
@Nick McCandless You've got some good ideas from other posters here, along with some pitches, and some that may be a little of both. I know as an RE investor, I have always been focused on out of state, and I started with both private lending and buying turnkey and still do both of those things, but late last year I started investing in a unique crowdfunding platform, where I bought into a portfolio of 10 rental properties that the managers already own, and I co-own with them. It is about as simple and passive as REI can be, and I really like the model and the principles behind it. The investment level starts at just $10k. I wrote about the investment in a blog last month Have I Found the Holy Grail of Passive Real Estate Investing?
One more investment possibility for your consideration perhaps.
- Irvine, CA · Member since 2016 · 27 posts · 3 votes10y
@Larry Fried I've looked into the crowdfunding methods and they are certainly attractive but the big negative, correct me if I'm wrong, is the lack of leverage meaning when you buy a property, you usually put 20% down and you are now capitalizing on an investment worth 4x the principle. So if you bought a house for 100k with 20k, then the property goes up 20% in value, you just made 100% profit because its based off the investment which is leveraging money.
With crowdfunding, its all cash so you don't have this benefit, correct?
- Investor · Long Beach, CA · Member since 2015 · 201 posts · 29 votes10y
Congrats in jumping in. With 50k, you can get 3 houses Out-of States with a turn key company, worth over double and you can refinance new buyers at 12% with a rent-to-own strategy, so the ROI is awesome! I started Only OOS, 14 deals in 18 months in IL, IN and GA with 4 different teams, and never saw one of my property!!! Yes completely doable. :-)
You can also invest here in California but will be harder, with less margin, but you need lenders, I know at least 4 who can probably help you leverage your first investment!
You need a plan, preferred strategy and NUMBERS!!!
Speaking tonight on that too... and let us know how we can help!
- Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes10y
Originally posted by @Nick McCandless:
@Larry Fried I've looked into the crowdfunding methods and they are certainly attractive but the big negative, correct me if I'm wrong, is the lack of leverage meaning when you buy a property, you usually put 20% down and you are now capitalizing on an investment worth 4x the principle. So if you bought a house for 100k with 20k, then the property goes up 20% in value, you just made 100% profit because its based off the investment which is leveraging money.
With crowdfunding, its all cash so you don't have this benefit, correct?
Nick, essentially correct, except you are not including either cost of sale (commisssions, etc) or closing costs in your figures. You should also consider that things can move in the opposite direction and potentially you can lose a that investment just as simply, so it is a riskier investment. In addition equity investments in some crowdfunding can be leveraged within the investment.
- Real Estate Investment Specialist · Los Angeles, CA · Member since 2016 · 24 posts · 7 votes10y
@Nick McCandless there are a few options and strategies to move forward with, however Investing in a turn key rental property is by far the easiest strategy for B&H and has the least risk volatility. A turn key property should already have a tenant paying rent in the location and have a property management company familiar with the location and have an application list for new tenants. This is extremely beneficial if you are a new investor. The best market throughout the US with the lowest active management costs, trending upwards for employment and population growth, low property taxes and insurance and high rent by ratio with high cap rate would have to be Jacksonville, FL.
- Rental Property Investor · Jacksonville, FL · Member since 2015 · 342 posts · 142 votes10y
If I had that type of money, here is what I would do:
Utilize the BRRR strategy
This is what I'm looking to do for mines. $50K in cash can go a long way if used effectively!
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