Don't start investing until you have $100,000.
Van Nuys, CA · Member since 2016 · 89 posts · 23 votes
Don't start investing until you have $100,000.
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Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
9yI would have never started investing, if I had followed that rule. huh!
122 Replies
- Real Estate Investor · Shelton, WA · Member since 2013 · 369 posts · 639 votes9y
Don't get me wrong, his books are very motivating, but maybe Grant should be more upfront about the source of his "investing" and say.. "Dont start investing until you have the financial backing of other rich members of the church of Scientology" ... He let that one slide in one of his YouTube videos awhile back.
- Investor · Galena, OH · Member since 2016 · 19 posts · 8 votes9y
To me, you should have your personal finances in order before you start investing. If you can't create a budget, have credit card debt, can't or won't live within your means, and don't have enough saved for a decent sized rainy day fund then you shouldn't be investing.
100k is an arbitrary number. For some that may make sense. To me it didn't. I started investing when I had an extra 5k. I started with stocks and did a lot of reading and research before jumping in. Even if you're prepared, you're going to get an education and you're likely going to pay for it. Literally pay for it. I lost some of that initial investment but I learned a lot, refined my strategy and forged ahead. Had I waited until I had 100k I don't know when I would have started but I do know I likely would have still paid for my education. Except it would have been 20% of 100k instead of 20% of 5k.
- Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes9y
I definitely would, and did, start well before that $100k mark. I actually made my first real investment using some of my summer internship savings from college, $2000, and put it into purchasing stocks. I did this because I wanted to learn as I went, and I definitely did as I lost big initially and gained well after.
I did the same thing in real estate when I put in $20k of my savings from my first job, and I jumped in so I could learn. I just make sure now that I am well planned financially, and that even in the case of a setback my business will still be able to maintain itself.
Not investing until you reach $X is lost income/appreciation, compounding gains, and more importantly time wasted away not investing and learning.
- 9yWilliam KwongPro MemberReal Estate Agent · Jersey City, NJ · Member since 2015 · 110 posts · 53 votes
@Daniel Cuevas I watch a lot of his videos and he's literally the MAN!
To your question, I think it depends on your income and market to be honest. And more importantly, how creative you can get on your financial solutions. Where I live, it can get pretty expensive depending on the market your focused in.
I started with less than 30K purchasing a 450K MultiFamily with 120K worth of Renovations (Totaling 588K Loan). Plus, don't forget an additional 10K I used out of my 401K "penalty free". This is a huge source for money you can use to get started. A lot of us who have 401Ks because of our jobs and contribute every month, won't see that money till 59 1/2. Chances are, that 10K will be worth way less when I'm 60 and I won't need it as much as I need it now. (Disclaimer, you have to pay the taxes on that 10K the following year.)
Also, opened up a few credits cards that have 18 months or 15 months 0% interest on Purchases so I could survive/live comfortably during my reno process and pay my mortgage using my active income. Then, when the units get rented and I live rent free, I can pay them back and it's like free money to borrow with no interest.
So you CAN and SHOULD get started as soon as your comfortable with getting started. You set your own parameters and thresholds tailored to your own lifestyle. And learn how to get creative!!!
As Grant would say, "Whatever It Takes!"
- Investor · Seattle, WA · Member since 2016 · 66 posts · 29 votes9y
@Daniel Cuevas I used a private lender and a refi to pay them back. Worked out well, but I learned after the fact that condos aren't the best rentals due to HOA discrepancies / assessments. Luckily, my HOA is managed correctly. It could have easily been a nightmare from the HOA point of view. I would recommend sticking to SF or MF buildings for this reason.
- Van Nuys, CA · Member since 2016 · 89 posts · 23 votes9y
@Simon Wold That makes sense. Its difficult to find a single family in the area within the price range that I'm looking for but I'm sure its possible. This is why I am considering a condo. When you refinanced, was it for 100% assessed value or was it based off of other factors, not too knowledgeable of refi's.
@William Kwong I agree, every situation is very different and its built off of the premise of discipline more then anything. Invest in yourself and your ability to make the money, then invest.
That is a great technique, the company I work for does offer a 401k but I decided not to take advantage because it wouldn't be my money anymore. I'm working on getting started right away/
- Real Estate Agent · San Diego, CA · Member since 2016 · 28 posts · 4 votes9y
@Keeya WangJones I would be interested in helping you find that San Diego buy and hold deal you are looking for. Please PM me if you are interested.
- Investor · Seattle, WA · Member since 2016 · 66 posts · 29 votes9y
@Daniel Cuevas here is how it worked:
- Hard money loan @ 12% interest to purchase property at auction. ($80,000)
- Rehab to rental condition (~$5,000 of my personal money)
- Had an appraisal that came in at $82,500. **Side note here: be careful on condo appraisals. I was expecting the appraisal to come in at ~110k which would have allowed me to refi without putting much money into the deal. Little did I know, there weren't comparatives in my complex. Instead of just taking comps of condos on the same road, they pulled from the most recent sales in my complex which were in 2010**
- Refinanced into a 30 yr loan of $61,875 (75% LTV)
- Down payment was the difference between the hard money loan and the refinanced 30 yr loan.
Keep in mind that the 30k cost I was referring to included all of the loan / holding / rehab costs associated with the purchase. The numbers aren't exact because I don't have them in front of me, but they are close.
If you use this method correctly, you can acquire a REI with little or no money down. Just using what is coined as the 70% rule / BRRR Strategy.
Hope this helps!
- Van Nuys, CA · Member since 2016 · 89 posts · 23 votes9y
Originally posted by @Simon Wold:
@Daniel Cuevas here is how it worked:
- Hard money loan @ 12% interest to purchase property at auction. ($80,000)
- Rehab to rental condition (~$5,000 of my personal money)
- Had an appraisal that came in at $82,500. **Side note here: be careful on condo appraisals. I was expecting the appraisal to come in at ~110k which would have allowed me to refi without putting much money into the deal. Little did I know, there weren't comparatives in my complex. Instead of just taking comps of condos on the same road, they pulled from the most recent sales in my complex which were in 2010**
- Refinanced into a 30 yr loan of $61,875 (75% LTV)
- Down payment was the difference between the hard money loan and the refinanced 30 yr loan.
Keep in mind that the 30k cost I was referring to included all of the loan / holding / rehab costs associated with the purchase. The numbers aren't exact because I don't have them in front of me, but they are close.
If you use this method correctly, you can acquire a REI with little or no money down. Just using what is coined as the 70% rule / BRRR Strategy.
Hope this helps!
It absolutely does, thank you very much.
Originally posted by @Rod Desinord:
under that rule a lot of people would be still working their 9-5's
They are.
- Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes9y
@Keeya WangJones I don't own anything in Encinitas (or anywhere in California for that matter) as my focus is cap-rate/cash-flow rather than looking for appreciation. Frankly, if I had the DNA/mindset/fortitude/etc. to buy for appreciation I'd be better off buying here and holding for the next 20 years. But that's really not what lets me sleep at night. I buy multifamily properties in Arkansas. They cash-flow better and don't get the large swings in appreciation/depreciation that California does. Anyway, long answer to a short question!
- Moreland Hills, OH · Member since 2016 · 50 posts · 47 votes9y
I'm starting out with 10k in cash and more available in credit/loans. It's all about mindset right? Isn't that Grant's thing? haha.
I'm just going to 10X my 10k to 100k in the next 12-24 months! (See what I did there)
Seriously though, it all depends on your personal situation; I live in Cleveland where we all know property is dirt cheap and the cost of living is rock bottom. I'm currently staying with my parents and have been living extremely frugally for almost a whole year and have been able to save that 10k living on a salary of 29k (thats before tax!).
How bad do you want it? That's the question I would ask yourself. I was truly intimidated jumping on this site and into the world of investment. Some of the people in real estate are just monster successes in everything they do in life it seems! But seeing what can be accomplished by anyone, given enough drive and motivation, that is truly inspiring! I've found motivation and determination within myself I didn't know was there.
Summary:
Make the sacrifices necessary to accomplish the goals you have set for yourself. If real estate investment is the ultimate goal then a lack of 6-figure capital to start with certainly won't stop you! GET OUT THERE AND DO IT!!!
- Accountant · Lihue, HI · Member since 2016 · 52 posts · 24 votes9y
Sorta. You're Schedule E would be in the green, but your checking account could be in the red :(
- Poughkeepsie, NY · Member since 2017 · 32 posts · 4 votes9y
Don't wait. Invest as soon as you can. Reinvest your gains and continue to compound. Use other resources to your advantage, networking, financing, skills, biggerpockets.com and do what you can. The real estate market is not static and timing holds much value too.
- Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes9y
It's not a matter of who is right or wrong. BP followers are primarily new investors that are learning the game and networking. Cardone has over 25 years of experience in sales and multi-family investing. He is telling you to think bigger. $100K is a down payment on a $400K deal.
- Insurance Agent · Member since 2015 · 191 posts · 124 votes9y
I am off work today due to a "snow day" so had a little time to actually listen to the podcast was referring to and found about what i expected. Cardone over simplifies economic concepts to the point that his explanations are partially if not completely incorrect. However, the conclusions he reaches are by and large correct showing that he understands the concepts but does not have faith that his listeners have the capacity or desire to understand more detailed explanation.
Examples:
1. His grandmas bank account earned in the high teens in 1976 and earns almost nothing now which means traditional savings accounts are less valuable. - In reality the inflation rate in 1976 was 16.5 and is currently near 0. The real income from these accounts is almost exactly the same and savings accounts have been and will likely always be based on inflation + around 50 basis points.
2. The minimum wage adjusted for inflation is $2 less today than it was in 1960 so that means the dollar is losing value. - The minimum wage adjusted for inflation has nothing to do with the real value of a dollar. It is absolutely true that real income earned by the lower class has remained stagnant or slightly decreased for decades while the real income of the wealthy has increased significantly. However, this has no relationship to the value of money.
Cardone's ultimate take away that you should not just sit on your money but should instead invest it in something (namely real estate) is totally correct but not for the oversimplified reasons he stated. Investments unlike cash increase with inflation. Real estate investments allow investors to take advantage of leverage which increases the amount you can invest and therefore increases the potential profit.
Don't invest until you have $100,000 is another example of an oversimplification. People should have enough cash reserves to take care of themselves and their family if they loose their job and should have reserves built into an investment to withstand negative cash flow for a period of time. People should also not invest all of their savings in one investment that could serve to be life ruining if it fails.
It is hard to imagine someone having sufficient savings, cash reserves and the money for the down-payment on an investment property without having $100,000. The conclusion that you should not invest until you have savings, cash reserves and the money for a down payment is correct for most people. This conclusion does not take into account the complexities of the individual. A 25 year old with no family to support and a steady income can probably invest his first $10,000 in a SFH. He has less responsibility, more time to make up for a failure and cash flow to get through a tough part of the investment. A union member with fixed pension payments does not have to worry as much about savings and can probably invest with a much lower amount in the bank.
Finance and economics is complex and takes time and brainpower to understand. If finance and economics could be explained and understood in simple terms there would not be an industry of professionals paid handsomely for dedicating their lives to understanding it. Anyone claiming to be able to explain these complex ideas using a few easy to understand principles is selling snake oil and its important people take in this type of information with skepticism.
- Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes9y
Cardone may not be as sophisticated as you are Mike, but I'll bet he is making more. He has credibility because he has achieved what most of us wish to achieve.
- 9yAlex ShaughnessyPro MemberReal Estate Investor · Spring Valley, CA · Member since 2016 · 288 posts · 98 votes
I think 90% of ppl would never invest if this was the case. saving up that much, while dealing w/ all that life throws at you, would require a lot of things going your way. other variables of kids, bills, etc. the people that would benefit the most from investing are those that probably don't have the income from a job that will allow you to save 100k in the bank in any decent amount of time.
- WA · Member since 2016 · 99 posts · 44 votes9yI decided if the next property I view doesn't go through for whatever reason... I'm going to hold out until I hit $100k. 11 months away from hitting that goal. Ben Carson and Trump are doing very strange things to getting funding for FHA that creates turmoil in down payments in high market like SD. I will need the $100k just to get my foot in the door. It's a shame!
- 4yJennifer Jo McCallonBusiness MemberMember since 2020 · 62 posts · 59 votes
Oh man, if I had waited until I had $100k to invest I'd still be renting and driving my 2003 Toyota Matrix. No offense to Toyota Matrixes, it was a good car. It was that initial leap of faith in buying my first investment that built my business, when I had maybe $20k in the bank from working a second job for a year.
- Member since 2021 · 217 posts · 190 votes4y
Need to be more specific. For REI, I don't know.
Investing in general though, is a mindset and a habit you need to build. It's absurd to wait till you have X dollars, then think you are going to flip some switch and become an investor. You are likely to make greedy, horrible mistakes in the beginning, driving by fear of missing out and a desire to want it NOW. It will take a while to develop a temperament where you realize you are in a marathon, not a sprint. You are also going to have to develop your inner compass so you don't go for half *** gurus, financial planners, syndicators, ect. All of them will be happy to tell you what to do with that 100,000. Your best interests might be different.
Start with your first dollar. Every dollar you get is a little soldier you need to put to work making you more dollars.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes4y
Grant also said REITs are awful and he is currently doing a REIT..
This is not a one size fits all answer just like Dave Ramsey who many active investors would say his advice is horrible but he caters to the 99% population who are not real estate investors.
I can see his point and agree with it for some and disagree for others. For me I took about $35k and turned it into seven figures but also have put a TON of sweat equity into learning my niche.
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