Sewell, NJ · Member since 2017 · 9 posts · 3 votes
I want to ask everyone in here what they would do if I had given them $20,000.
This could be answered 100 different ways and quite frankly I would love to hear all 100 answers.
Try to be as specific as possible, don't just say "I would invest it" tell me what you would invest in and how you would do it with your $20,000 budget.
Go!
If I wanted to be active, I would probably start a small cash business within my area of expertise, Something small and simple, maybe construction since I have a background in it. Or I'd buy a cheap buy-and-hold (maybe combined with private/hard money to cover the difference, if necessary) that cashflows.
If I wanted to be passive, I'd either invest it in a fund, tax liens, a private money loan, or lend it out through a hard money deal. I'd also probably consider doing some P2P lending in unsecured notes which you can invest in for as little as $25, I've had average returns between 10-12% range. Not bad, for little to practically no work, all done at a computer.
Oh and I'd also consider paying down debt or funding my retirement accounts.
If I wanted to be active, I would probably start a small cash business within my area of expertise, Something small and simple, maybe construction since I have a background in it. Or I'd buy a cheap buy-and-hold (maybe combined with private/hard money to cover the difference, if necessary) that cashflows.
If I wanted to be passive, I'd either invest it in a fund, tax liens, a private money loan, or lend it out through a hard money deal. I'd also probably consider doing some P2P lending in unsecured notes which you can invest in for as little as $25, I've had average returns between 10-12% range. Not bad, for little to practically no work, all done at a computer.
Oh and I'd also consider paying down debt or funding my retirement accounts.
If just getting started I'd use part of it to get a small multi and house hack, say 3.5% down (FHA) on a 200k house leaves you with 13k. Save a few more months and you have 20% down on a single family rental in a stable market in the Midwest. Use that cash flow plus the savings on your house hack, save and repeat.
@Kevin McCollick Just don't spend it on a $20K guru coaching program. That sounds like a bad joke but I'd read enough threads about people spending $15K-$50K and not getting nearly enough value out of it. Personally, I can't house hack and it isn't enough to get me into anything I'd want. I'd probably tag it as my "reserves" fund and start saving for a down payment on an asset I found desirable.
I'm really glad you posted this. I've been thinking about the same thing. I've decided that I'll probably end up using it to buy a small property. I'm thinking down payment plus some for rehab that I can use as a rental with equity that I can hopefully use as a down payment on another property.
I put an offer an a rental property today where I'll be putting $20k down. That's how I'd spend the budget. If I didn't invest the money in real estate, I'd spend it on the following:
1) Pay down debts. Anything to improve DTI ratios are helpful and anything put toward high interest rates on balances is instant financial alleviation, whack the debt!
2) Invest in yourself. Education, conference, business relationships, etc. Anything to put you in a stronger position mentally is helpful.
3) Robo-Investing Apps. I've personally used Acorns, Digit, Betterment, Wealthfront, WiseBanyan, and Stash Invest over the past year. I pulled 14% in the past 9 months on $22k spread evenly across those apps to diversify.
4) Travel. See another culture outside the USA or get familiar with another real estate market in a driving distance. The more aware of the world around you, the more successful you will be.
5) Do nothing. Hold it in reserves until you have a winning deal or opportunity in front of you. Nothing wrong with having a stock pile of free cash! :)
6) Invest in other people. To be successful, you need a team. Use money as a tool to buy time and eliminate doing things you don't want to do, or could be done better by someone else. Spending money on team members who assist in your ability to make money is a wise investment.
Put money down on a Sober home, or maybe student home? I have a friend who bought a $37,000 house and collects $1600/mo from recovering addicts. Certain rules are put in place, and you get someone to manage it for $200-$400/mo. No licenses are USUALLY needed. But you will deal with some headaches here and there. Just my input(:
Well, this is going to depend on what your long term goals are whether your looking to aggressively grow your wealth or slowly collect rental properties.
Aggressive Wealth Growth: I would recommend finding the least expensive Hard Money lender in your area, which would allow you to leverage your cash more to flip a property. I would also use $2,000 for a direct mail campaign.
Conservative Wealth Growth: I would use the money with a BRRRR strategy that way you could still pull some equity back out while building cash flow. I would consider buying a 4-plex using an FHA loan 3.5% down and live in 1 unit and rent out the other essential house hacking. If you go the BRRRR strategy i would still use Hard Money to leverage the small amount of cash your have. Then once the repairs are complete and you've forced the property to appreciate refinance with a local portfolio lender.
If I was already in a good financial situation, and had numerous rental properties, I would use 20k to fund someone else's project for a decent return. OR
1)Buy a Vending Machine Route
2)Buy a dealer's license and flip a few cars
3)Buy an income producing website
4) Become a Silent Business Owner ( Invest in to someone else's business )
5) If you don't need the money, donate to charity. It's tax deductible(;
6)Buy a few cheap cars, ( hire an attorney) and seller finance to low-credit buyers. (BUY A GPS TRACKER) Haha now I am just having fun. But in all seriousness I would buy another rental property(: but I have thought about all of these! P2P would be awesome but It is not legal in Ohio :'(
Check out Dave Ramsey's books and Kiosaki's books for free at the library. Two very different perspectives. Prioritize and plan. Then act. I used Ramsey to get personal finances straight then Kiosaki to use leverage for cash flow. I would buy another rental that cash flows. Each one brings the next one sooner! If I could, I would DEFINITELY house hack! Conserve cash for next one and keep on rolling forward. Having personal finances in order simplifies this. Listen to Scott Trench's podcast from yesterday (free) and consider buying his book. He has great ideas! Good luck to you!
I would probably buy an REO near me with cash that would rent for around 800-900/mo after about 2-5k in repairs. I would leverage it for about double and buy two more.
I want to ask everyone in here what they would do if I had given them $20,000.
This could be answered 100 different ways and quite frankly I would love to hear all 100 answers.
Try to be as specific as possible, don't just say "I would invest it" tell me what you would invest in and how you would do it with your $20,000 budget.
Go!
Sounds like a down payment on a pretty good investment property! :)
Having $20,000 is a good position to be in and better than most people who are beginning to plan for their financial future. With that being said you have a few options in front of you and your age, income, and personal life play a big role into which path is right for you. You could:
1. Pay down bad debts such as credit cards or car payments with high interest rates pay them off so you can start saving more cash flow on a monthly basis (If they exist). No point in investing money to get a 5-8% return when your outstanding debt is costing you 12-20% a year.
2. Park the money in a Roth IRA account which will allow you to build up tax free income until your ready to make a purchase on an investment property. Once you do you can leverage your IRA to make the down payment. (However be aware that your earnings will also be locked up in your IRA portfolio making it tax free but you will not be able to access the cash flow for personal use).
3. Put the money in a regular brokerage account and park it an S&P 500 ETF which tracks the US economy as a whole and has historically returned 6-8% annually and continue to park additional saving there until you would like to diversify further and add a rental property to your portfolio.
4. Depending on your market you may be able to get started investing in multifamily homes through house-hacking with the use of an FHA loan. This will allow you to only put down 4% though given the fact you will need to have money in reserves and for closing costs I wouldn't use more than $8,000 on a down payment allowing you to purchase up to a $200,000 multi family home.
Hope this helps, best of luck on your financial journey.
@Joshua Hollandsworth I know you said it was a friend that invested in the sober home, how did they find information about doing that. I have heard of doing this before or even a halfway house for people getting out of prison being integrated into the community. Really interested.
@Edgar Perez Honestly, I am 90% sure she just collects under the table and doesn't claim. So I would hate to give you any legal advise. But the cash flow on these deals are INSANE! I did some research, and (to my knowledge) you don't need any licensing. My friend has a guy. He enforces the rules. He finds the tenants. He kicks them out. He does EVERYTHING for $200/mo. Everything! I feel as though I would have a hard time managing these kind of tenants without a guy like this. He is a recovering addict himself, so he knows where to find them. So, to my knowledge, here is what you need to do:
Buy a house.
Fix it up.
Buy beds and furniture
Buy all necessary living applicances
Buy silverware etc.
I am pretty sure you can (and should) only have 4 guys in one 3-4br house. Find out what is fair to charge.
Have an attorney write up a contract explaining the RULES! NO DRUGS OR ALCOHOL! No women stay the night vise versa.
MUST HAVE JOB! Etc.
Find a guy like the one I mentioned. A guy who knows how to find and manage these people. Pay 500/Mortgage collect $1600 Rent. Boom livin life!
@Edgar Perez Honestly, I am 90% sure she just collects under the table and doesn't claim. So I would hate to give you any legal advise. But the cash flow on these deals are INSANE! I did some research, and (to my knowledge) you don't need any licensing. My friend has a guy. He enforces the rules. He finds the tenants. He kicks them out. He does EVERYTHING for $200/mo. Everything! I feel as though I would have a hard time managing these kind of tenants without a guy like this. He is a recovering addict himself, so he knows where to find them. So, to my knowledge, here is what you need to do:
Buy a house.
Fix it up.
Buy beds and furniture
Buy all necessary living applicances
Buy silverware etc.
I am pretty sure you can (and should) only have 4 guys in one 3-4br house. Find out what is fair to charge.
Have an attorney write up a contract explaining the RULES! NO DRUGS OR ALCOHOL! No women stay the night vise versa.
MUST HAVE JOB! Etc.
Find a guy like the one I mentioned. A guy who knows how to find and manage these people. Pay 500/Mortgage collect $1600 Rent. Boom livin life!
Word of Caution:
NEIGHBORS do NOT like these homes!
These guys can be unpredictable and/or violent
My friend's situation is probably not the "advised" way of doing things. If a guy is caught with drugs, What IS an eviction notice? They just get thrown out. Loses his job? Thrown out.
You should want to help these people, not just profit off of them. So keep the place clean !
Purchase a rental property for 17K-19K already occupied that is worth at least 26-28K appraised with tenants in place. Delay refinance with a conventional lender at 70% of the appraised value the pull 90-100% of your money back out and repeat the process. In order to do that you must first identify a market that will allow this sort of investing strategy. I invest in one. Best of luck to you on your journey and fact finding mission.