Property Manager · Novato, CA · Member since 2018 · 29 posts · 5 votes
Hello All,
My name is Makala and I am very eager to buy my first property. I have spent months trying to gather as much information as possible, but it seems as though the learning for Real Estate is never ending, which is wonderful. I currently have $5,000 to work with as a start and was wondering if it is even possible to do anything with such a low number? Investing the the Bay Area is so expensive, should I consider looking out of state?
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
7y
Hi Makala,
$5k is not enough to invest in the Bay or in another state. Don't put it into an IRA. You don't want the only amount of money you have trapped into a retirement account. Just do the math. If you took the $5k and had a 12% return for 10yrs straight compounded it would be $15,529 which doesn't change your life.
Keep saving the money don't bother investing it into anything because the honest truth is that it won't be enough to make an impactful dent into your life. Just keeping it completely honest here and showing you the best route. Instead, keep saving away and find a side hustle and stack cash that way.
Number 1 thing you need is to increase your income. 2nd decrease your expenses.
Property Manager · Novato, CA · Member since 2018 · 29 posts · 5 votes
7y
Hi Caleb,
Thank you for your reply. Why would I need more money for out of state if I am entering a fairly cheaper market then the Bay Area. Is that because of taxes and things of that sort. Is an REIT a property that need to be fixed?
Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes
7y
@Makala Lee-Norwood I admire your desire to get into REI but money and desire are not the only things you will need to get into investing. Without going into detail about your current financial status, other than the $5000, there is very little constructive advice anybody can offer. One of the first barriers that you will need to address is credit. You need to be able to get a loan for any property, local or out of state. I would suggest that you take some time to review your current earning power and your credit rating. If you are currently pulling down a good salary that will help, but if you are not then you will either need to partner with somebody who does or get your W2 work sorted out. Polish your credit rating so that it will be easier to get a loan. The truth of the matter is that getting your first loan, at a young age, is probably harder than finding your first deal.
Property Manager · Novato, CA · Member since 2018 · 29 posts · 5 votes
7y
Hi @Arlen Chou,
Thank you so much for your feed back. I am not very sure about REI, someone just recommended it to me. I have a pretty good credit score and annual salary. I just want to see if I even have a chance trying to start out with that much money because it is so expensive in the Bay Area, should I look else where.
Property Manager · Novato, CA · Member since 2018 · 29 posts · 5 votes
7y
Hi @Aaron Wade,
Thank you very much for your input. Whats is a Roth IRA account? I was listening to a podcast today that was speaking briefly about it, but I didn't get the whole picture. So would I put the 5k in a Roth account to help the money grow?
Lender · NJ NY PA CT GA FL, Puerto Rico · Member since 2015 · 212 posts · 111 votes
7y
@Makala Lee-Norwood keep accumulating, maybe you can get a job in real estate industry - that will speed up the process. You are right, it's a never ending learning process... but it also did not take you a week to save money.. check out "refresh your wealth" podcast - abundance of knowledge when it comes to IRAs.. Open Roth, put in another 5k, then convert to Self Directed IRA with checkbook control (IRA LLC), once converted - lend money for 10-12% to an investor, put in another 5k (2nd, 3rd year), lend more... repeat, repeat, learn, learn... once you have substantial amount then you can make choices which strategy to use.. there are many ways to participate in creating real estate wealth...hold on to your money, don't rush.. its very easy to lose it all
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
7y
Hi Makala,
$5k is not enough to invest in the Bay or in another state. Don't put it into an IRA. You don't want the only amount of money you have trapped into a retirement account. Just do the math. If you took the $5k and had a 12% return for 10yrs straight compounded it would be $15,529 which doesn't change your life.
Keep saving the money don't bother investing it into anything because the honest truth is that it won't be enough to make an impactful dent into your life. Just keeping it completely honest here and showing you the best route. Instead, keep saving away and find a side hustle and stack cash that way.
Number 1 thing you need is to increase your income. 2nd decrease your expenses.
Rental Property Investor · Chubbuck, ID · Member since 2018 · 532 posts · 466 votes
7y
I am going to give you some good advice. Take 20 minutes and read the 7 levels of investors. Here is the link. http://www.belnapfamily.net/teach/7Levels.pdf. Also read a couple of real estate books.
Jumping into real estate investing is almost always a level 5 investing. Before you jump into this type of investing you should already be at level 4 which is an automatic investor. Never skip level 4 to jump into level 5. Based on you not knowing what a Roth IRA is you need to slow right down and start learning more about investing and how to invest in real estate along with stocks and mutual funds and retirement accounts such as 401ks and IRA accounts.
As far as the $5000, I would keep saving it as you educate yourself. Invest the minimum to get your highest 401k match from work if you have a retirement account or do the max into an Ira, save the rest for real estate until you have enough for a 20% down payment, closing costs, 6 months of reserves, and funds for improvements if you are going to flip or brrr it. You don’t need the improvement funds if you are going to by a turnkey property. You should be educated by then and know how you want to invest in RE by then. Buy your property and then save up your income for the next 20% down and keep repeating. Decide how many properties you want and then start paying off the debt with your rental cash flow and any other cash flow you have from a job or business etc.
Good luck, and you have a bright future, be patient and steadfast and you will be ready soon enough.
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
7y
@Makala Lee-Norwood
Here's what I did with 5k to get into real estate investing. I put it in a Roth IRA. Within the Roth I bought and sold stocks over the years. I tried to put in 4 or 5k a year in my Roth as well as my wife's Roth. You can always take out what you put in without paying any tax. You just can't take out anything above what you put in (the basis). Four years ago I pulled out 62k from our Roths to buy my first investment property. I knew only 5k wouldn't be nearly enough so I kept saving all I could to accumulate more in my Roth so I could snag a property with a cash offer some day. It's all about delayed gratification. Be patient and don't give up on your goal. I now have 6 rental properties. It doesn't happen over night so be patient and keep spending less today so you can have a big cash pile to make and offer some day. Once you get that first one under your belt it gets easier. You refinance that property and buy another. And keep going.
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
7y
Learn to market and learn how to market. Learn to turn 5k into 25-50k cash and then do it again on that 25-50k. Then you have a good base to start to buy/leverage money if it fits your goals.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
There’s ways to get into RE with just 5k down ( I’ve done it) but you’d need reserve money and closing money and find a seller willing to finance the property to you . I would not recommend this to you though as your too green in RE and lack the funds
Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
7y
@Makala Lee-Norwood
Try looking into First Time Home Buyer Clubs at credit unions, local neighborhood authority homeownership grants, and low down payment loans. It's not quick money, but lenders will match you 4 dollars to every dollar you put in. Homeownership grants might give you enough for closing costs and part of a down payment. FHA loan is only 3.5% down payment. House hack a duplex and get started.
Congrats on getting started! I have to agree with many of the posts, do your self a favor and obtain a good knowledge base about real estate investing before you start. I recommend you read some books, attend some events and get connected with the local real estate investing groups. Perhaps you could find a mentor who has been in real estate for years who is willing to let you tag along for various meetings and projects to gain some hands on experience. These new connections will also be able to help you with saving more for real estate investments, and can help you look for real estate investments. Having a great network of educated and experienced people is a very valuable asset.
In terms of Roth IRA's, they are a type of retirement account. The way they work is that you pay the taxes on the money now (in your annual taxes) then the funds are in the Roth account, there are limits on how much you can contribute each year. The contributed funds can be invested in many different ways. The main key of a Roth IRA is that when you reach retirement, you can take distributions from the account without having to pay the taxes on the funds. Many consider it wise to start building your retirement accounts at a young age, if you are interested in a Roth IRA, I would recommend you learn about the types of investments and see what suits your goals best. The conventional investments are things like, stocks, bonds, mutual funds and CD's. These are commonly available investments through a bank or brokerage. More advanced investments such as using your retirement funds (Roth IRA, Traditional IRA, 401K) to invest in real estate, private lending and businesses is available, but they have rules and regulations. If you wish to use a retirement account to invest in these alternative investments, you need to have a special Self-Directed account. You should be sure to learn all the rules regulations and general information on these accounts before using one to invest in real estate.
Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes
7y
@Makala Lee-Norwood thank you for your honest reply about your interest in real estate, it really does help in getting you better feedback from the group. REI is not something you want to start half cocked, shysters and bad tenants will eat you alive locally or out of state. By definition, any action you take is a start, so by coming on to the forum you have already started with your $5000, you just have not spent any money.
You will not be able to buy anything in the immediate Bay Area with $5k in your pocket, that is just a straight up fact. You SHOULD NOT buy anything out of state with $5k in your pocket, that is just my opinion. Be very careful with your money, the majority of people on BP are great and share info and advice for free, but there are some sharks in these waters so keep your guard up.
I am sure 100% of the people on this forum will agree that investing, in one form or another, in real estate is a good way to POTENTIALLY secure your future. But before you jump in with the money you have or in the future you should educate yourself to all of the different possibilities and at the same time get your hustle going and build more cash. Don't pay for any courses or mentor programs. Read on BP and get out to local meet ups and talk to real investors BEFORE you throw down any cash to see if this is something you really want to do.
My name is Makala and I am very eager to buy my first property. I have spent months trying to gather as much information as possible, but it seems as though the learning for Real Estate is never ending, which is wonderful. I currently have $5,000 to work with as a start and was wondering if it is even possible to do anything with such a low number? Investing the the Bay Area is so expensive, should I consider looking out of state?
Save it! There is no reasonable investment that will kick off a relevant enough amount of money to bother with a $5,000 investment. If I were you I would save up enough money to cover the down payment on a property. If you are going to owner occupy it you'll only need 3.5% down. I saw you were in the Bay area so $5,000 isn't enough to do that. Lol if you were out where I am in Cleveland it'd actually be too much money as properties out here regularly sell for way less than $50k but I'd imagine you don't want to move so keep stock piling that cash until you've got enough cover the down payment on something.
Property Manager · Novato, CA · Member since 2018 · 29 posts · 5 votes
7y
@Anastasia G. Thank you so much for your insight. I am working on saving more and I will watch that podcast to gain more knowledge. I currently work for a Property Management Company were I am beginning to learn things of the other side of the spectrum starting out.
Property Manager · Novato, CA · Member since 2018 · 29 posts · 5 votes
7y
Hi @Craig. Thank you for this link. I looks like I have a ton of more research to do and knowledge to acquire. I will get back to studying. I appreciate your advice.
Property Manager · Novato, CA · Member since 2018 · 29 posts · 5 votes
7y
Hi @John. Thank you for the advice. You really made me understand what I need to do in a simple way. Everyone keeps mentioning a Roth account so I will look into that.