Purchasing with 60k cash at auction for rental - Good Idea?

Question

Hi,

I’m an Australian looking to make as much cashflow as possible using the 60k iv saved up over the past couple of years.

This would be my first purchase.

Iv strongly been leaning towards paying cash for a property for the usual reasons, plus not being a US citizen. However, the listings iv been looking at have been mostly between 70-100k renting for between $700-1000 per month.

So instead of stalling for the next 1-2 years to get my budget higher, I thought that foreclosures and auctions would be a good idea because I could get a property worth more than, say, 70-100k, with the 60k that I have, plus getting a lot more cashflow through rental income than what I initially thought I could with a cheaper property.

What are your guys thoughts? Is this a dumb idea? I know a little of the major pit falls with auctions and foreclosures, but is this idea realistic?

Thanks heaps

Kyle Jensen · Answer

Nathan, I think you received a lot of good advice in your thread about looking for $1k a month in cash flow. It’s really a matter of picking a strategy that aligns to your goals and risk tolerance.

If it were me, I’d look for a good value add property that needs renovation. Purchase price in the $40-45k range and renovations around $15k. If you do it right, you should have built in equity and it will cash flow well with no mortgage. It also open you up to executing on the BRRRR strategy if you so choose.

Kyle Jensen · Answer

@Nathan Asher Robson

Auctions can certainly provide opportunities to pick up properties at a discount, but it’s also riskier. Do you have reserves on top of that $60k for renovations? Chances are there will be several hidden costs and additional repairs needed before the property is rent ready. Since this is your first property, I would tend to shy away from auctions, but others may disagree with me on that. I think if you’re diligent with your research and put some offers out there, you should be able to find markets where $60k cash land you a decent cash flowing property.

Nathan Asher Robson · Answer

@Kyle Jensen

Thank you so much for your reply.

No, I do not have any reserves. At the very most, I have 60k to spend, which would include the reserves.

Do you know what kind of property that budget could cover - renovations and all?

Lastly, at average case scenario, what kind of property do you think I could acquire?

Thanks so much again