What to do with $75,000 saved up
Hello,
current situation: I’m military and wife is a realtor. We Live in our primary home that we would like to stay in for at least 5 years. We own 1 condo that cash flows $400 a month after all expenses etc.
question? we currently have $75,000 saved up for our real estate investments but we don’t know how to approach the next buy/couple of buys. Saving up for the 75k took over a year and we don’t want to buy and then have to save and wait again. With this amount of money saved up…..what would your approach be? We would like to possibly buy one more condo and then begin our multi family journey.
Thanks in advance!!!!
Tough question, how little $75k goes these days. Maybe try a 2 to 4 family house. I started with $50k in 1994, 28 years later, total returns/value has increased tremendously. Good luck.
I am new to this, but if I was you guys I would use the BRRRR strategy and buy a duplex, triplex or 4-plex that needs about 50k in rehab. I'd buy it with a hard money loan, find a really good contractor through talking to multiple and getting multiple bids, rehab the property, rent out the property then refinance and hopefully I can pull all, if not most, of my money out of the deal to be able to REPEAT. Remember the 4 keys of BRRRR though 1. Line up your refinance lender first (cash out refi). 2.Stay on budget and on time on the rehab. 3. Nail your ARV 4. Understand seasoning (the amount of time before you can refinance a property.
Hi, Brad,
Congratulations on starting your RE investing journey! Depending on where you live and how close you can find investment properties, certainly another condo could work.
You should also consider a duplex, if the deal makes financial sense. That's a reasonable step up and gives you a chance to develop some processes to manage your properties.
I'm a big believer if you want to scale up, that you've got to develop processes that help you efficiently manage properties. And if you document those processes, as you build your portfolio, you can get part time help up to speed more quickly so you can grow and work on finding good investment properties.
Next, investing as an LP in multifamily syndications can grow your savings, but it won't give you commercial real estate investing experience if you want to become an active investor.
For more active learning, look for a nearby meetup and attend a conference or two yearly hosted by the names we all see in the multifamily syndication space*. That way you'll find people who are active, get to know people who invest in your area and who you develop a relationship with. Volunteer to be part of a team to learn how they operate. And read books. There are lots of resources available.
Good luck!
* Some examples: Bigger Pockets, Jake and Gino, Dan Handford, Joe Fairless, Michael Blank, Dave Lindahl, The Real Estate Guys. Just do a Google search and you'll find plenty of networking opportunities.
Congratulations on your savings! I would ditto @Devonair Jackson and use the BRRRR strategy. You can always acquire the property with a hard money loan and cash out refi on the back end. Be careful though as rates have gone up significantly! You still want to make sure the property cash flows after all is said and done. But I like the saying "Marry the property and date the rate"!
Good luck on finding your next property! Wishing you all the best on your RE journey!
Quote from @Devonair Jackson:
I am new to this, but if I was you guys I would use the BRRRR strategy and buy a duplex, triplex or 4-plex that needs about 50k in rehab. I'd buy it with a hard money loan, find a really good contractor through talking to multiple and getting multiple bids, rehab the property, rent out the property then refinance and hopefully I can pull all, if not most, of my money out of the deal to be able to REPEAT. Remember the 4 keys of BRRRR though 1. Line up your refinance lender first (cash out refi). 2.Stay on budget and on time on the rehab. 3. Nail your ARV 4. Understand seasoning (the amount of time before you can refinance a property.
Thanks a lot for the reply man! Really appreciate it!!!!
I like your thought process. There’s a good amount of duplexes in my area. All around the 250k range and most if not all need some work. So what you’re saying is use a hard money loan for the 250k and then finance the rehab using part of my 75k and then go from there?
thanks again !!!
@Brad Stallings I'd try to house hack. You can put down low down payments and it's not unusual to see 50%+ returns. It's a lot easier to save up cash when your living expenses are low.
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I'd say BRRR. As others mentioned go hard money. Build your team. From there rinse and repeat. Start with 1 at a time soon it'll be 2 and it'll snowball. If you wanted more passive you could dump it in multi family but wouldn't be able to recycle the $$$ you invested quickly(unless you have equity when buying)
why not jump into MF now instead of later? every single person that jumps into MF says "I wish I had started MF sooner"
Quote from @Brad Stallings:
Hello,
current situation: I’m military and wife is a realtor. We Live in our primary home that we would like to stay in for at least 5 years. We own 1 condo that cash flows $400 a month after all expenses etc.question? we currently have $75,000 saved up for our real estate investments but we don’t know how to approach the next buy/couple of buys. Saving up for the 75k took over a year and we don’t want to buy and then have to save and wait again. With this amount of money saved up…..what would your approach be? We would like to possibly buy one more condo and then begin our multi family journey.
Thanks in advance!!!!
would you like to invest in a cash flowing commercial property with 6 figure net?
Quote from @Brad Stallings:
Quote from @Devonair Jackson:
I am new to this, but if I was you guys I would use the BRRRR strategy and buy a duplex, triplex or 4-plex that needs about 50k in rehab. I'd buy it with a hard money loan, find a really good contractor through talking to multiple and getting multiple bids, rehab the property, rent out the property then refinance and hopefully I can pull all, if not most, of my money out of the deal to be able to REPEAT. Remember the 4 keys of BRRRR though 1. Line up your refinance lender first (cash out refi). 2.Stay on budget and on time on the rehab. 3. Nail your ARV 4. Understand seasoning (the amount of time before you can refinance a property.
Thanks a lot for the reply man! Really appreciate it!!!!
I like your thought process. There’s a good amount of duplexes in my area. All around the 250k range and most if not all need some work. So what you’re saying is use a hard money loan for the 250k and then finance the rehab using part of my 75k and then go from there?
thanks again !!!
Anytime man! I am no expert on the strategy, but I know 75k is a lot of money to start with especially with using BRRRR because if you do it correctly you can pull some, if not all your money out of the deal and REPEAT the process. One reason I want to start to BRRRR when I save some money up is because you can buy houses under market value because they are fixer upper properties and add value to them through the rehab. If I was you I would get David Greene's book on BRRRR, it is fantastic and I have learned A LOT! The 4 keys I gave you earlier was from the multi-family millionaire book by Brandon Turner. Also, I'd consume some podcasts on BRRRR because it really opens your mind up how they work, but I think it's a phenomenal strategy that you can pull off with the right team! You need a great contractor, agent, lender and property manager to help you with the project.
Quote from @Sean Tucker:Absolutely!
Quote from @Brad Stallings:
Hello,
current situation: I’m military and wife is a realtor. We Live in our primary home that we would like to stay in for at least 5 years. We own 1 condo that cash flows $400 a month after all expenses etc.question? we currently have $75,000 saved up for our real estate investments but we don’t know how to approach the next buy/couple of buys. Saving up for the 75k took over a year and we don’t want to buy and then have to save and wait again. With this amount of money saved up…..what would your approach be? We would like to possibly buy one more condo and then begin our multi family journey.
Thanks in advance!!!!
would you like to invest in a cash flowing commercial property with 6 figure net?
Quote from @Brad Stallings:
Quote from @Devonair Jackson:
I am new to this, but if I was you guys I would use the BRRRR strategy and buy a duplex, triplex or 4-plex that needs about 50k in rehab. I'd buy it with a hard money loan, find a really good contractor through talking to multiple and getting multiple bids, rehab the property, rent out the property then refinance and hopefully I can pull all, if not most, of my money out of the deal to be able to REPEAT. Remember the 4 keys of BRRRR though 1. Line up your refinance lender first (cash out refi). 2.Stay on budget and on time on the rehab. 3. Nail your ARV 4. Understand seasoning (the amount of time before you can refinance a property.
Thanks a lot for the reply man! Really appreciate it!!!!
I like your thought process. There’s a good amount of duplexes in my area. All around the 250k range and most if not all need some work. So what you’re saying is use a hard money loan for the 250k and then finance the rehab using part of my 75k and then go from there?
thanks again !!!
Hey Brad!
Hard money loans are available for these types of fix and flip properties.
Hard money lenders usually help with 70% to 75% of the purchase price for first time investors. You can use that $75k as a 25% to 30% down payment. They will then fund 100% of the rehab paid in draws.
The way this works is you will pay for the work out of pocket and call in for periodic inspections as you work through your project. The hard money lender will then reimburse you for your costs to keep you as liquid as possible.
Each lender is different and some have different criteria.
Once you refinance out of the property the cash out is yours to keep after paying back the hard money lender the total balance of the loan. The remaining proceeds of the refi are yours to keep, and you have most of not all of your original investment returned to you as well as a hopefully cash flowing property in your portfolio.
Like others have said, rinse and repeat.
Find a reputable syndicator that's taking non accredited LPs or has a fund for non accredited investors. Im currently a syndicator but don't have a big track record if interested I can recommend you to well known groups with great track records.
On the LP journey you will get a insight of how the multi family world is with monthly updates from the GP by the time the exit strategy is implemented usually 3-7 years(although lately I seen a lot of 1.5 years) you would have enough to start your own journey in the MF world.
@Brad Stallings do you want to be active or passive? Consult with your tax pro, but with your wife being a real estate professional, I think you're able to you can take advantage of the depreciation benefits on a syndication.
If you want to be active, I would personally still go the commercial real estate route. You can use that $75k to help an experienced investor/team with earnest money and use it as an opportunity to learn the ropes of being on the GP side while you make a nice return. Just make sure you find a partner that you truly want to partner with. Hopefully, that would lead to future partnership opportunities as well, but at the very least it would be a nice credibility boost for future deals.
Quote from @Adam Lacey:My thoughts as well 75k emd get you a gp spot and learn
@Brad Stallings do you want to be active or passive? Consult with your tax pro, but with your wife being a real estate professional, I think you're able to you can take advantage of the depreciation benefits on a syndication.
If you want to be active, I would personally still go the commercial real estate route. You can use that $75k to help an experienced investor/team with earnest money and use it as an opportunity to learn the ropes of being on the GP side while you make a nice return. Just make sure you find a partner that you truly want to partner with. Hopefully, that would lead to future partnership opportunities as well, but at the very least it would be a nice credibility boost for future deals.
Quote from @Issac San Miguel:
Quote from @Brad Stallings:
Quote from @Devonair Jackson:
I am new to this, but if I was you guys I would use the BRRRR strategy and buy a duplex, triplex or 4-plex that needs about 50k in rehab. I'd buy it with a hard money loan, find a really good contractor through talking to multiple and getting multiple bids, rehab the property, rent out the property then refinance and hopefully I can pull all, if not most, of my money out of the deal to be able to REPEAT. Remember the 4 keys of BRRRR though 1. Line up your refinance lender first (cash out refi). 2.Stay on budget and on time on the rehab. 3. Nail your ARV 4. Understand seasoning (the amount of time before you can refinance a property.
Thanks a lot for the reply man! Really appreciate it!!!!
I like your thought process. There’s a good amount of duplexes in my area. All around the 250k range and most if not all need some work. So what you’re saying is use a hard money loan for the 250k and then finance the rehab using part of my 75k and then go from there?
thanks again !!!Hey Brad!
Hard money loans are available for these types of fix and flip properties.
Hard money lenders usually help with 70% to 75% of the purchase price for first time investors. You can use that $75k as a 25% to 30% down payment. They will then fund 100% of the rehab paid in draws.
The way this works is you will pay for the work out of pocket and call in for periodic inspections as you work through your project. The hard money lender will then reimburse you for your costs to keep you as liquid as possible.
Each lender is different and some have different criteria.
Once you refinance out of the property the cash out is yours to keep after paying back the hard money lender the total balance of the loan. The remaining proceeds of the refi are yours to keep, and you have most of not all of your original investment returned to you as well as a hopefully cash flowing property in your portfolio.
Like others have said, rinse and repeat.
I had no clue some lenders pay for 100% of the rehab. I have been running numbers on BRRRR properties and this would make things a lot smoother and easier. Paying the down payment of 25 to 30% isn't bad with 75k especially because the rehab is being funded. @Brad Stallings just remember as David Greene and Brandon Turner say, "You make your money on the BUY." If you buy right, the BRRRR could be a great strategy for you guys!
You could easily get a 3-6 or more unit building in Cleveland or the suburbs. With $75k down you can get something really nice up to $400k.
Thank you for your service. I'm sure you're gonna get a lot of BRRRR suggestions with that amount of money, but that can be a difficult thing to jump into depending on your experience, comfortability, and knowledge. Might be even more tricky if you've moved around a lot while serving and don't have 100% clarity on a market. I'd also try to stay nearby until you've got the confidence and team in place to move to OOS investing. Best of luck!
I would challenge you and your wife to rethink that first sentence. Being in the military you can recycle the VA loan by moving into a new primary residence and paying 0 down, using only a small amount of your capital for closing costs (~15k). All you have to do is occupy that "new residence" for a year, and in the process you could maximize your potential by finding the most expensive multifamily (4 unit) you could get approved for, therein maximizing your return on appreciation (% of total value), cashflow (higher rents in bigger/more expensive properties), and utilizing all of your remaining capital (~60k) for equity increasing rehabs.
Assuming your primary residence isn't investment material and more-so a buy and hold family home, you could minimize your losses by renting it out for a year while you occupy your new investment property. After the year of sacrifice you can re-occupy your family home and watch the chips stack in your fully renovated, fully rented, quadplex.
here is the kicker: You can also cash-out refinance the VA loan with as little as 2.5%-3.5% down. That is incredibly valuable considering most people who use this process successfully are planing for a 75-80% ARV return. We are talking a 96-97% ARV return. That equation is not very hard to satisfy and will almost guarantee substantial money back in your pocket from that original 75K. Leverage your entitlements as a military member!
Hi @Brad Stallings! I think you have gotten some great answers above. A big factor is you need to consider: how active do you want to be in these investments. If you would like to be a passive investor, do your research on syndicators and their current offerings. This allows for diversification and little to no work on your end. The syndicators will have a lot more experience and run things for you. This may allow you to learn more while still investing in the asset classes you want to know more about. Good luck!
Hi @Brad Stallings! I think you have gotten some great answers above. A big factor is you need to consider:
How active do you want to be in these investments. If you would like to be a passive investor, do your research on syndicators and their current offerings. This allows for diversification and little to no work on your end. The syndicators will have a lot more experience and run things for you. This may allow you to learn more while still investing in the asset classes you want to know more about. Good luck!
@Brad Stallings I would split that between a couple of properties. In some of the more affordable Midwest markets you can probably afford 1 SFR and one small MF which would maximize your cash flow. Just be careful not to buy at low price points that will put you in bad neighborhoods and make sure you have reserves for emergencies.
@Brad Stallings
I would be very careful getting a hard money loan right now. The bond market and Eurodollar futures markets are projecting a FED pivot late this year or the beginning of next year. Remember these are only probabilities not certainties. What happens when you go to get the refi and the building does not appraise for the value you estimated, and interest rates are higher than your projections? The last thing you need to do is over leverage yourself in a risk-off environment and lose everything. You think it was hard to save $75k wait till you lose your butt. I have no problem buying a cash flowing asset and use the BRRR strategy to build equity. I would not buy anything that does not CF day one. I believe that some of the advice on BiggerPockets about buying assets that have a negative CF is completely wrong. If you are buying something with negative CF you are speculating that the property will go up in value. Everyone has recency bias because that's what it has done for the past 10-12years. When everyone starts speculating in the market and no one thinks a market will go down that's when you should be cautious. We are seeing a dramatic increase in inventory and a lack of demand in housing. I understand that supply is still under 2019 levels, and everyone says it is simple supply and demand, but they do not even look at the demand side. Housing inventory is at I believe 2.7months nationwide and we are seeing prices come down M-o-M in places like SD, SF, San Jose, PHX. Still a seller's market but the M-o-M data dropped yearly appreciation from 19% to 17% still a very high level when the norm is 3-5%. We're seeing a lack of mortgage demand which should in turn lower pending sales and that will lower closed sales.
Long story short I would look for a CF deal. I would buy as many units as possible, if you want to stay residential then I am shooting for a 4plex. Be careful with condos and properties with HOAs. You want some type of value-add deal. Do NOT overpay for the property. If you cannot find a deal do not just buy to buy. Buy in landlord friendly states, ie red states. The market is hitting an inflexion point and you want to keep your eyes on it. These were national trends and all RE is local. For instance, if I am in Bosie, SF, PHX, SD etc. with seeing a M-o-M drop in median home sales, and a big drop in pending home sales I am probably going to at least pause and see where the market is heading.
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