Let's say I have $10k to invest

29 Replies

Hello everyone.  I have an opportunity to get a personal loan for about $10k and was thinking about what I could do with it as far as investing.  Obviously the loan would have a monthly payment which I will need to account for when pursuing a possibility. 

Thanks for advice. 

@Jose Diaz  

That amount of money wont get you much when it comes to buying a house.  $10k is only 20% of a $50k home ( which would have to include repairs  and you have to qualify for bank financing ) but you would still have about $4k in total closing cost.  

Hey Jose,  If you know other investors that you trust maybe you two could pair up and do something. Remember cash is king and I started with less than 10k

Good luck

@Jose Diaz   There are other ways to invest in real estate. 

@Curt Davis   If he has time to invest as well, then I suggest he invest in himself.  One way he can do that is by marketing for motivated sellers in his farm area.  If he mails to a list of 1000 absentee owners it should cost him no more than $1,000 if he outsources the mailing of these letters.  To me, this is far better than investing in a down payment on one house.  That way, he can learn while talking to sellers, networking with buyers, and closing deals. If he closes just one deal he could easily net $5,000 or more on that one deal, and gain a ton of experience along the way. 

@Ben G. 

That is true he could do that and it would not be a bad idea but most people when they have so little funds wont take this risk even if the cost and risk is low. Plus knowing he has to pay it back makes a person even more hesitant to do it. 

Although marketing for motivated sellers is a great idea, I would not use those.funds because I have a monthly expense from the loan.

@Jose Diaz  Have you thought about partnering with other people to bring in the same amount and everyone split the profits. I would be interested in that, so if you go that route, let me know and we could figure something out.

Thanks,

George

What about trust deed investments, depending on your interest on the personal loan their are deed secured investments that get you 15% to 20%.

Otherwise a $10k investment pretty tough to get into a property and rehab it to the point where it's ready for a rental.

Originally posted by @George Makakaufaki:

@Jose Diaz Have you thought about partnering with other people to bring in the same amount and everyone split the profits. I would be interested in that, so if you go that route, let me know and we could figure something out.

Thanks,

George

 It would be a great idea to partner.  Its very difficult to find someone in Miami not trying to screw you over or have a subliminal intention. 

@Jose Diaz How about trying to match your 10k? Make it a goal asks family members or friends to see if they would like to venture with you in a form of a loan. People you can trust and give them an incentive to repay them maybe 10-15% ROI within a year or two. Once you doubled your purchasing power, crunch the numbers. Find an investment that covers your costs and make it a priority to return whatever you match as fast as possible, while keeping a reserve. Don't invest the full 100k, cut your risks, maybe 70-85k to lower your payments. Put 5k of your personal loan and reserve the other 5k for emergency funds. Invest with 15k, 5 from you and 10 you raised. Once you repay 50% of your matched investment then capitalize on your reserved funds and payoff the last 50%. Good Luck!!!

@Jose Diaz   surely your monthly expense could easily be covered by the income you could produce from just one deal.  Would you spend $1,000 to make $2,000?  If so, then why wouldn't you spend $1,000 to make $5,000.  I would spend $5,000 to make $1,000.  One could argue that putting a down payment on a house is riskier than investing that money into yourself by marketing for a deal.  

@Gabriel Rebustillo I got the wrong circle of friends and family. They are all broke, LOL.

@Ben G.  I understand what you are saying and I agree. I don't know if I could afford wishing that a motivated seller would call knowing I have to repay the loan. Maybe I am just coming up with excuses, not sure.

@Jose Diaz   What is the payment every month on your loan payment if you don't mind me asking? 

@Jose Diaz if you could provide a little more information about yourself we may be able to assist you better. For instance do you rent or own? If you rent I would recommend purchasing a duplex. With an FHA loan that would only require 3.5% down. Get one side rented or keep it rented and stay in the other side for as long as FHA requires then pull some cash out if its available or save the money you would be paying for rent and purchase another duplex for 3.5%. Keep recycling this process until you are able to acquire enough cash or resources to purchase a rental without having to move.

Wow!  That's a big payment on a 10k loan.  I was assuming it would be lower than that.  I'm not sure what your income is, but yes, I'd be a little more hesitant to invest in marketing with that large of a payment. 

Originally posted by @Jose Diaz:

@Gabriel Rebustillo I got the wrong circle of friends and family. They are all broke, LOL.

@Ben G.  I understand what you are saying and I agree. I don't know if I could afford wishing that a motivated seller would call knowing I have to repay the loan. Maybe I am just coming up with excuses, not sure.

 First, you need to get away from those friends, pronto!

Second, how about a duplex in Dania, hallandale , west of 95, or north Miami? 

@Jose Diaz  I have to agree with @Ben G.  . I think the best use of at least some of your loan right now is to market for motivated sellers. Obviously don't use the whole amount, but do get started right away. If you select a good list, and use a mail piece that gets the phone ringing then you should be able to get a deal with a relatively small investment. 

Even if you find a rental property that you can purchase with $10k down it is unlikely you will clear $450/mo. net income to pay the loan, and then you've tied up all your reserves. That to me is much riskier than spending $1000 or so on some well focused marketing. 

Still not sure? You can still find deals without spending much money at all, here are some ideas:

1. Pick a neighborhood you like and go knock on doors and speak to people. I did this a ton my first year in the business. True story: I knocked on a lady's door, she had just inherited the house next door from her father and wanted to sell it. The next day I knocked on another door just blocks away - the guy who answered was a local police officer with a contractors license looking for a house to rehab. I put the deal together and made $12,500! No marketing dollars, just sweat equity :D

2. Call on For Sale By Owners. These people actually want to sell their house - you just need to learn how to talk to them and get them realistic on pricing.

3. Call for rent signs, many landlords will be interested in selling. 

4. Get some decent looking business cards made and give them to people at local groups you're involved with (church, school, gym classes, etc). Nearly everyone is interested in real estate, so it's easy to strike up conversation!

5. Attend local RE investment groups, get to know the active investors, then pair them up with any leads from the above activities. 

Right now I suspect fear is your biggest obstacle - it is for everyone when starting out. Taking action is the best solution. Just do something that will get you involved in the business and see where it leads. 

And by the way, there are plenty of decent folks down here in Miami (yes, some crazies also!) so don't hesitate to ask for help anytime. You're in the right place for it! 

Best of luck! 

@Jose Diaz if you can use the FHA loan you should. You will probably get the most bang for your buck. Also, maybe look in tax liens. 10k would be enough to invest there.

Originally posted by @Richard Richard:

@Jose Diaz if you could provide a little more information about yourself we may be able to assist you better. For instance do you rent or own? If you rent I would recommend purchasing a duplex. With an FHA loan that would only require 3.5% down. Get one side rented or keep it rented and stay in the other side for as long as FHA requires then pull some cash out if its available or save the money you would be paying for rent and purchase another duplex for 3.5%. Keep recycling this process until you are able to acquire enough cash or resources to purchase a rental without having to move.

 That would be a great idea. The issue is that I cannot get a traditional or fha loan now. I have a bankruptcy that is 4 years old and a foreclosure that will be 3 yrs old in November of this year. I got stung real bad during the housing crash and I am still hurting. The past 2 years I have attempted to purchase a property when I was able to save up money only to be denied at the underwriters desk week of closing.  So I guess some of you can understand my trepidation to reinvest however I want to succeed this time. I have very little margin for error this time around (self imposed). 

I have been driving for dollars and have written down over 30 properties I am going to start a campaign on. 

Its either my.reality or perceived reality that I can't allow myself to invest money only to not gain anything and be.stuck with a payment for empty hands. 

I think it's smart of you to hold on to that money rather than invest in a rental property.  Use that money to send letters to your D4D leads.  Keep that money as an emergency fund.  I agree with @Chris Kennedy even if you do find a rental property that cash flow might not even cover the loan payment that you'll be making.

Read this if you need some guidance on driving for dollars.

I am not a real estate expert, nor do I have a lot of experience. But personally if I were in your situation, instead of a 10k loan, I would attempt to get a 10k credit card. the reason I say that is because you would then be able to get your feet wet with a little marketing and only be responsible for paying back what you spent vs $450 a month. marketing will be a crucial part of your investing so its better to learn now in my opinion

With only $10K I would not consider a long term investment like a rental or trust deed.  Your primary goal, IMO, is turn that cash as fast as possible while increasing the amount.  The best way is to do wholesale flips.  Find a property, put it under contract, and flip the contract to a rehabber for an assignment fee.  A flip can be done in 10 days or less.  But there are many ducks to get in order.  First develop a buyers' list, through joining a real estate investment club and getting to know people, especially the owner/moderator.  craigslist is a good source but there are good people and untrustworthy people there.  Know what type of property and criteria each person wants.

Second, develop a targeted marketing plan. For, example, pre-foreclosures with equity. There are various sites that provide lists of pre-foreclosures and notices of auction sales for around $49 per month. Get the right contracts, private not realtor's. Your marketing costs will be minimal; door knocking, phone (use Skype), and gas. Don't let anyone tell you there is no money out there. If the deal is good (you MUST buy at the right wholesale price) it doesn't take much to find private money (not hard money pretending to be private) but true private investors. Joining one or two real estate investment clubs again is a good source and in my area costs about $20 per month, less paid annually. After your first one or two successful deals money gets even easier. I have five private investors for short term (less than a year) cash. One of my doctors, a restaurant owner where we eat regularly, a neighbor, and two other real estate investors I met at the real estate club. You are really being a bird dog for rehabbers who are always looking for deals, albeit for a fair assignment fee to you. Learn MAO, subtract your assignment fee, and never, never, never violate MAO.

Another low marketing budget area is probate houses.  There is an excellent probate thread here on Bigger Pockets.

Also, Mike LaCava posts regularly on Bigger Pockets on House Flipping and has an outstanding (no phony GURU pitches) House Flipping website.  Study what he teaches. 

Start small, stay focused, be persistent, don't give up.  You can do the above without borrowing anywhere near $10,000 and the interest that goes with it.  $500 will give you a great start and I rarely spend $500 a month.

Jose,

1.  Forgive yourself, move forward. (Pa' lante! As they say in Hialeah).  

2.  Take a different route than the one already traveled.  Think POSITIVE CASHFLOW.  (Read Rich Dad Poor Dad and Cashflow Quadrant, sorry @Joshua Dorkin  ).  $425 monthly payment to start investing=negative cashflow.

3. $425 on a 10k personal loan seems really high!  Many companies are looking to make good money on your situation if your eager enough.  Sounds like a recipe for redisaster.

4.  Look around, sell stuff on craigslist, raise $1k in cash.  If you haven't used it in 6 months, GUIZO! (Meaning: finger across the neck, it's out of there!)

5.  Use the $1k cash you got from selling your stuff on Craigslist to open a $500 bank CD and $500 secured credit card.  Then pull out a $500 loan off of your bank CD and you will now have access to your cash paying back only interest to use ur money.  Why pay someone to use your own money?  Because you will now be rebuilding your credit with a secured credit card account and an "Installment" loan secured by the CD and best part is NO $425 payment.

6.  Get some business cards. $30 at fedex.

7.   Go outside knock on your neighbor's door, introduce yourself, tell 'em what your looking to do (preferably in Spanish) and tell 'em YOU ARE NEW AND NEED HELP finding properties.  "CAN YOU PLEASE HELP ME?"  Hialeans are known for their sense of community and trying to help each other out.  I'm sure you will be surprised by the response you get from your neighbors, for free.  I once knew a lady in Hialeah who would open her kitchen window at lunch time and make and serve colada to her neighbors walking by.  She knew all her neighbors and was the "water cooler" of her building.  You can also identify such a person in your building and neighborhood and ask them to help you spread the word.  Out of pocket to you = 0.  (NOTE: The important part about this point is knowing yourself what you are trying to do and if you don't yet it's ok, just keep learning about wholesaling). 

When you are done with your neighbors, at the very least you will have gained confidence to work other areas in Hialeah.  

Hope this helps!

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