Starting With $100K, but still have a mortgage with 1% equity

9 Replies

OK BP. I've been reading and listening to the podcast and I'm ready to make a move.

Background: Wife purchased a home last year (before we were engaged & married) with 0% down with Agricultural Loan plan. We still owe roughly $240k on our home.

I have about $100k in a trust that I can use for our home or to purchase assets. ie. shares, investments, RE, etc.

The question that I have is this..

How do I leverage this $100k the best way possible?

We have been attending Tax Auctions at the County Court House to learn the process and find out what is needed to buy these foreclosed and distressed properties. They are "cash only" deals with zero contingencies allowed. Title Search MUST be done prior to bidding.

We're targeting small single families that need some work. Ones we believe will still stay within our Cash limit of $100k.

There are some properties we know we can move on, if we have more capital.. but even still... I'm quite nervous to put all my eggs in one basket (property) and tie up all my liquidity and potentially lose some of it.

So with this said, what makes sense?

- Buy, fix, and hold(rent) with a refi to purchase second, third, fourth?

- Buy, fix & flip.. 2, 3, 4 times then do the buy and hold?

- Put the $100K into our home and HELOC a down payment (this would take the short sales out of the equation)

I'm doing my best to try and wrap my head around the best strategy to take.. just need some help and guidance.

Thanks.

Updated over 2 years ago

Our mortgage and current housing situation isn't hurting us.. I just wanted BP to get the full picture.

@Allen Brouwer  Is house hacking an option? 

If so, you could consider selling and buying a duplex or a live in flip.  This would be the least risk to learn real-estate. 

Originally posted by @Joshua D. :

@Allen Brouwer  Is house hacking an option? 

If so, you could consider selling and buying a duplex or a live in flip.  This would be the least risk to learn real-estate. 

Not an option... I don't believe in going backwards... I like going forwards..

Same with anything else.. you go out and buy a nice car or toy.. realize that the payments are quite high and that you don't really need something like this.. but instead of selling it.. you look for ways to increase your income to not change your lifestyle.

Our mortgage and current housing situation isn't hurting us.. I just wanted BP to get the full picture.

@Allen Brouwer I apologize if this comes out the wrong way, but is the property YOURS or is it your wife's? I think this is a big difference...Do you own any property yet? There is only 1% equity on the home? What can it rent for and how much is your P&I?

Originally posted by @Nick Britton :

@Allen Brouwer I apologize if this comes out the wrong way, but is the property YOURS or is it your wife's? I think this is a big difference...Do you own any property yet? There is only 1% equity on the home? What can it rent for and how much is your P&I?

Our home is "OURS" technically still in her name right now.. we just got married last month.
I do not own any other properties yet. 

I'm not interested in renting out my home.. but if it were to rent out - it would rent around $1500-$1800p/m

Those agricultural loans have scary early termination fees if you leave within 5 years, usually.  Smart to stay in and enjoy your house together @Allen Brouwer .

You have every option every other person who has $100k has except house hacking. Your 1% equity doesn't really play into this, except you can't occupy!

 You could... buy - fix- flip a couple times to build more cash, then get a rental every few.  Depends on your rehab skill level and risk tolerance.  If hiring out every task it will be very expensive. If you're wrong and the market sours or you buy poorly - you will lose $.

Buy, rehab, rent, refinance, repeat (BRRR) - but I think getting money out of investment property is a little more difficult, so you may just leverage from the beginning.

Many many more things you can do, of course.  That's why we have BP!  Look up  "I have money, where do I start?" or something to that effect.  Education is always a good thing, too. Don't be afraid to buy some of that responsibly.  Good luck!

Originally posted by @Steve Vaughan :

Those agricultural loans have scary early termination fees if you leave within 5 years, usually.  Smart to stay in and enjoy your house together @Allen Brouwer.

You have every option every other person who has $100k has except house hacking. Your 1% equity doesn't really play into this, except you can't occupy!

 You could... buy - fix- flip a couple times to build more cash, then get a rental every few.  Depends on your rehab skill level and risk tolerance.  If hiring out every task it will be very expensive. If you're wrong and the market sours or you buy poorly - you will lose $.

Buy, rehab, rent, refinance, repeat (BRRR) - but I think getting money out of investment property is a little more difficult, so you may just leverage from the beginning.

Many many more things you can do, of course.  That's why we have BP!  Look up  "I have money, where do I start?" or something to that effect.  Education is always a good thing, too. Don't be afraid to buy some of that responsibly.  Good luck!

 Thank you Steve. Appreciate it.

I probably need more information before I proceed. So education is a good thing.. Maybe I can find examples of what others did in my shoes and copy them.

Hi @Allen Brouwer ,

Great to see you on here again. I'd like to play the game: If I had a $100K.  : )

If I had $100K I would research local multi family properties and financing options.  I would try to buy 2-3 multi family properties with as little down into each one (if possible - it depends on the purchase prices.) I'd make sure that each property cash flows positive with a cash on cash return at the minimum at 10% (the higher the better of course).  

Then I'd leverage the rest of the cash left over and use that to secure a flip.  

I'd suggest checking out Patch of Land as they have a innovative crowd funding platform and they evaluate each deal to ensure they believe it will be successful (another set of checks and balances especially for a new flipper).  Then as long as you and your project is approved your request is funded.  If Patch of Land isn't your thing, perhaps you can partner with someone on the 1st flip.  You bring cash, they bring cash and you spend your time managing the flip and learning the ins and outs of it so you can replicate in the future.

I believe this strategy is the best of leveraging other people's money to increase your returns as well as having your eggs in more than 1 basket.

(On the other hand, I would never use $100K to pay down a bank loan. If you were to do this, you'd be turning the control of your money over to the bank. Which of course means you'd need to rely on them to approve you to borrow it back. Plus, they likely would only let you borrow back 80%-90% CLTV (combined loan to value) which means you probably won't be able to borrow back the $100K.)

Hope this helps! : )

Originally posted by @Ashley Wishinski :

Hi @Allen Brouwer,

Great to see you on here again. I'd like to play the game: If I had a $100K.  : )

If I had $100K I would research local multi family properties and financing options.  I would try to buy 2-3 multi family properties with as little down into each one (if possible - it depends on the purchase prices.) I'd make sure that each property cash flows positive with a cash on cash return at the minimum at 10% (the higher the better of course).  

Then I'd leverage the rest of the cash left over and use that to secure a flip.  

I'd suggest checking out Patch of Land as they have a innovative crowd funding platform and they evaluate each deal to ensure they believe it will be successful (another set of checks and balances especially for a new flipper).  Then as long as you and your project is approved your request is funded.  If Patch of Land isn't your thing, perhaps you can partner with someone on the 1st flip.  You bring cash, they bring cash and you spend your time managing the flip and learning the ins and outs of it so you can replicate in the future.

I believe this strategy is the best of leveraging other people's money to increase your returns as well as having your eggs in more than 1 basket.

(On the other hand, I would never use $100K to pay down a bank loan. If you were to do this, you'd be turning the control of your money over to the bank. Which of course means you'd need to rely on them to approve you to borrow it back. Plus, they likely would only let you borrow back 80%-90% CLTV (combined loan to value) which means you probably won't be able to borrow back the $100K.)

Hope this helps! : )

 Awesome.. yes.. this helped tremendously. Thank you.

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