What you do with $20,000

16 Replies

My dad received a pretty decent settlement in a injury case at his job so he was able to give me $20,000. I have it sitting on an interest yielding savings account but of course that will multiply very slowly. I need some advice or ideas on multiplying that Money faster in real estate, what would you guys do?

this may come as a suprise to you, but I would likely invest it in real estate!

Lol not a surprise. Just looking to see what others would do in the Realm of Real Estate more specifically I guess.

@David Edwards well if I could meet the terms of a hard money lender and do a flip then I would do that. Other wise I would JV with someone on their deal or deals and do that to build more capital. This way I'm learning while making money

I've used a lot less to buy profitable houses.

Look into BRRRR method and raising private capital.

Good for you for doing something smart with this money. I've seen people blow $20k on electronics and other crap and be broke again in a few weeks.

What are your goals in RE? While it's not a huge amount of money in this particular business, it is certainly more than many of us started with. Depending on your goals, I would suggest investing in some education but he very selective. You could also try "house hacking" if that fits your life right now.

I see you're interested in wholesaling and $20k would make a great marketing budget. Do some research but basically divide that cash up over a period of several months and commit that much to marketing every month. You can do direct mail very easily online if you have the cash to spend.

@David Edwards

If you don't own a home, house-hacking is the way to go.

If you own your home, then consider investing in yourself and getting a real estate license. You could do a lot of marketing with that kind of cash. 

Do take into account your own strengths and weaknesses though, getting advice from strangers on the internet is not useful when you don't provide detailed information for them to give a good assessment. Blanket advice is usually not that useful.

I would put that as 25% down on an $80,000 deal that cash flows well. I don't know your market, so I don't know what that gets you. I could get three $500 per month rentals for that much.

@David Edwards 4 months ago I purchased an REO with $20k down, it's cash flowing $387 per month. It also appraised $25k above sales price so the bank essentially paid me $5k plus 3% in closing cost to get the property. There are plenty of good deals out there that you can get for $20k

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I am not familiar with your market, but with a quick internet search I was able to find several properties that were under 80K that should cash flow well.  Start looking at real estate and go to local meet ups.  You could either partner with someone or go it alone.  

Check neighborhoods and make sure it is somewhere that is either improving neighborhood or a neighborhood you would feel comfortable going to.  

Make sure you vet anyone you pard with.

@David Edwards ,

This is a real estate website, so everyone should be on the real estate bandwagon... however..  you gotta decide, do you want an active or passive investment?   Do you want to be a landlord?  Do you have other reserves available?    It can be very lucrative, but it's a lot of work! 

@David Edwards

First off, sorry about your dad's injury. I hope he is fairing well. How generous of him to give you some of his settlement. My Pops would've went shopping. Or did something really great for his GRANDkids. Consider yourself blessed.

Now, I think everyone has provided some great advice. Basically, buy income-producing real estate, using one or several different strategies. I second that, but before this, I think it would be wise to consider a couple other factors. 1.) What are the tax implications of the settlement money? Will your Dad have to pay taxes on this award? If so, you may want to reserve a few thousand for his tax bill... 2.) What's your personal credit looking like? All of these strategies involve getting mortgages, and you can't really do that if your credit is a mess. Make sure you're looking good, or rather good enough, on that front before you pursue buy and hold properties. It matters less for flipping or wholesaling.

My $0.02. Best of luck!

I'll add to the chorus - you should use it for a house hack. Either look for a multi-family FHA opportunity or if you have solid credit try to get a 5% down no PMI mortgage on a SFR through fannie's HomeReady program (a good lender can help you with this).

Going through this process myself right now so I'll give you a quick rundown on some actual numbers.

The property: Older, cosmetically outdated but perfect structurally. $300k purchase price, 5bd/2ba in Denver - area with a lot of new houses being built that's a 10-15 min drive to downtown & near light rail. 

I plan to live in it for a year or two while I fix it up - I'm not handy but I'm good at watching YouTube to figure out how to do stuff. Should be able to rent it by the room while I live there for ~$650/room. 

My PITI comes to ~$1500/mo total:

4.125% @ 5% down, no PMI

Taxes: $632/yr

Insurance: $684/yr

Total cash outlay to purchase: $17,500

I expect even with only 3 renters (keep 1 room unoccupied) I'd get ~$1950 which means I live free while cashflowing and have an asset I expect to appreciate significantly. If I feel like bumping up my earnings I could stick another person in there and bring that up to ~$2400 rent/mo while living for free.

When I move into my next house hack I'll be able to rent it such that it cashflows as well and repeat the process. If I refinance in a couple years I'll more than get my initial downpayment back from it. If you can find an MFR in your price range you'll probably make out even better than me, SFRs usually have tighter margins.

(note: there are other expenses like maint, capex, utilities, vacancy, etc. not listed above that should also be considered)

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