How should I use my $50,000

8 Replies

I'm a new invester just getting education on investing. I have about $50,000 in equity in my primary home and I have about $90,000 in consumer debt, this does not include my mortgage. I'm trying to figure out the best method to get out of debt. Should I take that $50,000 and flip a house? Is that possible with only $50,000? Or should I purchase a rental with that $50,000? Or should I take the $50,000 and pay off some of my consumer debt. I want to be a real estate invester and eventually quit my 9-5 but I'm just trying to figure how to get started with all the consumer debt I already have. So what would you do with $50,000 if you had it?

Hi @Stephany Miles and welcome to the BP community!  

I would start small and build a property portfolio and not take on any debt. With little cash you can get a website going (to sell what you buy), find motivated sellers, and start flipping property. Vacant land is a great place because there are no big issues and you can buy and sell all over the country pretty easily.

And without debt, it is okay if a property takes a few weeks to sell. The key is really learning how to buy it right. It's helpful if you can look at property with no emotion, it as an investment. If you cannot buy it so inexpensively that you can easily double your money tomorrow, don't buy it, just move on to the next deal. Easy to get your phone ringing with motivated sellers once you learn how to reach them!  Hope this helps you!

I think its important for us to know the terms of the debt you have outstanding, in order to better guide you. If it is an attractive rate and you are finding deals with good returns (both of these are subjective), it may be worth it to invest. 

Otherwise, I would pay down the debt

I am also a new investor with 50k from equity from my home and about 95k in debt not including my mortgage. I am real interested in what people advise. I decided to try to leverage a flip with hard money but not to pay off my debt. I want to use it to help fund rentals and create enough cash flow to cover my monthly debt payments. I know Dave Ramsey and others would say to get rid of the debt first but I think I am going to continue learning the BRRR method and try that with some flips along the way. If possible I will try to lower my interest rates and payments while committing to not take any more liabilities. As I get a few more flips in I will pay off the debt. Right now I am in contract with my first house that I plan to flip. I am actually second guessing it as my market is starting to slow down in Columbus, ohio for the particular house that I have possibly from the fact that it is going into the holiday season.

Are you able to keep up with your monthly payment? If so then use the equity for investment. If not pay down the dept enough to get you a better rate and monthly payment and invest the rest of the money if there is some left. As long as you are not behind in your payments and the lenders are not pressing you to pay in full, I wouldn't advise throwing more money that way. Its already not enough to pay it off to give you a peace of mind.

Originally posted by @Stephany Miles :

I'm a new invester just getting education on investing. I have about $50,000 in equity in my primary home and I have about $90,000 in consumer debt, this does not include my mortgage. I'm trying to figure out the best method to get out of debt. Should I take that $50,000 and flip a house? Is that possible with only $50,000? Or should I purchase a rental with that $50,000? Or should I take the $50,000 and pay off some of my consumer debt. I want to be a real estate invester and eventually quit my 9-5 but I'm just trying to figure how to get started with all the consumer debt I already have. So what would you do with $50,000 if you had it?

 Hi Stephany, you could buy an investment property for under 200K that has good cash flow and that could help pay off some off the debt.  As I have said before on these forums, it really all comes down to risk tolerance.  If you have a low risk tolerance, then I would focus on paying down the debt and get it to a place where you feel more comfortable looking at an investment property.   The high risk tolerance way to go might be investing in a flip and making some "quick" money to pay down the debt and invest in other income property. Middle risk might be using the 50K or less as a downpayment on an investment property with good returns.  Without knowing some of the other factors like your income, savings and,  I'll say it again, risk tolerance, it's challenging to give you the best advice.  I hope some of this info helps.  Best of luck! 

Want to reiterate what @Robert Ellis said and say the answer to that question depends on your risk tolerance.  Real Estate is a highly speculative investment, but with that has significant returns!

You will have opinions on both sides of the spectrum and ultimately I don’t feel your going to get an answer that’s going to guide you in one way or another.

I’d advise to look at potential worst case scenario and decide if in that situation you would have made a different decision.

This industry is all about managing the downside and have a plan for what happens when that comes, since it’s enivitable.

You will never loose money on an investment you don’t make, but on the other hand will never create the life you want if you don’t take action!  Which part of that sentence speaks to you more?

Just trying to give both sides!  Good luck! 

I've done well with BRRR over the past 4+ years. Started off with $30k, used that money to leverage private money a little beyond what i started off with.

Sitting at 72 units now, only buying SFDs , duplexes and small apartments. Don't own anything over a 5plex at this point and so far its worked great for me. Not sure where I'd suggest getting deals at in Columbus at this point, but really anything is possible if you set your expectations right and are ok with long-term growth over short-term gain.

@Stephany Miles any updates on how you've decided to approach using your $50k of equity?

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