Where to invest $20-30K in 2013

Question

If you had $20-30K to invest in a real-estate related venture in 2013, where would you put it if your goal is to create reliable, ongoing cash flow in the near term?

Nancy Roth · Answer

Oh, forgot to mention I've set up a wholesaling business in the very prospective Washington DC neighborhood where I live. I just sent out my first mailer and am planning another.

But prices have gone very high here due to scarce inventory, and I don't expect to personally invest in any properties here--unless I find something really unusual.

Rolanda Eldridge · Answer

You're off to a good start..Maybe you can find a great wholesale deal to flip..

Luis Castillo · Answer

Great job Nancy, it seems like you're on the right track.  Sit down with a good mentor and figure out your short and long term plans. Know exactly where you want to be in ten years and you'll accomplish it much easier. Good luck!

Nancy Roth · Answer

Hi, Luis and Callum, thanks for your replies.

Luis, you are right, I should have told you more about myself. I am a newly licensed realtor (~8 months). I am not active in the retail real estate market, but the realtor license has delivered some helpful tools and education, and for some reason it adds to my credibility! I probably won't keep the license indefinitely, though.

I just bought my first investment property at end-October via my new self-directed IRA. That property, which is under the care of a savvy manager, is just about ready to rent (needs a lead inspection), and when I start getting cash flow (I expect roughly $700/month into the IRA) I'll start looking for another opportunity. I made some mistakes in buying that property--not serious, life-altering mistakes, but they did help me learn some "what not to do the next time" lessons. I think of it as paying tuition!

I have access to a lender who will finance an acquisition using the property as collateral. I could also partner with other IRA investors, though I'm still learning about the ins-and-outs of these arrangements. I don't know how to talk about risk tolerance. If an opportunity makes sense I'll pursue it.

My plan has been to buy a two-to-four unit building that is already tenanted, following the 50% rule, and hiring a reliable property manager. At this time I do not want to manage major rehabs. That may come later, this year or next, as I educate myself and extend my network.

Callum, those sound like great situations, and I can only hope I'll stumble across something like them in the next deal. I know the network is key in identifying them. I'm new enough to this so that I'm not yet comfortable buying in areas outside a 100-mile radius of my license area (Washington, DC). My circle of colleagues at this point is heavily focused on this area.

That $20-30K, believe it or not, goes pretty far in some markets in the DC-MD-Virginia region. I bought my SFR in Baltimore for $23K, for example, and have invested another $3-4K in repairs. I expect it to bring in $850 in monthly rent, of which $150 will go to manager and taxes/expenses. It will pay itself back in 3-4 years.

So I've reached out to more-experienced investors in the BP community because I've been so single-mindedly studying buy-and-hold, I'm a little concerned that I might miss other kinds of opportunities.

Chuck Catchings · Answer

Hi Nancy, I sent you a connect request as I have some suggestions for you. Just depends on what your looking to do. This is a great site and lots of people with very good advice & ideas.

Luis Castillo · Answer

Nancy it would depend on several things such as your investing knowledge, your risk tolerance, how hands on do you want to be both in management and rehab. Do you bring anything else to the table like are you a realtor, loan rep, general contractor etc. and do you have additional funds.

If you have some experience and no additional funds, try to get into situations where you can flip small SFR's. Investing the 20k in a long term investment probably won't leave enough cash flow to change your financial situation enough to invest in one long term deal.

Callum K. · Answer

Nancy Roth in the past two weeks I have come across 4 distressed families that have lots of equity but have either lost their job, incurred lots of medical bills, or are going through a divorce.  All of these sellers want out and want out quickly.  These are $150k-$200k homes with lots of equity so hopefully a couple of these deals will go through early next year.  By buying on the cheap I am able to rent with plenty of cash flow.  That's what I would do, but I have no idea how to find these kinds of deals.  I am afraid much of it is luck and listening/talking to colleagues and friends...