22, no debt, income increasing- when to jump in?
Hey all! This is my first post. At first I wrote this really long post but it was about 15 paragraphs so I synthesized it into three pretty relevant questions.
If you had $25k at age 22 what would you do with it?
If you had $40k at age 22 what would you do with it?
If you knew next year you would have $75k saved, is there value in waiting to invest it all at once?
Rule: Have to leave $15k in for 6-month emergency fund. You have no debt. Credit score 760.
No equity going into a house at the moment- but have the cheapest rent possible in your area.
Two biggest contenders in my mind at the moment:
Dump all profits into index funds utilizing some IRA/401k contributions for extra benefit
OR
Save up enough to begin flipping houses- still do 401k to at least matching level
Note: not working a 9-5 job, work all your own hours only have to attend 2 meetings/wk 2 hrs each
Your job is already incredibly rewarding so you are willing to take on extra bs/work in order to compound your savings over time. Not in a rush but want to turn your money into more money.
@Justin, how much is your rent, vs what your mortgage would be if you could BUY that home?
How far afield are you prepared to look (and find a team) to get into investing? ie. Need more info.
On the face of it, investing your savings into indexed funds is NOT the best use of cash.
Why? Because you should ALWAYS be able to getter better ROI by leveraging it into RE.
eg. For every $25k saved, you can buy Real Estate costing $100k (aim: worth even MORE)!
(Whereas, is it ever possible/wise to leverage your cash the same way into indexed funds?)
As to WHEN you should buy Real Estate - it always depends on the specific DEAL!
If it doesn't ALREADY have the potential to be worth a lot more (not just because of future appreciation guesswork), then - why buy ANY real estate?
At ANY point in the RE cycle, there WILL be bargains out there. But, unless you're educated enough to KNOW the difference between a real bargain and what a Seller might TELL you is a bargain, then - you're not ready! Answer: Research and due diligence. Good that you asked!
Hmmm. Seeing as your job IS "incredibly rewarding", why bother with flipping? The LONG term goal for your savings would be PASSIVE income, right? Why not buy-to-hold, from day one?
All the best. Welcome to BP...
Why not build equity AND divert all rent to savings by starting with a live-in flip/house hack? You can take advantage of leveraging owner-occupant for low down on loans. Also sounds like you have the time to put in your own sweat equity which can double down as an education and cost savings.
Good luck!
@Brent Coombs
Thank you for the detailed response! The thing that stood out from your post is this- long-term I am interested in more passive income. I do not want to be a landlord though so renting out houses doesn't sound the best to me. Can you further explain the "buy and hold" strategy?
@Account Closed, "buy and hold" can/should be quite passive, provided that from your original analysis, before submitting Offers, all its realistic expenses, INCLUDING the cost of hiring a (good) Property Manager, are taken into account. Basically, once it's rented out, your Property Manager arranges ALL the work needed, so that its NET income to you is completely passive. Cheers...