What to do with 100k

Question

I'm a newbie and looking for advice. My wife has recently received 100k from her employer. We are considering purchasing our second income property. My wife likes the idea of paying cash for a property in the mid-west and not having a loan. Our agent brought up a good idea that I like but my wife is hesitant about. Instead of spending all 100k on 1 door, buy 5 doors with 20k down on each. Thoughts?

Nathan Gesner · Answer

Read a few books on real estate investing to learn the power of leverage. I like the Unofficial Guide to Real Estate Investing. Here's a very basic explanation to get your juices flowing:

Assume a house costs $200,000 and rents for $1,500. The market appreciates 3% per year.

Buy one house for cash. In five years, you'll have Pay cash for one house and rent it for $1,500. After five years you'll have earned $90,000 in rent income and gained $34,000 in appreciation.

Buy four houses with $50,000 down on each. Mortgage payment is $1,000 on each house, so you're essentially earning $500 per house or $2,000 a month. After five years you'll have earned $120,000 in rent income and gained $136,000 in appreciation. You've earned $132,000 more by splitting your money and leveraging it.

James Wise · Answer

Paying cash now and then doing a refi when rates drop is what I'd do.

Nate Sanow · Answer

Leverage is great. The 5 property idea is maybe kinda sorta a good idea… but here’s where I disagree and find it flawed:1. You don’t have 100k to deploy, you need to keep at least 6 months worth of property payments to keep set aside in reserves. Aka be aggressive sure but be safe

2. Sounds like the advice is to lock up the capital in the form of down payments and wait and play the long game. It’s not wrong, but it’s not ideal. If I had an extra $100k liquid I wouldn’t do it. I’d flip and I would brrrr and I would grow the liquidity.

I’d probably in your shoes brrrr one property at a time.

Aj Parikh · Answer

Getting 5 properties with 20k down is a great option. But it will be tough to find 5 properties in a good neighborhood but it can be done. Turnkey companies are a great way to get started and if you have a busy 9-5 routine, it will be even better to just work with them and scale your portfolio. Feel free to reach out if you want to discuss.

Holly Baum · Answer

If the numbers make sense and you can cover the 5 properties, I would go that way!

Eliott Elias · Answer

Buy as many doors as you can with that money. Buying property is a free for all now, don't find yourself buying just one property

What to do with 100k

Most Popular Reply