I have 250k to invest...what is the best way to start?

39 Replies

Hello I have been a stock market investor for the last few years and now I am wanting to learn more about real estate investing. From what i have researched Theres a few ways to do it (Reits, syndication, or to buy a unit yourself) What do you recomend the best method is? I have previous experience subletting with Airbnb units and it was very profitable until my apartment barred tenants from doing it. Also, I live in Nashville so we have booming job growth yet prices are overvalued. Would it be better to wait or get in now? Thanks

Were it me, I'd keep it in Cash right now.  Anyplace else is a gamble and having cash if it gets much worse would make you feel like you're shopping for deals at the dollar store.  

I'm not saying you should be looking to take advantage of anyone.  I'm just saying cash is the safe bet for now and could put you in the position to make some good moves in the future.

If you're not risk averse and have plenty of time to rebuild your nest egg, there are several stocks that seem poised to profit and/or rebound right now.  Keep in mind that risk and return are always correlated and to do your research.  

Thanks for the response. When looking for properties to invest in should you assume 1% return per month? SO if the unit is valued at $400,000 I should be looking to earn $4,000 per month in rental income ? 

Also, I think the prices across the board have seem to have increased astronomically over the last 8 years. Will they go down anytime soon? I heard luxury houses usually go down first, but with this virus putting so many people out of work, it leads me to believe there will be some tax sales to look out for

@Scott Louis you're totally right about the astronomical increase over the last 8 years. I recommend waiting at least a few months to see if prices start dropping so you can get more for your money. When it comes to the 1% rule I can say it's a good target, but appreciation for me is more important. For my rental I'm at about 0.9% and it's still cash flowing well, but the appreciation really makes the difference over time (driven by a good neighborhood and growth in the city and surrounding area).

I expect home prices start declining as we speak. Not allowed to do open house, broker tour or show homes here in Northern CA all locked down. I expect marketing time to go up from 20 days up to who knows followed by local tech layoffs.  Southern CA will also get hit hard. This Corona disease can take a toll out of housing industry. We have a problem finding tech tenants for a couple years now. Suggest you wait this fall when traditional time for home price to go lower.

I agree about waiting a bit if you're looking at real estate.  The 1% per month really depends on location.  In AZ you typically won't see that in any neighborhood you'd want to invest in, but inflation has made the difference in most years (likely not this one).  

In 6 months I'd say you'll be a much happier person with $250k in the bank vs one with a property they bought 6 months earlier for $250k.  

Buy a multifamily property and manage on your own. Maybe start with a 4 plex. Put the minimum 25% down (and no more than 25% down unless the bank requires you to) and get into a fixed 30-yr loan at a great rate. Start analyzing as many deals as you can now. I anticipate pricing going down a bit as well, so spend this time getting your finances in order, talking to banks to get rates, LTV info, etc. so once you find the right deal you will know it's the right deal and you can jump on it. Connect with a realtor to begin the search. Best of luck!

Leverage is the name of the game in real estate investing. The more of your own money you put into a deal, the lower the ROI. Find that balance between high ROI and putting the minimum amount of money into the deal. That's what my husband and I have done for 8 years and it's boded very well for us.

@Scott Louis

Hold onto your cash until you’re educated enough to invest and not lose it. Bigger pockets is a great resource - don’t skimp on this!

Originally posted by @Scott Louis :

Hello I have been a stock market investor for the last few years and now I am wanting to learn more about real estate investing. From what i have researched Theres a few ways to do it (Reits, syndication, or to buy a unit yourself) What do you recomend the best method is? I have previous experience subletting with Airbnb units and it was very profitable until my apartment barred tenants from doing it. Also, I live in Nashville so we have booming job growth yet prices are overvalued. Would it be better to wait or get in now? Thanks

 Put into an online savings account right now if you are smart. 

Hey Scott,

We're in a very shaky economy at the moment. In theory, as you probably know already, the market should have tanked given the jobless claims report that came out this week alone. JPow's pledge to keep the printer running 24/7 shouldn't have delayed the inevitable. (by the way, let me know if you're optioning any calls or puts next week).

Anyway, save your cash for the time being. Renters are in theory only covered for the next 4 months given the stimulus, AirBNB is dead, and appreciation plays are now depreciating in most markets. You'll be hunting diamonds in the roughest patches if you try to hop in now.

Thank you Lee, Ive been studying and tryin to learn as much possible right now due to the current economy...and I am  watching videos from Grant Cardone with Cardone Capital. He teaches to avoid anything less than 16 units. He also says theres 4 ways to invest in real estate (reits, do it yourself, or syndication, or his way where he puts his own money in) His strategy seems to be invest in the largest complex with a good cap rate and good cash flow, stay in for a few years and then sell it. Is he a good person to follow? Do you recomend do it yourself for starting out or a syndication? I am already invested in a few REITS 

Originally posted by @Wyatt Franta :

Hey Scott,

We're in a very shaky economy at the moment. In theory, as you probably know already, the market should have tanked given the jobless claims report that came out this week alone. JPow's pledge to keep the printer running 24/7 shouldn't have delayed the inevitable. (by the way, let me know if you're optioning any calls or puts next week).

Anyway, save your cash for the time being. Renters are in theory only covered for the next 4 months given the stimulus, AirBNB is dead, and appreciation plays are now depreciating in most markets. You'll be hunting diamonds in the roughest patches if you try to hop in now.

Do you think there will be tax sales to look out for in light of our current unemployment? 

All of this is true but none of us know what is going to happen with real estate prices.  They may decline next month, they may decline in 2 years.  We just don't know.  Just like the stock market, we shouldn't try to time real estate.  If the deal makes sense and pencils out nicely, when why not go for it?!  At some point, you need to take action, if this is something you want to do.  But I agree, spend time learning about this.  Podcasts are amazing learning institutions.  Bigger Pockets has changed my life.

Originally posted by @Scott Louis :

Thank you Lee, Ive been studying and tryin to learn as much possible right now due to the current economy...and I am  watching videos from Grant Cardone with Cardone Capital. He teaches to avoid anything less than 16 units. He also says theres 4 ways to invest in real estate (reits, do it yourself, or syndication, or his way where he puts his own money in) His strategy seems to be invest in the largest complex with a good cap rate and good cash flow, stay in for a few years and then sell it. Is he a good person to follow? Do you recomend do it yourself for starting out or a syndication? I am already invested in a few REITS 

Grant Cardone is a pyramid scheme fraud and just had to let go of his entire staff without notice. I mean you literally could not have chosen a worse example. He also has a lot of empty units in his complexes and is using dubious methods to fill them, unsuccessfully. Just because someone has bro vibes doesnt mean he's your bro!

As Warren Buffet says, It's only when the tide goes out that you discover who's been swimming naked.

Multifamilies, maybe 3-4 units, are great starting points with high returns for investors. But they aren't easy to find. The good news is that you can start offering well below market as the virus will speed track the RE bubble burst that was expected to be coming. I had cash on hand for this.

Talk to different lenders and see what interest rates you can get with 20% down, 25% down, 5% down, etc. Then look at rentals comps, demographics, etc. and see what your cash flow can be. Then go for it. 

1% rule isn't make or break, if you find a SFH in a good neighborhood or school district, fairly recent and the numbers check out, its fine to get into it much lower than that. Start analyzing the numbers and stay away from syndication to start out-- really that's just giving your money to others and not having any control over it. I like the idea of investing in situations where you have control over your own destiny.

 

I would wait another 3 months to 6 months and build cash reserves. Lets see what will happen to the overall market and everyone's health in the coming months. Values will go down. Purchasing now is like buying a falling knife you are going to get cut. 

Originally posted by @Scott Louis :
Originally posted by @Wyatt Franta:

Hey Scott,

We're in a very shaky economy at the moment. In theory, as you probably know already, the market should have tanked given the jobless claims report that came out this week alone. JPow's pledge to keep the printer running 24/7 shouldn't have delayed the inevitable. (by the way, let me know if you're optioning any calls or puts next week).

Anyway, save your cash for the time being. Renters are in theory only covered for the next 4 months given the stimulus, AirBNB is dead, and appreciation plays are now depreciating in most markets. You'll be hunting diamonds in the roughest patches if you try to hop in now.

Do you think there will be tax sales to look out for in light of our current unemployment? 

In my opinion, absolutely. China is currently experiencing mass layoffs even though its economy is open for business. Another pandemic has appeared; diminishing demand. The U.S. will face this same issue once we get back to work. Global demand for goods has and will continue to diminish as the world tries to battle and then recover from COVID. The velocity of money will continue to decrease, and short sales + foreclosures will start popping up over time. 

I'm still reading the stimulus package (A cliffnotes version would be nice, GOVERNMENT...), but I've been hearing from others that corporations with 500+ employees are eligible for forgivable grants & Economic Injury Disaster Loans (EIDL) if they *promise* not to fire a certain percentage of their workforce, among other requirements. If this turns out to be true, I'm anticipating a blood bath. 

Please don't take that last paragraph as fact, and I would advise talking to CPAs, they may know more about the bill come Monday.

There are plenty of amazing options out there if you know the right people and right places.

@Scott Louis

Hey Scott,

Good job on saving so much, that gives you a great head start. But I’d be very careful about talking about how much money you have. There are plenty of people who’ll be more than happy to take that money off you. Like many people suggest, I’d say wait a while, we have no idea where this is taking us. But I do believe that there will be some deals in the future. Take the time now to educate yourself, and figure out what you want to do and what your goals are. Decide on a niche, and drill down on it, pick a market and a submarket, and familiarize yourself with it. Then start analyzing deals, so that you know what a good deal looks like. Also reach out to people on here that are doing what you’re doing, and try and pick their brain.

Lastly, I don’t think you should listen too much to Grant cardone. He’s very successful at what he does, but he’s a salesman, and a slick talker. There’s not much substance behind what he says. But that’s just my opinion.

Hold your cash and wait.  Educate yourself.  Listen to those who have been through the Financial Crisis and the recession that follows.  Do not listen to questionable gurus and anyone promoting their own special investment.

Not sure why'd you get out of the stock market right now :)

If you're an active trader, this is a great time. I don't need to tell you that. 

Since you're new --- in this market right now --- you don't want to pick up marginal deals as the next 12 months are unknown. Only great deals. 

As everyone keeps telling me (because I'm not)...is be patient and not rush into a deal. 

(p.s. careful what you hear from Grant Cardone. Has some good tips and good salesman, but don't take his stuff at gospel...from what I've read, he's paying near market price for some of his properties).

@Scott Louis

Stocks are riddled with accounting fraud, ponzi schemes and insider trading, I'm surprised you survived it.

Don't have to worry about any of that with real estate.