Advice for a Newbie with only $5,000

21 Replies

Hello BP people!

I'm new to real estate investing but have long loved the of land-lordship, architecture, anything real-estate basically.  I've finally decided to start investing in real estate.  I'm am currently only worth my savings account which is roughly $5,000.  I've been considering buying some C class properties around $100,000 or less with minimal repair that would also hopefully be close to the 1% rule.  The only problem is that it seems like I need $20,000 dollars to get something like this.  I could roughly save up that amount in 2 years but am itching to get into the game now.  (I've been looking in the Alabama area as of recently.)  I thought about borrowing money from a family member but I would have to pay them back which means I would have a property now but would then have to wait another year or two before I could make my next move.  If I have to borrow money to get a cash flow property and spend a few years paying that person back maybe I should invest in a B class property instead or even just a plot of land.  I'm not sure what I should do at this point.

I was hoping to get some advice or ideas on how to get started with such a low amount, anyone who did get started with little money or any advice or ideas available.  I appreciate any help.

(I should note that I live in Japan so buying a house and living in it is not an option for me.)

Sincerely,

Cory Ballantyne

I think you should focus more on the cash flow for that property instead of worrying about buying it in a B class or C class. Get familiar with all the expenses and get to know what houses similar to the one you want rent out for.

Focus on networking with lenders/agents/property managers/et al for now would be my advice. That way you know what you can afford and what you'd need as a down payment while gaining valuable connections for once you actually start investing. Build your knowledge so when you have the money you are ready to invest. You don't want to be ready with the money but not know how to find worthwhile deals.

Hey Cory,

I'd keep saving and find more ways/a new way to earn income faster. That should be priority #1.

Aside from that, keep telling friends & family about your ambitions. If you find a good enough deal, the money will come.

Are there any investment opportunities in your market? I'll admit, I know nothing about RE in Japan!

Best of luck to you!

Abel

Thanks everyone for your quick responses.  I am currently researching the Birmingham and Huntsville, Alabama area.  I'm talking with a friend here in Japan about investments in America and am looking to build some connections through BP.

@Abel Curiel I've reworked my budget to squeeze an extra $1,000 out of it for the year but unfortunately my income doesn't allow for much more than this.  I'm currently saving nearly 50% of my monthly salary.  As far as Japan goes, it's complicated and usually buying a house or land is a money pit due to high taxes and degradation.  Houses are like cars here where they lose value over time.  

Originally posted by @Cory Ballantyne :

Thanks everyone for your quick responses.  I am currently researching the Birmingham and Huntsville, Alabama area.  I'm talking with a friend here in Japan about investments in America and am looking to build some connections through BP.

@Abel Curiel I've reworked my budget to squeeze an extra $1,000 out of it for the year but unfortunately my income doesn't allow for much more than this.  I'm currently saving nearly 50% of my monthly salary.  As far as Japan goes, it's complicated and usually buying a house or land is a money pit due to high taxes and degradation.  Houses are like cars here where they lose value over time.  

 Interesting, didn't know the market over there was like that.

As for advice, I'd look for better employment, to be able to save up faster. As for what type of properties you want to look for.. cashflow is King, especially given your financial situation.

I honestly wouldn't look into investing long distance with your minimal income and minimal cash in hand. At the end of the day, something can easily go wrong on a property and cost you $10,000 and you have no way to afford that. Your number one priority should be increasing your income. You can only reduce your spending so much, I'm not sure how the job marker there works, but I'm sure you can find some way to move up financially.

On another note, if you are able to increase your income, for long distance investing you're definitely going to want to know someone you trust who is knowledgeable in the market you're trying to get into. Being long distance doesn't even really allow you to see the property, and you can easily be taken advantage of because of that. You also lose any ability to save money doing things yourself, repairs, painting, property management, etc, that most people who start with little money do to save on cash.

As for the C vs B class, 1% rule, etc.. you want to look more into the actual expenses. In my marker a 1% property would lose money every month.. you typically need higher return the lower the price, many expenses are the same or minimally different, regardless if the house is $20,000 or $200,000

@Alan Fitzpatrick thanks for the advice. I am still getting used to figuring out the costs of everything. I will keep in mind that costs and ROI are equally important. As for Jobs in Japan, I make top salary in my field in terms of my education. I could increase my salary by going back to school and getting a higher degree but I was thinking that money would be better spent on REI. Potentially, I could go back to school if I do this RE thing correctly so I greatly appreciate everyone's help.

There's so many avenues to explore.  I wonder if putting my money into a CD for a few years would be a good idea while I try and generate more income.

Originally posted by @Cory Ballantyne :

Hello BP people!

I'm new to real estate investing but have long loved the of land-lordship, architecture, anything real-estate basically.  I've finally decided to start investing in real estate.  I'm am currently only worth my savings account which is roughly $5,000.  I've been considering buying some C class properties around $100,000 or less with minimal repair that would also hopefully be close to the 1% rule.  The only problem is that it seems like I need $20,000 dollars to get something like this.  I could roughly save up that amount in 2 years but am itching to get into the game now.  (I've been looking in the Alabama area as of recently.)  I thought about borrowing money from a family member but I would have to pay them back which means I would have a property now but would then have to wait another year or two before I could make my next move.  If I have to borrow money to get a cash flow property and spend a few years paying that person back maybe I should invest in a B class property instead or even just a plot of land.  I'm not sure what I should do at this point.

I was hoping to get some advice or ideas on how to get started with such a low amount, anyone who did get started with little money or any advice or ideas available.  I appreciate any help.

(I should note that I live in Japan so buying a house and living in it is not an option for me.)

Sincerely,

Cory Ballantyne

 you're gunna hate me for this, but I wouldn't consider buying in America, from japan, for your first deal, unless you had in the range of $75-$100k. when you invest locally, you can get low down payments and house hack, you can drive to see properties, you can go to investor meetups and pick peoples brains, and you have the luxury, if something goes wrong, of seeing what went wrong and even going in and picking up tools yourself to save on labor if absolutely necessary. from japan, you will need to fly to see any property you hope to buy, probably have trouble meeting up and networking, and everything will have to happen with boots on the ground financed out of your pocket. I would never feel comfortable unless I had substantial reserves.

I would suggest using the forums and blogs to learn as much as you can while you save. use your time to network and hopefully find someone willing to let you work through a deal with them. then once you have a decent reserve, try to make something happen.

I also second increasing income as that will help you accrue reserves faster

@Deep Johal I have considered a partner.  I wouldn't mind partnering up with someone actually.  My contact here in Japan has actually suggested partnering with him but at the moment it's not right for either of us.  Thanks for the idea.

Thanks everyone for the advice so far.  I will continue to think about how to make my $5000 grow.  I wonder if borrowing from family is a good idea to get started or putting my money into a high interest account of some kind for a couple of years is a good idea or doing something else.

I'm not worried about being overseas and investing.  Maybe I have too much faith in people haha but it doesn't seem like that risky.  

I currently live in the UK and am looking for RE deals in Huntsville, AL. I've spent the better part of the last 6 months doing research and building a rapport with contacts in the area. I'm originally from Birmingham, but only just visited Huntsville in March.

I would highly recommend reading "Long Distance Real Estate Investing" by David Greene. It's a wonderfully informative book explaining in detail our situation of investing in a distant market.

Also, try your best to calm your anxiousness! I know it's hard, because I've been doing it for months. The idea of creating wealth is exciting, but best to do the homework first, than get in over your head early, without the savings to recover. Oh, and SAVE SAVE SAVE!

But like anything else in life, it's all about your goals and ambitions! But enjoy the process, embrace the grind, it WILL pay off!

Good luck

-Matt

@Cory Ballantyne You should PM @Daniel Mills  

He's an accomplished OOS investor in Japan. He invests across the US and has a lot of insights into the process. There are a lot of things to consider. From strategies, to moving money, to the tax treatment.

He also happens to be an educator, so maybe he can teach you some things. 

@Charles Self (aka Matt) thanks so much for the info! I’ll look into reading the book. I agree, I need to do more homework. Looking at the tried and true paths mentioned in the books though seem to require more money than I have right now. Kind of a bummer but not much I can do other than save.

@Johnny Le thanks for the offer.

@Rob Drum haha, thanks so much for giving me Daniels name. He’s actually my contact here in Japan and originally talked me into the real estate market after we were connected through a “how to start a retirement fund as an American in Japan”. Life is crazy.

@Cory Ballantyne ,

Try to come up with some kind of creative side hustle to increase your income. Saving 50% of what you already make shows you're on the right track, but anything extra can be saved at 100%. Put a skill to use in some of your spare time, like teaching english or anything else you can come up with. Read, read, read, find a way to make yourself an asset and then use that to leverage mutually beneficial partnerships. Think about the advantage of being on the opposite schedule from America, with a local partner to cover business hours you could utilize the time where your competitors are sleeping, that would be an asset factor in my opinion.

Best,

Hey @Cory Ballantyne - from a fellow expat in Japan, welcome to BP.  If you're out West near @Daniel Mills , I hope you haven't been too seriously effected by the recent quake and rains.  

Some thoughts, many of which have been covered above: first, what @Nick Mulligan said should form a substantial part of what you do, no matter what you do.  The more you can learn and the more people you can create a connection with the better your options will be moving forward.  You can't try things you aren't even aware of. 

Second, I would generally stay away from investments here in Japan, unless you're looking at purchasing an entire building.  I'd be happy to speak about this more, but in most cases, for most Americans, you're more likely to find a solid deal in the US than you are here in Japan.  

I think that leaves you looking at long-distance investing, which is completely doable.  The book has already been recommended above, and that's a great place to learn more.  Some investors are strongly opposed to long-distance investing, but just as many people make it the primary strategy for their investments.  Also, given your capital available now, it's likely you'd be better served by partnering up, at least initially.  Efforts to learn and network now can lead to natural partnerships, so don't stress about that at first.  Just put the word out to people you are in contact with that you're looking to do a deal.  Your existing network, including Dan and this forum, can help you quickly vet any potential deal to at least ensure that it's not completely idiotic on its face.  Having that resource is invaluable.  

If you're ever up in Tokyo and would like to talk real estate, please feel free to drop me a line.  

Hello Everyone,

Thought I give an update on my situation.  I have recently started a second job that will hopefully generate me an extra $1,000 a month (that's looking at the bright side) but a minimum of $500 extra.  With this money I hope to have $20,000 in years time.   I, also, may have an friend who will let me invest his money for him.  I'm thinking a partnership on the first house just to get my feet wet.  Any thought's on partnering with someone? Other than that I am researching alabama and michagan as potential starting points.  Thanks for all the support so far.

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