$20,000 Cash...What Do I Do?

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$20,000 Cash...What Do I Do?

Anthony Sorrentino
Real Estate Agent · Hudson, MA · Member since 2015 · 3 posts · 4 votes

Greetings All!

So here is the scoop. I have $20,000 cash and was thinking of investing in real estate somehow. The issue is I am not sure how to use that money in real estate. Do I become partners with someone and both of us invest cash and time and we get a return that we split? Or do I loan out just the cash and get a return on that? or should I buy a super cheap run-down fixer-upper? Maybe there is another path altogether, but that's why I am asking here. I am located in the Boston area.

IF anyone has any suggestions on how I can smartly go about investing this money, I am all ears. My goal overall is to make some kind of return on the money wether I own and hold onto a piece of the real estate or not.

Thanks!

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Erik W.
Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
7y

@Anthony Sorrentino, I'm glad to see you're thinking about alternatives to owning a house outright, because as others have said, $20K will barely get you a 5% down payment on MA property in some areas.

There are TONS of ways to make money in "real estate."  Most folks here are limited to thinking about owning doors, but you can do a lot.  For example...

Strategy 1: Can you RENT a home for $1,000 / month, with permission to sub-lease, and set it up via short-term rental?  This is called "arbitrage" or as some call it "the spread" method of investing.  You lease for $1000, then rent it out to short-term corporate tenants ($1800/month), or for 3 months at a time to an insurance company looking to temporarily house their clients who lost their home in a fire ($2,000/month) or AirBnB/VRBO (vacation rentals) for $150/night ($3000 per month @ 20 days occupied) + cleaning fees.  The repairs, taxes, and insurance stay on the owner.  Your $20K gives you 20 months + if you reinvest the profits you can keep on churning that money and extending the deal.

Strategy 2: Open-air storage.  Can you find a small commercial lost (1/2 acre) and put a fence around it, then lease it out to folks who will pay $100/month to store their boat, RV, camper?  You might need more than $20K, but probably not a TON more.  Maybe find a partner and each put up 50%....could you do it for $40K?

Strategy 3: Notes.  Discount/non-performing notes can often be purchased for 10-30 cents on the dollar, so you could lock up some good 1st position notes on well-located property for not a lot.  Then either flip those notes to other investors or hang onto them and foreclose.  Takes a lot more specialization, but the good news here is that beause it is harder fewer people are doing it.  Less competition....

So there are just a few methods.  I bet if you think about it, Google a bit, and talk to folks in the industry you can find a dozen more ways to leverage just those cash funds into a nice return while you work up to owning dirt, sticks and bricks.

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  • Nick C.
    Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
    7y

    My guess is $20k will not get you very far in the Boston area. It may be enough to get a marketing campaign going though. 

    0Reply
  • Marci Stein
    Rental Property Investor · New York, NY · Member since 2011 · 956 posts · 510 votes
    7y

    Why not use it for a down payment on a property around Pittsfield?

    2Reply
  • Bill Plymouth
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 416 posts · 396 votes
    7y

    @Anthony Sorrentino send it to my pay pal account. 

    Joking aside, I’m not familiar with the Boston market, but I’ve heard it’s pricey.  

    If you’re just looking for a return, lend it out at 10-12%.  You’ll get a check in the mail every month and get paid back when the deal is done.

    My personal preference would be to partner up with an experienced investor on a rental/flip.  I think that’s where you get more bang for your buck.

    0Reply
  • Erik W.
    Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
    7y

    @Anthony Sorrentino, I'm glad to see you're thinking about alternatives to owning a house outright, because as others have said, $20K will barely get you a 5% down payment on MA property in some areas.

    There are TONS of ways to make money in "real estate."  Most folks here are limited to thinking about owning doors, but you can do a lot.  For example...

    Strategy 1: Can you RENT a home for $1,000 / month, with permission to sub-lease, and set it up via short-term rental?  This is called "arbitrage" or as some call it "the spread" method of investing.  You lease for $1000, then rent it out to short-term corporate tenants ($1800/month), or for 3 months at a time to an insurance company looking to temporarily house their clients who lost their home in a fire ($2,000/month) or AirBnB/VRBO (vacation rentals) for $150/night ($3000 per month @ 20 days occupied) + cleaning fees.  The repairs, taxes, and insurance stay on the owner.  Your $20K gives you 20 months + if you reinvest the profits you can keep on churning that money and extending the deal.

    Strategy 2: Open-air storage.  Can you find a small commercial lost (1/2 acre) and put a fence around it, then lease it out to folks who will pay $100/month to store their boat, RV, camper?  You might need more than $20K, but probably not a TON more.  Maybe find a partner and each put up 50%....could you do it for $40K?

    Strategy 3: Notes.  Discount/non-performing notes can often be purchased for 10-30 cents on the dollar, so you could lock up some good 1st position notes on well-located property for not a lot.  Then either flip those notes to other investors or hang onto them and foreclose.  Takes a lot more specialization, but the good news here is that beause it is harder fewer people are doing it.  Less competition....

    So there are just a few methods.  I bet if you think about it, Google a bit, and talk to folks in the industry you can find a dozen more ways to leverage just those cash funds into a nice return while you work up to owning dirt, sticks and bricks.

    6Reply
  • Alan Brown
    Rental Property Investor · NY MA CT VT MT, MO · Member since 2015 · 200 posts · 116 votes
    7y

    @Anthony Sorrentino, yah, I'd go with @Bill Plymouth's idea... or, depending on prices in Hudson, you might be able to house hack on a multi, the best possible thing, I think, for a newbie investor... get an FHA loan (must live in the property for at least a year) on something under $300k with a 3.5% down payment, maybe a duplex or even a single family home... if its a SF, you can rent out bedrooms, you might be able to live for free, and then use it for equity to move on to bigger and better things. a couple of years of appreciation in the Boston area my add nicely to your cash. I just realized that I'm getting about 70% annual return on my initial $50k I put down on a 4 plex, when I figure in appreciation, net cash flow and mortgage paydown!!... other than that, find someone you trust, preferably in an area near you, and partner with them; you might get a much better return on your cash, and learn a boatload in the meantime. THAT would be the best return you could ever get!

    Good on ya for getting going!

    2Reply
  • Cody Clinton
    Rental Property Investor · South Florida · Member since 2019 · 24 posts · 14 votes
    7y

    @Anthony Sorrentino Why not use that money to purchase a cash flowing home in another market? Should be able to find $80K-$100K homes that cash flow SOMEWHERE. This country is a big place and there's always homes to buy. What's that old saying? I've never met somebody who only does 1 deal. It's either zero, or 100. Good luck brother!

    2Reply
  • Steve Bracero
    Real Estate Agent · Westboro, MA · Member since 2016 · 1k+ posts · 471 votes
    7y


    @Anthony Sorrentino

    I would also look into house hacking , where you can get into the property for low money down, FHA is 3.5% down and you can begin your investing journey

    2Reply
  • Justin Rank
    Investor · Winhall, VT · Member since 2016 · 106 posts · 44 votes
    7y

    Look to house hack in central mass(worcester, Fitchburg, Leominster) with a 3.5 down FHA. I wouldn't recommend starting out investing out of state.

    1Reply
  • Account Closed
    Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
    7y
    Originally posted by @Cody Clinton:

    @Anthony Sorrentino Why not use that money to purchase a cash flowing home in another market? Should be able to find $80K-$100K homes that cash flow SOMEWHERE. This country is a big place and there's always homes to buy. What's that old saying? I've never met somebody who only does 1 deal. It's either zero, or 100. Good luck brother!

    You can buy cashflowing SFR'S in Indianapolis all day long for 80-100K

    1Reply
  • Jason Martinez
    Real Estate Agent · Cypress, CA · Member since 2018 · 88 posts · 41 votes
    7y

    @Anthony Sorrentino

    Everyone above is giving you great advice. And I was just in your position with that much $$ and I ended up closing on a $92k property in Indianapolis in a B class area. So @Account Closed is 100% correct. Do your due diligence and look for growing markets or house hack in your current market. 

    Oh and READ READ READ, listen to podcasts, there is way too much free education out there. You started here so that's a good start. Goodluck! 

    2Reply
  • Lien VuongBusiness Member
    Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
    7y

    So you have two options - 

    1. Invest in a property that would increase or create a passive income stream - probably an owner occupied property of sorts where you can probably buy something with the max of $500k. This is very doable as you are in a secondary market that has more properties available. I see two families in the $350's and threes in the $450-500 almost daily within driving range of that area. This is a more secure method and allows you to get your feet wet in the rental space and learn about landlording first hand. Your bonus Buyer's Agent commission will help with closing costs as well as small updates when you close. 

    2. Invest in yourself. What that means is use the $20,000 and invest in your real estate business. The ROI on that will far exceed that of buying a property because you're creating the right vehicle to propel more deals and generate more income. How should you spend it? COACHING. Getting a coach for around $600-1000/month will help you structure your business and create massive success going forward. Now this might take a little time to get going but let's be honest, two deals that you get out of this will pay for the coaching session for your entire year.

    I think both vehicles will help you gain more momentum in your future and investing goals. I personally am lucky to be in a position to do both and have gained success quickly. Please feel free to reach out if you need anything else. 

    [email protected]
    The Elle Group5154 Reviews
    WebsiteView Page
    2Reply
  • Account Closed
    Rental Property Investor · Brooklyn NY · Member since 2018 · 263 posts · 469 votes
    7y

    My response is based on the assumption that this is all your cash in the bank.

    Max out a Roth IRA - $6,000 (low-cost index fund; can grab funds later penalty free if needed)

    Savings account - $14,000 

    Educate yourself.  Find the route that fits your investing style.  Be patient.  Keep saving.
     

    1Reply
  • Eric Graig
    New York, NY · Member since 2018 · 8 posts · 2 votes
    7y

    Sorry if I'm responding the wrong way. I'm not sure I've ever seen a forum that works this way.

    @Bill Plymouth: I'm curious who or how you can find someone to lend money to at 10% to 20%. What could/would a lender do to assure payback?
     

    0Reply
  • Hai Loc
    Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
    7y

    @Anthony Sorrentino

    Donate to charity.

    Investing in syndication or crowd fund

    Or partner with a flipper and learn from them

    0Reply
  • Bill Plymouth
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 416 posts · 396 votes
    7y

    @Eric Graig great question.  I have never personally lended money (in a professional sense) before.  But, the lender essentially acts as the bank.  If they are not paid, they can foreclose on a property.  There are legal forms and contracts that you fill out as well to keep everything documented.  

    Can any hard money or experienced private lenders chime into this one to give a better explanation?

    2Reply
  • Charlene Stovin
    Member since 2015 · 16 posts · 5 votes
    7y

    @Steve Bracero quick question on this...so you get the fha loan, live in the home while fixing or whatever....at what point can you rent it if you are looking at sfh?

    0Reply
  • Jim BlackburnBusiness Member
    Lender · Florida Based (48 states Puerto Rico) · Member since 2017 · 321 posts · 121 votes
    7y

    @Anthony Sorrentino

    Do you already own a property as primary residence? If not, I would use the 20k to buy a 4 unit property with 3.5% down with seller covering all costs. 20k will get you a 571,000 piece of real estate.

    Jim

    954-993-1625
    Stairway Mortgage, a Division of NEXA Mortgage LLC597 Reviews
    WebsiteView Page
    1Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    7y

    I like the idea of @Jim Blackburn, depends too how much multi family is there.

    0Reply
  • Anthony Woods
    Rental Property Investor · Corona, CA · Member since 2015 · 46 posts · 8 votes
    7y

    @Anthony Sorrentino

    Partner with someone or look for a syndicator and invest passively for 10 to 12% return and a 3-5 year commitment before return of principle

    0Reply
  • Steve Bracero
    Real Estate Agent · Westboro, MA · Member since 2016 · 1k+ posts · 471 votes
    7y

    @Charlene Stovin

    FHA can be used for 1-4 units, so its important you intend to occupy the property for at least a year after closing.

    0Reply
  • Denis Churchill
    Loxahatchee, FL · Member since 2017 · 20 posts · 10 votes
    7y

    @Jason Martinez Congrats! If you don’t mind, was it turnkey and if so , what company? Thanks

    0Reply
  • Account Closed
    Flipper/Rehabber · Midland, TX · Member since 2018 · 26 posts · 6 votes
    7y

    @Charlene Stovin

    It's typically one year.

    0Reply
  • Keith A.
    Rental Property Investor · TX · Member since 2019 · 236 posts · 392 votes
    7y

    1) pay down the principal on your primary residence by 20k.  

    2)Keep doing this until you have enough equity in your home that you can get a HELOC.

    3)Use HELOC to pay cash for a property to rent out.

    4)Pay down the HELOC until there is enough to buy another rental.

    5)Repeat steps 3 and 4 over and over and over...

    6)Retire early.

    0Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    Saved up a bit more. You want money for down payment + RESERVES for any repairs. Then do house hack where you put down 3.5% and live in a unit. Add a seller paid closing cost credit to offer. 

    0Reply
  • Max T.
    Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    7y

    @Anthony Sorrentino

    20k is what I was working with when I bought my first property, a live in duplex. I still have it after moving out years ago and it is one of my top performers. Your market may vary.

    0Reply
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