$50k burning a hole in my pocket

9 Reply

OP

Member since 2019 · 66 posts · 32 votes

6y

@Russell Brazil - Thanks for the info. I guess we don't have a long term plan on WHEN to rent it. It would be a primary residence but not sure for how long. Is there a certain window or just after a year assuming, an FHA loan, we move out and then start renting it out?

When running calculations, should we focus on assessing rental income post that period? Should we consider fixing it up a bit?

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Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

6y

Originally posted by @Jeremy D.:

@Russell Brazil - Thanks for the info. I guess we don't have a long term plan on WHEN to rent it. It would be a primary residence but not sure for how long. Is there a certain window or just after a year assuming, an FHA loan, we move out and then start renting it out?

When running calculations, should we focus on assessing rental income post that period? Should we consider fixing it up a bit?

Typically you need to live in a house a year before renting it out.

In Montgomery County you do not typically get a good return on renovating a property. (PG and DC you do however)

FHA is really for people with poor credit. There are better conventional loan options if you have good credit.

As for calculations, I honestly never really do them on buy and holds. Life doesn't happen like a spreadsheet.

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1 Reply

OP

Member since 2019 · 66 posts · 32 votes

6y

We both like the Montgomery County area and NOLA location with Amazon coming online soon, so that sounds in line with our thinking.

Assuming we get very favorable financing, it sounds like the plan would be to use all the $50k to get the best house we can in a high demand area, dont really worry about fixing it up, and then start renting it out as soon as possible?

Andrew Carlson

Rental Property Investor · Rochester, MN · Member since 2017 · 224 posts · 323 votes

6y

Buy a home for yourself first. Many real estate investors truly get started when they buy their first home. Although it doesn’t seem very ‘investy’ (just made up a word), buying a Primary residence is a way to get good financing terms, add value by doing the live in flip, and paying down the debt. My wife and I didn’t want roommates either, but when some friends needed a place to crash for a few months at a time, it was great extra income. Plus you will learn a ton from owning your own home. Good luck, keep your eyes on the prize!

4 Reply

OP

Member since 2019 · 66 posts · 32 votes

6y

Thank you @Andrew Carlson! I totally agree and love the insight.

OP

Member since 2019 · 66 posts · 32 votes

6y

I guess I'm trying to figure out the in-between time and how to factor for that. That time between buying the house, and then when it truly becomes an investment regardless of the appreciation. For example, If I have $50k, how much should I keep back for live-in fixes? How do I calculate the return on that and how fast should I do those fixes over? I'm not a flipper and this will be my primary residence but I should at least put a stake in the ground to be able to evaluate, correct?

2 Reply

Marian Huish

Real Estate Broker · DC MD, VA & NV · Member since 2014 · 512 posts · 292 votes

6y

Don't over-analyze @Jeremy D.... there's too many hypotheticals there with regard to where, what, when, etc... it's like trying to plan when to have a child, timing between each, how many, college costs, when they'll start 'paying back', ; D. Just don't buy something that needs more work than you can afford and leave yourself a comfortable cushion... maybe 3 mos. of extra living expenses. I'd actually find a property in a neighborhood under-going revitalization such as Edgewood in DC that will likely be a lower cost to get in and show faster appreciation. Good luck!

1 Reply

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OP

Member since 2019 · 66 posts · 32 votes

6y

@Marian Huish :) hahaha, being a CPA, over analyzation is in my nature ;-)

1 Reply

Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

6y

Originally posted by @Jeremy D.:

@Marian Huish :) hahaha, being a CPA, over analyzation is in my nature ;-)

Funny you say that as Im good friends with 2 CPAs, who specialize in working with real estate investors....and both of them get analysis paralysis with jumping into real estate themselves.

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Tom Ott

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

6y

Originally posted by @Jeremy D.:

Newbie post.

Got $50k and trying to see what to do with it. SO and I LOVE DC and our jobs are mostly located in the Bethesda area. We are currently renting but want to start putting that money to work. SO is not a fan of the house hack (privacy and safety concerns) and multis are hard to come by, so either seems like buying and holding or keep renting and use our money elsewhere. Also, we both have excellent credit and have never owned a home. I'm guessing cash flow is out with that scenario, so how else should I think about it as an investment if all I'm really relying on is appreciation and possibly fixing it up? I know the general thought is that appreciation should just be the icing and is a nice to have but shouldn't drive the decision.

Questions:

Should we consider other strategies?

How can we make a good long term strategy with Buy and Hold? If we fix it up a bit, how do you model that into your projections for ROI?

TAGs: DMV, Virginia, NOVA, DC, Washington, DC,

I would for sure use it to put 20% down on a buy-and-hold in the Midwest. You can easily find a property that meets the 1% rule.

Account Closed

Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes

6y

50k in the dc area? You need to save more money. I actually agree with @Tom Ott I bought a house yesterday in Ohio for 43,000 the rents for 800 a month.

3 Reply

OP

Member since 2019 · 66 posts · 32 votes

6y

@Account Closed, I've thought about this too. Wading far outside my limited experience, If I base my plan on the above guidance from the PRO DC buyers group, it seems that I should buy a dwelling in an appreciating area of DC, stay for a year, and then rent it out. It might not be a cash flow play, but there is still some value in that.

In the other camp, if it went with some other investment, then I would still need to pay for rent somewhere and I think that significantly impacts any returns realized? Additionally, the financing would be different too? I would then need to focus on the 1% rule here as well? I'm not as versed here so wasn't my first inclination, but willing to learn from further insight into this area :)

Going completely crazy, I've considered that I just keeping renting but at the same time buy a house in a resort area to start doing STRs. Have a place in the mountains and use it once a year to go skiiing for a few days, haha.

Account Closed

Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes

6y

Originally posted by @Jeremy D.:

@Account Closed, I've thought about this too. Wading far outside my limited experience, If I base my plan on the above guidance from the PRO DC buyers group, it seems that I should buy a dwelling in an appreciating area of DC, stay for a year, and then rent it out. It might not be a cash flow play, but there is still some value in that.

In the other camp, if it went with some other investment, then I would still need to pay for rent somewhere and I think that significantly impacts any returns realized? Additionally, the financing would be different too? I would then need to focus on the 1% rule here as well? I'm not as versed here so wasn't my first inclination, but willing to learn from further insight into this area :)

Going completely crazy, I've considered that I just keeping renting but at the same time buy a house in a resort area to start doing STRs. Have a place in the mountains and use it once a year to go skiiing for a few days, haha.

I just don't understand what you could accomplish in the DC area with $50k. Buy yourself an efficiency unit in the hood?

OP

Member since 2019 · 66 posts · 32 votes

6y

@Account Closed, haha. No, definitely not. Thinking of using that as a downpayment. finance the rest.

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Cassidy BurnsBusiness Member

Investor · Alexandria, VA · Member since 2016 · 859 posts · 460 votes

6y

@Jeremy D. everyone is going to have different strategies on this website and it really comes down to what your life needs. But I think we are forgetting to ask a few questions.

-How long do you plan on living in the Washington DC area? If over 2 years I 100% think you should purchase a primary residence using a 3-5% Down. Strictly because of the loss of equity. If we use @Russell Brazil example of his house in Rockville. IF you rent his house for $3,100/month for the next 2 years, you will be paying $74,400 in rent.

-Do you want to be property manager out of state ? This will decide if you want to buy that $40,000-$50,000 house in the midwest ?

-Are you chasing cash flow or equity? If you are chasing cash flow, go elsewhere, if you are chasing potential appreciation / rent NOI, you are in the right place, the Nations Capitol.

I'm sure I'm missing a few, but good luck!

2 Reply

Christopher D.

Rental Property Investor · Redding, CA · Member since 2018 · 22 posts · 12 votes

6y

@Jeremy D.

I was in the same situation as you a few years ago. I ended up getting a short sale condo on the route 1 corridor in Alexandria near the Target... it needed moderate work, so I house hacked with a buddy and fixed the place up a bit over the course of a year, then rented it out and cashflow about 150/ month. HOA fees suck, but at the time a condo was all I could comfortably afford. IMO as far as appreciation, I'd look in PG county, specifically historic Hyattsville and the Riverdale area. Over the last 5-10 years, you can't even recognize those neighborhoods because they've changed so much... and for the better. Additionally, the purple line is slated to have a station at Riverdale rd and Kenilworth and another one in Langley Park (depending on your risk tolerance.) Common sense tells me that the cheapest real estate within the beltway is in PG, and people are getting pushed out of DC and moving there for affordability. Tacoma Park is nice too, but more expensive than the Hyattsville/ Riverdale area. I worked for PG fire for 8 years and did handyman work for 3 house flippers in the area. Initially they bought all their houses in AA county and Annapolis, then it seemed like all their flips migrated towards the Hyattsville area. Working for the FD gave me the opportunity to literally see every street/ neighborhood change throughout the years. I know ill probably get ripped on by the senior guys here, but there are some really nice condos in the Arlandia area that are well maintained and have somewhat functional HOA's. It might be worth looking into and see if the numbers and price points work for you. Best of luck and let us know what you end up doing!

3 Reply

OP

Member since 2019 · 66 posts · 32 votes

6y

@Cassidy Burns Thanks for the questions. It definitely helps with focusing a jumble of thoughts.

1. SO works up in Bethesda and we plan to be in the area for at least 2 yrs. Though if we moved, we more than likely keep it and rent. Mind-blowing, but never really put together those numbers like that, $74k that's crazy.

2. If out of state I'd think I'd need a property manager at least until I feel more comfortable.

3. Not really sure what I'm chasing just know that I need to put the money to work. But, if I need it for my primary residence, then I'm guessing its a potential appreciation / rent NOI play

Jack Seiden

Real Estate Agent · Washington DC · Member since 2016 · 847 posts · 656 votes

6y

I'll also add I actually would not look for a fixer upper. at the below lets say 500k price point you are either looking at houses in which the discount for a fixer upper is actually less than value of renovations (for instance getting 30k off on a house that needs 100k of work). or a house that would be functionally unlivable. Put a good down payment on a house you want to live in long term and use the savings that your getting from not renting to build a nest egg to invest in the future.

4 Reply

OP

Member since 2019 · 66 posts · 32 votes

6y

@Jack Seiden - That's good info. We are thinking a bit above that based on our inquires. Something in the $550-$800k range. Would that same advice still apply? We would probably only live in it for a year. In that time it would probably be more sweat equity we put into it than hiring for something substantial.

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Pace Jordan MorbyPro Member

Investor · Tempe, AZ · Member since 2016 · 20 posts · 50 votes

6y

With 50K, you could buy 5-10 cash flowing properties SubTo or Seller Finance in Phoenix Arizona.

Account Closed

Member since 2020 · 12 posts · 2 votes

6y

@Jeremy D. I definitely agree that you should find a home in a competitive area that has a strong rental market where rents are constantly going up. Me and my husband also had the question as to whether we should buy and then rent out while we live there as we like our privacy and it'd be our first home. I personally don't see an issue with getting a property to rent out. You can even purchase properties that already have renters and assume the leases getting you started faster. I'd recommend PG since light renos can increase the values quickly.

OP

Member since 2019 · 66 posts · 32 votes

6y

@Account Closed Thanks for the location suggestion - something to consider. As our jobs are in Bethesda, sow we'll probably need to focus on the more northern part of the county if we did go that route.

Questions regarding that advice: How much should you reno? Just enough to get renters in the door in a house hack situation? What's the return on doing renos on the house for gaining ARV vs doing it for gaining renters?

Andrew McCartin

Washington, DC · Member since 2019 · 23 posts · 12 votes

6y

@Russell Brazil Interesting point about FHA. Do you know of any conventional options for folks with good credit but looking for low money down?

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Russell BrazilBusiness Member

Moderator

Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

6y

Originally posted by @Andrew McCartin:

@Russell Brazil Interesting point about FHA. Do you know of any conventional options for folks with good credit but looking for low money down?

Fannie Mae's HomeReady loan allows for 3% down. You should reach out to @Upen Patel, he is a loan officer in the area I work with a lot.

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