What would YOU do w/ $20k?

21 Replies

Hi all! Just sold some stocks and got $21k. I'd like to invest it into RE. I wouldnt mind something with HIGH risk either.

So my question is : If you had $20k, where would you invest? and what would you invest in?

Hopefully this is the right category for this question - if not, I apologize!

Thanks for taking the time to answer.

-B

I think buying performing notes are a great place to invest capital especially in small dollar amounts.

  • Passive income
  • Secured by real estate
  • No vacancy
  • No landlording

And many other benefits as well.

Both real estate and note investing has its pros and cons but notes are a great place to park money and get passive income.

The important question is what do you hope to accomplish?

When I first started investing I wanted to flip, flip, flip and end up with a big pot of gold (cash) at the end of the day.

I quickly realized that wasn't the best long-term play and once I wanted to quit flipping, the cash would not come in anymore.

I've since switched gears to investing in multifamily properties that cashflow well. Depending on your personality, this may or may not work for you. I get along very well with most of my tenants and have very few headaches. That being said, the proverbial pot of gold is more like a long trail of gold coins. You're not going to feel rich right away, but you'll certainly be able to build a sustainable income stream much better than by flipping.

This also depends on your market. If I was starting out with $20K to invest in my market I'd buy a Quad with FHA or conventional financing with ~5% down. Your ability to qualify for such a loan would be pretty strictly based off of your income and not the building's. But you could get into a 200K-400K 4 unit property that pays for itself plus gives you a place to live relatively cheap or free.

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@Anthony Dadlani - Thank you for the response. I dont know anything about note investing. I will have to do a lot of research - know of any good sites I can learn on?

@Michael Seeker - FHA loan, do you have to be a first time home buyer? I already have (2) homes.

What are your guys thoughts on buying (2) homes in Flint, or Warren, MI or even Syracuse NY for $10k/ea that are rented at $650/ea. I doubt they will ever go up in value.

An example: 2316 Joliet St, Flint MI --- For sale for $5500. Current tenant thru Jan 2014 at $625/mo.

It notes that house has LEAD PAINT. How can a house be rented w/ lead paint??

Thoughts?? HIGH RISK -- HIGH REWARD?

@Brian Smartt the house you reference was built in 1920. Back in 1920 paint had lead in it. Even if you paint over it, there is still lead paint in the house (unless you remove anything that had paint on it). Even homes built up to 1978 may have lead paint in them. Unless you're eating the walls, chewing on the windowsills, or burning the house down, you should be okay.

Buying out of state has its own challenges -- you need to have a good team in place in the other state to help you with:

- Locating properties - what areas are good and what areas are bad? Is a $5000 house any good?

- Managing the rehab - if you can buy a house without a single bit of rehab, that's great, but when you buy low priced, typically you are looking at rehab. Who are you going to get to manage or do the rehab work from afar?

- Finding tenants - you want to make sure you have GREAT property management in place to find tenants who will pay on time and in full each month and who will take care of the place and not trash it.

- Ongoing property management - that property management should answer tenant questions and help the management for months/years in the future. Keep the tenants happy and the checks coming in.

If you have a good team or partner to work with in another state, then you could be in a great position even with the low amount of money that you have.

@Dawn A. - thank you for your help. Do you know anything about FLINT, zip 48504? Looks like C/D area. Cash flow would be pretty decent, but I highly doubt the homes would go up much.

Another "what if" scenario -- buying in "boom" towns, like Dickinson or Williston ND, Midland TX...they are booming now...but could bust any time. Rentals are HIGH now. Is there anyone out there doing this??

Everyone, thanks for your input/help - its appreciated.

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@Brian Smartt - In regards to your question about FHA loans, I believe there are ways to get an FHA loan without being a first time homebuyer, however those scenarios won't apply to you, so no need to go into them here.

You will not be able to get an FHA loan or low downpayment conventional loan on an investment property. If you're looking for a 30-year term loan, the best you'll be able to get is a conventional loan on an SFR at 20% down. There are a lot of other financing options if you are okay with shorter terms of 1-5 years, but I wouldn't recommend that if you can get the 30 year term.

Originally posted by Dawn A.:
Even homes built up to 1978 may have lead paint in them.

Half those built 1960 to 1978 have no lead-based paint, the other half very little. Some in the 1950s also have little or none. Some even older have little or none. The most common locations on the older ones are exterior wood & metal, interior wood, and kitchen & bathroom walls & ceilings. Testing is inexpensive, and is done with portable X-Ray Fluorescence machines (we use the Thermo Niton units). There is more LBP in fancier neighborhoods, as the "best" paints had the most lead. Ben Franklin wrote a letter detailing his knowledge of the dangers of lead, so the fact that it is a poison is nothing new.

1. Put as much as you can into your Self-Directed IRA - I think the limit is $5500 per year. I just found out last night that you can Wholesale using your SDIRA!. The IRA puts up the earnest money for the sales contract, then you can flip that contract and the assignment fee goes to your IRA. Your return is incredible.

2. Use the rest to partner with someone on another area you are interested.

3. Loan the rest of the money to someone and make a great return. (Did I mention I'm looking for private money?!)

4. Buy a decent used mobile home(s) and owner finance those out for a great return.

5. Use it for marketing to get your next great deal.

Endless possibilities - good luck and have fun!

Originally posted by Belinda Lopez:
1. Put as much as you can into your Self-Directed IRA - I think the limit is $5500 per year. I just found out last night that you can Wholesale using your SDIRA!. The IRA puts up the earnest money for the sales contract, then you can flip that contract and the assignment fee goes to your IRA. Your return is incredible.

2. Use the rest to partner with someone on another area you are interested.

3. Loan the rest of the money to someone and make a great return. (Did I mention I'm looking for private money?!)

4. Buy a decent used mobile home(s) and owner finance those out for a great return.

5. Use it for marketing to get your next great deal.

Endless possibilities - good luck and have fun!

How is #1 not against the rules for prohibited persons?

On #3, I think a LOT of people could use private money. You, me, heck, a lot of investors on this site.

@Brian Smartt

You've probably seen this already but just today on the BP Blog @Ken Corsini wrote a post titled "How to Invest Your First $25,000". Might be helpful, it definitely got me thinking.

http://www.biggerpockets.com/renewsblog/2013/08/07/how-to-invest-25000/

Originally posted by Dawn A How is #1 not against the rules for prohibited persons?

On #3, I think a LOT of people could use private money. You, me, heck, a lot of investors on this site.

#1 is OK as long as the SDIRA itself is the named purchaser on the contract. The profit would be subject to UBIT, however, which is a pretty stiff tax, since wholesaling is an active business and not an investment activity. It can be ignored, but you have to be prepared to defend your actions in an audit.

@Brian Smartt , @Dawn A. is correct about me being familiar with Warren and Flint. Flint is a small version of Detroit in regards to unemployment rate and crime. In fact a few years back it even beat out Detroit for murders.

Houses are very cheap but finding good tenants can b challenging.

Warren, South Warren specifically is a great rental area. There is some competition so I have to stand out against the rest. As for a house already rented in Warren for $10K... don't believe it. You can get a house for that much but it will not be livable. I average $23,000 on purchasing and rehabbing with my rentals. That's including permits and holding costs.

It really varies though. I only buy 3 bedroom homes but lately have gotten lots of requests for 2 bedrooms so am starting to search for 2 bedroom properties now.

If you are truly looking to invest out of State, PM me and we can talk a little more.

@Aaron Yates Reading posts on "what to do with 20K" because that is what I have.  So after 1.5 years, how is the Warren area doing?  I have a friend on Denmar near Veterans Memorial Park.  That is why Warren interests me.  What can be done with 20K in Warren?  Looking for short term investments to increase my capital as quickly as possible to do buy and holds or buy, rehab, rent and refi type buy and hold.