What to do with a pile of money
Realtor · Member since 2019 · 32 posts · 18 votes
What to do with a pile of money
Most Popular Reply
Specialist · Memphis, TN · Member since 2019 · 24 posts · 17 votes
6y@Michael Malmrose First, welcome to BP and congrats on taking your first steps to gain financial freedom!
I've read a few comments mentioning Turnkey as a viable option. And, they are right, but I want to help you understand why. For the BRRRR method to really work, the property still has to cash flow. Let's take your "undesirable areas" for instance. At a buy-in of $260k, you would still need to rent it out as close to $2600/month as possible. And that doesn't include your real cost if there are repairs needed on those properties.
In most cases, a lender will want to see that the property will rent out successfully for up to 6-months before they agree to refi. So, if there's any kind of renovation needed you could potentially be in the property for up to a year before being able to pull your capital out and start again.
Additionally, the kind of tenant you acquire in those undesirable areas won't likely take care of the property, or pay on time, or even pay at all.
I imagine the likelihood of renting out homes in the nicer neighborhoods at $4k/month is pretty unlikely, which makes your ability to cash flow positively even more difficult and pretty well rules out those neighborhoods.
With a turnkey solution, you have the option to invest out of state in growing and thriving markets. If you were to finance the purchase you could use $200k to invest in 4-5 properties in different markets thereby diversifying your portfolio and generating $1600+/month in truly passive income at leveraged cash on cash returns above 12% and higher.
It all comes down to your true goals and what's most important to you - your time or your money. That's the difference between an active investor and a passive investor.
So, to answer a couple of your questions directly:
- I don't think it would be easy to make this work in your market with the information you've provided
- You could absolutely invest out of state IF you partner with a great Turnkey provider.
At the end of the day, you have several options. But, the main goal is financial freedom. That said - it's important to invest in strategies that truly help you achieve that.
Please don't hesitate to ask other questions! I'm always happy to help!
79 Replies
- Developer · San Diego, CA · Member since 2012 · 133 posts · 114 votes6y
Are you willing to move? Would your current house cash flow if you rented it out? I think one of the best strategies for someone just starting out right now is picking up a 2-4 unit property with a 3.5% down FHA loan. This would be a low barrier to entry and leave you with that sizeable chunk of change in your hand to do something else as well. To stay on the up-and-up you'd have to live in in one of the units for 12 months.
- Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes6y
Originally posted by @Michael Malmrose:
Hello gang,
I've been a BP member for about three weeks now, and after much thought, I'd like to use the BRRRR strategy for financial freedom. Here's the lowdown...
-After refinancing, I will have about $200k to start.
-I live in the Salt Lake City area where the median home price is about $440K, and homes in "undesirable areas" are upwards of $260K. Anything less is typically a condo, a prefab, or a four hour drive to a remote area.
-I'd like to work this area, but with BRRRR, I'm not sure this makes financial sense.
A couple of questions...
-Is there a way to make this work in my area?
-Do I dare buy my first experience out of state? Like Alabama?
-Maybe try a fix and flip first?
-Any recommendations?
Thank you! Mike
There are many ways to financial success in real estate and the city you invest in plays a large role in that. Here is a spreadsheet of how one type of investing works:
Average Turnkey Cash Flow Per Door In Phoenix Metro Area No Bank Financing Needed
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes6y
Originally posted by @Michael Malmrose:
Hello gang,
I've been a BP member for about three weeks now, and after much thought, I'd like to use the BRRRR strategy for financial freedom. Here's the lowdown...
-After refinancing, I will have about $200k to start.
-I live in the Salt Lake City area where the median home price is about $440K, and homes in "undesirable areas" are upwards of $260K. Anything less is typically a condo, a prefab, or a four hour drive to a remote area.
-I'd like to work this area, but with BRRRR, I'm not sure this makes financial sense.
A couple of questions...
-Is there a way to make this work in my area?
-Do I dare buy my first experience out of state? Like Alabama?
-Maybe try a fix and flip first?
-Any recommendations?
Thank you!
Mike
I'd put it into a bunch of Turnkeys in the Midwest. Using 80% LTV you can get plenty!
- 6yAndrew HoganPro MemberRental Property Investor · Indianapolis, IN · Member since 2016 · 559 posts · 463 votes
Michael, I love SLC. There are so many others you can network with who can give you guidance. I'd do that before investing out of state. Yes it's a seller's market right now but not quite as bad as Sanfran or NYC.
- Specialist · Memphis, TN · Member since 2019 · 24 posts · 17 votes6y
@Michael Malmrose First, welcome to BP and congrats on taking your first steps to gain financial freedom!
I've read a few comments mentioning Turnkey as a viable option. And, they are right, but I want to help you understand why. For the BRRRR method to really work, the property still has to cash flow. Let's take your "undesirable areas" for instance. At a buy-in of $260k, you would still need to rent it out as close to $2600/month as possible. And that doesn't include your real cost if there are repairs needed on those properties.
In most cases, a lender will want to see that the property will rent out successfully for up to 6-months before they agree to refi. So, if there's any kind of renovation needed you could potentially be in the property for up to a year before being able to pull your capital out and start again.
Additionally, the kind of tenant you acquire in those undesirable areas won't likely take care of the property, or pay on time, or even pay at all.
I imagine the likelihood of renting out homes in the nicer neighborhoods at $4k/month is pretty unlikely, which makes your ability to cash flow positively even more difficult and pretty well rules out those neighborhoods.
With a turnkey solution, you have the option to invest out of state in growing and thriving markets. If you were to finance the purchase you could use $200k to invest in 4-5 properties in different markets thereby diversifying your portfolio and generating $1600+/month in truly passive income at leveraged cash on cash returns above 12% and higher.
It all comes down to your true goals and what's most important to you - your time or your money. That's the difference between an active investor and a passive investor.
So, to answer a couple of your questions directly:
- I don't think it would be easy to make this work in your market with the information you've provided
- You could absolutely invest out of state IF you partner with a great Turnkey provider.
At the end of the day, you have several options. But, the main goal is financial freedom. That said - it's important to invest in strategies that truly help you achieve that.
Please don't hesitate to ask other questions! I'm always happy to help!
- Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes6y
The REFI needs to make sense given the market rents. I would look at surrounding areas for a potential spread on appreciation. But it seems like you still need to iron out your investment goals first. Otherwise you'll get shiny object syndrome.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Forest Skufca:
@Michael Malmrose First, welcome to BP and congrats on taking your first steps to gain financial freedom!
I've read a few comments mentioning Turnkey as a viable option. And, they are right, but I want to help you understand why. For the BRRRR method to really work, the property still has to cash flow. Let's take your "undesirable areas" for instance. At a buy-in of $260k, you would still need to rent it out as close to $2600/month as possible. And that doesn't include your real cost if there are repairs needed on those properties.
In most cases, a lender will want to see that the property will rent out successfully for up to 6-months before they agree to refi. So, if there's any kind of renovation needed you could potentially be in the property for up to a year before being able to pull your capital out and start again.
Additionally, the kind of tenant you acquire in those undesirable areas won't likely take care of the property, or pay on time, or even pay at all.
I imagine the likelihood of renting out homes in the nicer neighborhoods at $4k/month is pretty unlikely, which makes your ability to cash flow positively even more difficult and pretty well rules out those neighborhoods.
With a turnkey solution, you have the option to invest out of state in growing and thriving markets. If you were to finance the purchase you could use $200k to invest in 4-5 properties in different markets thereby diversifying your portfolio and generating $1600+/month in truly passive income at leveraged cash on cash returns above 12% and higher.
It all comes down to your true goals and what's most important to you - your time or your money. That's the difference between an active investor and a passive investor.
So, to answer a couple of your questions directly:
- I don't think it would be easy to make this work in your market with the information you've provided
- You could absolutely invest out of state IF you partner with a great Turnkey provider.
At the end of the day, you have several options. But, the main goal is financial freedom. That said - it's important to invest in strategies that truly help you achieve that.
Please don't hesitate to ask other questions! I'm always happy to help!
Myself I would recommend one market owning in multiple markets can be expensive just in travel etc.. better in my mind to concentrate in one area that you can get a direct flight to..
- Specialist · Memphis, TN · Member since 2019 · 24 posts · 17 votes6y
Originally posted by @Jay Hinrichs:
Originally posted by @Forest Skufca:
@Michael Malmrose First, welcome to BP and congrats on taking your first steps to gain financial freedom!
I've read a few comments mentioning Turnkey as a viable option. And, they are right, but I want to help you understand why. For the BRRRR method to really work, the property still has to cash flow. Let's take your "undesirable areas" for instance. At a buy-in of $260k, you would still need to rent it out as close to $2600/month as possible. And that doesn't include your real cost if there are repairs needed on those properties.
In most cases, a lender will want to see that the property will rent out successfully for up to 6-months before they agree to refi. So, if there's any kind of renovation needed you could potentially be in the property for up to a year before being able to pull your capital out and start again.
Additionally, the kind of tenant you acquire in those undesirable areas won't likely take care of the property, or pay on time, or even pay at all.
I imagine the likelihood of renting out homes in the nicer neighborhoods at $4k/month is pretty unlikely, which makes your ability to cash flow positively even more difficult and pretty well rules out those neighborhoods.
With a turnkey solution, you have the option to invest out of state in growing and thriving markets. If you were to finance the purchase you could use $200k to invest in 4-5 properties in different markets thereby diversifying your portfolio and generating $1600+/month in truly passive income at leveraged cash on cash returns above 12% and higher.
It all comes down to your true goals and what's most important to you - your time or your money. That's the difference between an active investor and a passive investor.
So, to answer a couple of your questions directly:
- I don't think it would be easy to make this work in your market with the information you've provided
- You could absolutely invest out of state IF you partner with a great Turnkey provider.
At the end of the day, you have several options. But, the main goal is financial freedom. That said - it's important to invest in strategies that truly help you achieve that.
Please don't hesitate to ask other questions! I'm always happy to help!
Myself I would recommend one market owning in multiple markets can be expensive just in travel etc.. better in my mind to concentrate in one area that you can get a direct flight to..
That's a great point as it definitely can be. It really comes back to how active of an investor you are, and the amount of trust established between you and the company. Not that I am recommending you purchase a property site unseen, however, it's not uncommon within the turnkey strategy.
There are also many benefits to investing in multiple markets as part of diversifying your portfolio. Take the Dallas market as it compares to Memphis. Memphis is one of those markets that has a lower buy-in and steady economic growth. It's not a booming market, but it's consistent. Even when the housing market dips, Memphis has been quite resistant to the rest of the U.S. In Dallas, there's a bit of a higher buy-in (although great opportunities can still be found further into Fort Worth and other suburbs of Dallas), and there are higher property taxes which impact your cash flow.
However, a large majority of those high property taxes in Dallas are fed back into the public education system. When you invest in the education system you stimulate the cities potential for future economic growth and job growth for years to come. While you may look at year 1 of an analysis and think a market like Memphis outperforms Dallas, you aren't able to see the bigger picture. After a few years, you'll start to see that your returns begin to surpass and drastically outperform the Memphis property you purchased at the same time.
Does that make Dallas better than Memphis or other markets? Not at all, it's just simply a different strategy.
If you were to prefer to keep everything in one market that is all well and good - I just see the long-term benefit in diversifying across multiple markets as well.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Forest Skufca:
Originally posted by @Jay Hinrichs:
Originally posted by @Forest Skufca:
@Michael Malmrose First, welcome to BP and congrats on taking your first steps to gain financial freedom!
I've read a few comments mentioning Turnkey as a viable option. And, they are right, but I want to help you understand why. For the BRRRR method to really work, the property still has to cash flow. Let's take your "undesirable areas" for instance. At a buy-in of $260k, you would still need to rent it out as close to $2600/month as possible. And that doesn't include your real cost if there are repairs needed on those properties.
In most cases, a lender will want to see that the property will rent out successfully for up to 6-months before they agree to refi. So, if there's any kind of renovation needed you could potentially be in the property for up to a year before being able to pull your capital out and start again.
Additionally, the kind of tenant you acquire in those undesirable areas won't likely take care of the property, or pay on time, or even pay at all.
I imagine the likelihood of renting out homes in the nicer neighborhoods at $4k/month is pretty unlikely, which makes your ability to cash flow positively even more difficult and pretty well rules out those neighborhoods.
With a turnkey solution, you have the option to invest out of state in growing and thriving markets. If you were to finance the purchase you could use $200k to invest in 4-5 properties in different markets thereby diversifying your portfolio and generating $1600+/month in truly passive income at leveraged cash on cash returns above 12% and higher.
It all comes down to your true goals and what's most important to you - your time or your money. That's the difference between an active investor and a passive investor.
So, to answer a couple of your questions directly:
- I don't think it would be easy to make this work in your market with the information you've provided
- You could absolutely invest out of state IF you partner with a great Turnkey provider.
At the end of the day, you have several options. But, the main goal is financial freedom. That said - it's important to invest in strategies that truly help you achieve that.
Please don't hesitate to ask other questions! I'm always happy to help!
Myself I would recommend one market owning in multiple markets can be expensive just in travel etc.. better in my mind to concentrate in one area that you can get a direct flight to..
That's a great point as it definitely can be. It really comes back to how active of an investor you are, and the amount of trust established between you and the company. Not that I am recommending you purchase a property site unseen, however, it's not uncommon within the turnkey strategy.
There are also many benefits to investing in multiple markets as part of diversifying your portfolio. Take the Dallas market as it compares to Memphis. Memphis is one of those markets that has a lower buy-in and steady economic growth. It's not a booming market, but it's consistent. Even when the housing market dips, Memphis has been quite resistant to the rest of the U.S. In Dallas, there's a bit of a higher buy-in (although great opportunities can still be found further into Fort Worth and other suburbs of Dallas), and there are higher property taxes which impact your cash flow.
However, a large majority of those high property taxes in Dallas are fed back into the public education system. When you invest in the education system you stimulate the cities potential for future economic growth and job growth for years to come. While you may look at year 1 of an analysis and think a market like Memphis outperforms Dallas, you aren't able to see the bigger picture. After a few years, you'll start to see that your returns begin to surpass and drastically outperform the Memphis property you purchased at the same time.
Does that make Dallas better than Memphis or other markets? Not at all, it's just simply a different strategy.
If you were to prefer to keep everything in one market that is all well and good - I just see the long-term benefit in diversifying across multiple markets as well.
travel to your markets for OOS investors while not mandatory certainly I recommended.. for the average person starting out it can be pretty tough to have one house here one house there etc.
To me these markets at least were values are stagnate for the most part are interchangeable and it comes down to the team and PM.. those are the folks that will make your investment succeed or not.. the macro of a given economy simply in my mind does not flow down to owing a rental or two..
- Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes6y
@Michael Malmrose
I just closed on an out of state BRRRR. We haven't started the rehab, so I can't call it a success yet. It's all about finding reliable connections in the market. You need an expert in the market that can physically see the properties for you. My agent sends my videos of the walkthroughs, gives me his ARV estimate, and also helps me estimate the rehab budget. If the deal looks promising we'll get a contractor in there to get an accurate scope of work.
- Investor · Selma, AL · Member since 2017 · 39 posts · 13 votes6y
Always my concern with out of my market area is certainly boots on the ground and who that will be. I am in central alabama and have had success with BRRRR strategy and a few flips. Even being in the market it can be a challenge located and creating a team. Feel free to reach out it I may be of any assistance to you.
- Investor · Birmingham, AL · Member since 2016 · 315 posts · 206 votes6y
If you can always follow the good schools wither it's rent or flip. You can go c class and get about 3 to 4 that are paid for or you can get brand 3 or 4 new homes in Shelby or St Clair counties here in sweet home Alabama with 20% dp and get close to the same ROI. I have both. New homes have no major maintenance next 15-25 years. Think about that.
Good luck. Jp
- Real Estate Broker · Bradenton, FL · Member since 2017 · 544 posts · 363 votes6y
@Michael Malmrose
If you want to be successful locally, look at what strategies locals are using.
I’m willing to bet AirBnBs are killing it in SLC. Check into that! You may not even have to renovate, just decorate.
- Realtor · Member since 2019 · 32 posts · 18 votes6y
@Pedro Tavares: Yes, we are not opposed to moving to SLC. Unfortunately, the numbers won't work with the mortgage amount. I haven't driven for dollars yet, so maybe there is someone who just wants to unload. I have my RE license, so I'm able to find all the fourplexes out there and send a letter. Thank you for your advice!
- Realtor · Member since 2019 · 32 posts · 18 votes6y
@Mike M.: Looks like an interesting spreadsheet. I'll take a closer look at it I actually just looked in the Phoenix area online for a possible turnkey.
Thank you for your help!
- Realtor · Member since 2019 · 32 posts · 18 votes6y
@Tom Ott: Thanks for your thought, Tom! I like the idea of turnkey out of state and focusing in one area. Where in the midwest would you recommend?
- Realtor · Member since 2019 · 32 posts · 18 votes6y
@Andrew Hogan: I have yet to attend an REI meeting. I think I'll attend one. I know attending requires a membership or $30 or something
- Realtor · Member since 2019 · 32 posts · 18 votes6y
@Forest Skufca: Thanks for the great advice, Forest! I've been looking for turnkey opportunities in different states, and this looks very viable. I wouldn't be able to BRRRR anything so far away from home, but l love the idea of being a passive investor and using an 80 percent LTV. I just need to find an area, research it, and fly over there to make some offers. I'm gonna make some RE agent super happy
- Realtor · Member since 2019 · 32 posts · 18 votes6y
@Frank Geiger- Thank you for your reply! Yes, I do need to iron out my goals. Seems like I change plans every time I change my underwear!
- Realtor · Member since 2019 · 32 posts · 18 votes6y
@Jonathan Hulen: Thanks for your comment! You do all of this site unseen?
- Specialist · Memphis, TN · Member since 2019 · 24 posts · 17 votes6y
@Michael Malmrose No problem at all! Let me know if you have any additional questions. Happy to help!
- Realtor · Member since 2019 · 32 posts · 18 votes6y
@Taylor L.
I'm such a neophyte. What's triple net commercial?
- Realtor · Member since 2019 · 32 posts · 18 votes6y
@Mark A Story
Thank you, Mark! If I were to consider investing in Alabama, may I use your services? We could strike a deal
- Realtor · Member since 2019 · 32 posts · 18 votes6y
@John Patton
Alabama has some great deals. Is it hard to rent out homes?
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