150k ready to invest. Where should I start?

Member since 2020 · 7 posts · 2 votes

I've been told for years investing in real estate is the way to go but never did. I have 150k in stocks at the moment that are currently dropping because of the Coronavirus epidemic and I'm looking to take my investments and put it all into real estate. Looking for guidance on what direction I should go (long distance investment, BRRRR, rentals). I figure I came to the right place for advice on this topic. Thank you in advance!!

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Whitney HuttenPro Member

Investor · Boulder, CO · Member since 2016 · 1k+ posts · 1k+ votes

@Michael Gabin I have a slightly different opinion than Wil. I would look at your portfolio and see if you have anything to tax loss harvest. Depending on your situation (and work with a CPA), you may be able to lock in the loss on those stocks, pull that capital now, and have the IRS partner with you on the losses. Outside of that... Wil has a great point, the market is on sale right now.

That aside, I'd start here:

1. Establish your WHY of real estate investing...

Side note: Think about this... if the Coronavirus is spooking you, how will you feel about a long vacancy, eviction, bad contractor, tenant damage to your home, etc. (crap still happens in RE investing!)?

2. Once you know your WHY, then you can start to set goals. Maybe your WHY is to spend more time with family and friends and it will take $X/ month to get you there... now you can break that goal up into milestones.

3. Now you pick an investment strategy to get you there!! There is flipping, turnkey, brrrr, syndications in SFR, MF, MHP, SS, Land, etc... a myriad of choices.

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Kimberly Hoyt
Los Angeles, CA · Member since 2020 · 7 posts · 1 vote
6y
@Michael Gabin I fully agree with @Will Fraser. Do not dump your stocks. No matter your political affiliation, it is without a doubt that Trump is good for the stock market. This downturn has absolutely nothing to do with the economy and all to do with a once in a lifetime pandemic. Use other reserves for real estate investing.
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Mike D'ArrigoPro Member
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
6y
@Michael Gabin with shelter in place orders in place, it will be tough to do a long distance BRRRR. At some point you have to travel to your market. It can't be all hands off.
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Jed Haslam-Walker
Real Estate Agent · Sarasota, FL · Member since 2020 · 77 posts · 102 votes
6y
@Michael Gabin Hi Michael,
It sounds like you are getting ready to jump and that you have already done a good deal of legwork - people have already identified the key categories: Single Family Homes, Multi-Familys 1-4 for residential investments and 5+ for commercial, Retail property and commercial properties - and then there are the specialist areas like Hotels and Mobile Home Parks etc.
Some general guidelines are:
- Decide on your ultimate income requirement per month or per year - tax benefits and appreciation are often factored into these calculations but if you want somewhere to start that would be a good place.
- Once you've done that you can then start to work on the cash-flow per unit - a good rule of thumb is $200-$400+ for a SFR and $100-200+ for a unit in a multi-family ( that's Cash flow after expenses)
- If you plan to diversify within your Real Estate portfolio then you would be looking at a mixture of those cash-flows to make your required income
- That leads you to think about how you would like to manage the properties - do you want to engage management or manage yourself - this is another piece of the puzzle to decide so you can get started
- Once you've got a clearer idea of the overall shape then you would decide about the best way to organise the investments in terms of capital outlay...
  - Basically you would either;
    Pay cash outright - NOT a great plan financially probably don't need to go into that!
    BRRRR - this gives you maximum leverage and is great if you can find a good way to find deals below market, if you have a good agent to go after deals for you quickly and skilfully and if you have a good contractor to do the work etc. There are several ways to get this done but it is more labour intensive and the payoff is you get your equity without having to put the money in yourself
    20% down and rent straight away - this ties up your capital but it's quicker and simpler than rehabbing and you'll find deals more easily - you can still aim for good deals or you can turnkey but you won't be as restricted as you would if you need to BRRRR but the downside is you won't have as much protection against losses as you would if you had BRRRR'd the equity into the deal
    Then you would drill down to think about the actual numbers you need within your time-frame to be able to achieve your income goals - for example I need 1-3 units a year @ $x per month cashflow for 5 years to get $X per month
    Given that I have $150K and I plan to (insert financing strategy)I would need to buy 3 units a year at $X purchase price.
    Then you can decide on your three market areas. I always advise that you research 3 areas and get to know them - then your knowledge accumulates over time . there are plenty of areas to invest in you just need to choose your 3 and stick with it - at least until you have got your feet wet.
    The other route is to scale up to syndicating straight away - personally I always advise my clients against this route if they are a new investor - you need experience and market knowledge to do this well and the risks can be significant.
    Other quick points are
    SFRs tend to have less turnover but can have higher vacancy costs,
    Multi-familys can be more management intensive
    When you get going you can often need a minimum of 1-2 years landlord experience to get financing on investment mortgages
    There are a raft of more issues but as an answer to your general question that would be the general shape of how to think about how to structure your beginning...
    Hope that helps :)
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