I have 100k+ in savings and would like to invest that in real estate. I also rented until now and am in a situation where I need to buy a home to live in. I am currently considering using 20-30k as down payment for a residence and using the rest, about 100k for an investment property (probably a vacation rental). However, also wondering whether there's another way I could approach the situation. For example, buy a duplex with the savings I have and rent out one half; buying a multi-family and renting part of it etc. Would like to know whether any of you have been in a similar situation and how you approached it. The current plan I am leaning towards is to buy a home as primary residence and then buy another as an investment property.
Real Estate Agent · Skagit Valley, WA · Member since 2021 · 256 posts · 283 votes
4y
@Pat Chamara Some great thoughts and questions!... but there's really not much chance of any of us here being able to answer your questions. Partly, because there's really no one correct answer..... but mostly because we don't have any context - no idea where you are, average price of homes in your market, what your long term plans might be?
But hey, you're in an enviable position so we certainly want to encourage you to move ahead... and get started with something. I like your idea of house hacking the best. Buy a duplex, rent half out. Here's some pluses:
You're no longer renting so you're finally paying down your own mortgage... equals equity!
You have a chance to practice "self-managing" a rental unit. This is great experience. Even if you use PMs for all your future properties, managing once is a good way to learn tons of stuff.
While doing this first step in your journey, you'll have time to start researching and putting together specific criteria and strategies.... that will in turn lead to your real estate investing goals. Why is it that you want to invest in real estate? Being able to state that concisely will make all your other decisions simpler.
Property Manager · Tampa Bay/St Petersburg, FL · Member since 2019 · 41 posts · 43 votes
4y
Hi Pat,
It sounds like you're open to different property types and strategies.. Single family or house hack. It just depends on defining.. What is the best strategy for you in the short-term to reach long-term goals?
This is a really good position to be in because it's really up to you!
Strategy or goal could be anything like.. Do you want to house hack and ramp up to property #2 and scale quickly or does timing really matter?
Size of property (# of units) or condition (rehab) and pure monthly cash flow may take priority if scaling in a short amount of time is important. If scaling isn't the highest priority, there is more flexibility in the criteria that meets your strategy -- maybe a duplex in a location that is more ideal for you personally and is a base hit property investment that gets you to property #3 and beyond over time.
Not sure if you have looked into lending or funding just yet, but if you haven't it would be a good next step by answering 'What is my buying power?'. Answering this question will help you hone in on the best property type that meets your investment goals and personal living arrangement preference -- duplex, tri or even a SFH w/ guest house or in-law suite.
If you are looking to put together a good strategy, a good way to get there is by defining the criteria you have for an investment property. You may have already done this, but if you haven't and looking for ideas, criteria could be anything like:
Location |Property type (SFH, Multi, Etc) | Rental type (LTR or STR) | Property Class (A,B,C,D) | Property condition (Turnkey, Rehab) | Return Metrics (CoC, Pure Cash Flow, and more)
The above is the baseline criteria I run my investor clients through when beginning a property search.
Once the strategy is in place, we run properties through the criteria and place offers and negotiate on the best prospects in the market.
Real Estate Broker · Detroit, MI · Member since 2014 · 384 posts · 149 votes
4y
I suggest qualifying for your primary using a low down payment loan so that you can covert the rest to investable capital. Also, I suggest explore buying a 4 unit, living in 1 unit and renting the other 3. This could put you in a positive cash flow position which means you’re living for FREE!
My advice is that, sell a house full of cash out, go rent a property, and live in it. The key is to get all your cash out, invest in properties and flip them and make way more money quickly. Your smartest move right now is to buy, renovate and flip hole, profit out and buy and renovate it, flip it again because your markets are high right now, you can make your greatest profits. You want to get as much of that money out of the market as you possibly can. Pull to a cash position and go into lending or flipping, these are your best options. The market is going to correct and fall. don't buy a house right now. Do not buy multifamily.
You're at the top of the market and it’s going to correct and fall. I won't wait for the perfect deal. It's critical right now that you take your cash and put it into lending with people who are flipping. In the system, people are making 12% or 3.75 points which is 15.75 % of points a year on a deed, If you're going to be active in the system. Or you’ll get 20% of the equity share, so you do want to lend. With lending or flipping once, you're going to probably make 30-40% a year, if you're actively flipping and your full time.
It's really the simplest, smartest thing to do. Sell a house full of cash out, go rent a property, and live in it. You're not most of your money is going to go. Very little is going to go extra rent right now. The key is to get all your cash out, invest in properties and flip them and make way more money quickly. Why is the market headed up? That's your best strategy right now. You want to be in and out assets right now because we're coming close to the top of the market. We may be at the top, depending on where you are. We may even be headed down a little. Your smartest move right now is to buy, renovate and flip hole, profit out and buy and renovate it, flip it again because your markets are high right now, you can make your greatest profits. You want to get as much of that money out of the market as she possibly can.