How to Start off in Real Estate with $20k

Question

Hi I am a 22 year old and I currently run a fairly successful clothing brand and I do that full-time. I want to expand my business portfolio by breaking into the real estate business. I just don't know how to start off with $20k. I know that I want to buy property in Phoenix or Tucson. The population here is growing since a lot of Californians are moving out of California to AZ, TX, and other more affordable states. Plus Tucson has a very popular University. Please if anyone has any advice on how to start off with $20k I would very much appreciate it. Currently im thinking of just taking out a mortgage and buying like a duplex or a house and just renting it out? Is that a good way to start off or would you start off differently?

Ty Ash · Answer

Hi @Jesus Ramos!

A few other members have already called this out but definitely look into getting started with a house hack. I think that you'll also find a lot of value in listening to the BiggerPockets Money podcast to learn more about financial independence. It sounds like you're already well on your way but they (@Scott Trench and @Mindy Jensen) consistently talk about the 4 key levers in personal finance. Earn more, spend less, build a business, invest in assets (real estate fits into the last two levers but you're also working on your apparel business as well).

Next steps for you are to keep learning (Read Set for Life), interview a few investor friendly agents, and start analyzing deals that fit in your purchase price!

Best of luck, definitely keep us posted on your progress!

Marshall Leipprandt · Answer

@Jesus Ramos I would try to buy a duplex or a house like you mentioned, but would house-hack meaning that you would live in the property yourself while renting out the other units or bedrooms simultaneously. There are some good loan options for doing this that will not require a 20% down payment since that wouldn't get you very far in a market like Tucson.

If you use an FHA loan (3.5% down) and plan to live in the property as your primary residence, that $20K can go much further, although I would try not to use it all if possible so you can keep some cash on hand for issues that may arise at the property. Probably your main issue will be qualifying for a loan since you appear to be self-employed and lenders will be looking for a strong history of verifiable income. Doesn't mean that you shouldn't try, just something to know going while you start your research and communicating with lenders.

Many on BP will agree that house-hacking is quite possible the best strategy to getting started in real estate, particularly at a young age where there is so much to learn. Managing a property yourself will be a great introduction to the fundamentals of owning property and will be a spring board for scaling in the future and tackling bigger deals.

Travis Smith · Answer

@Jesus Ramos you are way ahead of me when I was your age.  At 29, I was having the same struggles to 'break in" to Real Estate and get started.  My three brothers were also at a similar crossroads in their life journey and ended up forming a multi-membered LLC and started to pool funds so we could get over the initial capital barrier of entry into Real Estate ownership.  But just as important as getting over the capital threshold was getting over our lack of confidence and know-how as individuals.  Doing it as a Tribe was the key for me and my brothers to get started.  12 years later we have a pretty impressive portfolio and it has changed the trajectory of our family's wealth journey.  Dare I say we've achieved financial independence via our Tribe!  Anyway, it only makes sense if you can find tribe members that are in similar situations and you know, like, and trust them.  With fintech platforms, it's never been easerier to Tribevest!  Give it some thought and let me know if you have any questions.  Always happy to share my experience in the collaborative investing category!    Cheers, Travis

Lane Aakhus · Answer

You may want to consider purchasing a place and house hacking for a few years while you build up your business and reserves. You could also consider taking on a partner.  Best of luck!

Chris Seveney · Answer

@Jesus Ramos

Start off as the bank and do private lending or buy a mortgage note. That can be done with $20k easily.

Basit Siddiqi · Answer

Closing costs are likely around $5,000 which leaves you $15,000 towards a 20% down payment. This will allow you to purchase a $75,000 investment home.

Bradley Dosch · Answer

Hey Jesus, that's pretty neat you have a successful clothing operation going. Definitely continue focusing on growing that! Your idea you mentioned at the end of your post is perfect. Buying something to live in and then renting out the extra space is a great way accelerate your wealth!

Andrew McGuire · Answer

@Jesus Ramos

That is enough down payment to get a fixer and house hack it. I would save another 10-15K for closing cost and reserve, something always goes wrong when you buy a fixer....

How to Start off in Real Estate with $20k

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