What can you do with $10,000?

[Chandler Williams]

Hey investors!

I'm a total newbie, so bare with me here. But I've read a few books this past year on various real estate investment strategies. I've been analyzing deals all over the country for the past month or so.
I've also been saving up some cash over time and have been trying to decide the best way to use it.

But I guess you could say I'm in a state of analysis paralysis LOL.

I know $10,000 isn't a lot of cash to work with, but I wanted to challenge the minds of some seasoned veterans here and ask what they would do if they only have $10,000 to invest starting out.

Since I don't own a home yet, I'm leaning toward a house hack with a 5-10k downpayment to get started. That strategy seems most feasible for me. However, I'm curious to see what others would do if they were in my situation.

Thoughts? or creative possibilities?

I look forward to reading your responses.

[Drew C Grossman]

Hi @Chandler Williams… welcome to the real estate world!

There is a million ways this question can be answered and it really comes down to your goals and expectations on what you want out of this? Find out what is realistic, what fires you up and formulate a strategy based on the resources you already have. 

It’s sounds like you have limited capital at $10,000 but may have the time/energy to put a deal together? Assuming you have the drive, capability and desire to be more of active investor/player this is what I would do if I had $10,000 to start out.

I would first get really really good at underwriting deals …and then find a property that has a 25% amount of equity upside in the deal day one and also a combination of healthy cash flow that can support the property DAY 1!!!. This is where you can go down the rabbit hole of where to find these deals…different philosophies and what is even realistic ect…this is super market specific and a whole conversation of itself….however still very possible as this is how I started out. Most important thing is to build a base of education to know what even exist out there? Don’t be a tire kicker that doesn’t know what’s realistic and looking for a fairy tale. This knowledge is essential 

Assuming you source a good deal (with multiple potential exit strategies), I would then bring in a capital partner to fund the down payment or Property acquisition…and get some sort of sweat equity (depending on your experience and value brought to table) and then invest the $10,000 you do have into the deal itself to add your stake, add some skin to the game and align your interest with your capital partner. Although it won’t super easy to find a capital partner, it will be easier than finding a good deal! Once you have a good deal, everything else will fall into place. Hard work will pay off. 

Here is a realistic example of what's achievable in my market for your situation. You could find (with good amount of work) a new construction build for under 200k using cash and source a good deal…bring in a capital partner with $190k…you add $10k of your own money and get 5% equity + 5% equity for sourcing the deal for a total of 10%. Now you have a brand new property that has no mortgage, rents for $2,000 a month with $300 a month in taxes, insurance ect…profit $1,700 a month. You're investor makes close to 10% cash on cash if you keep all your money in the deal…however if you do this process right you will have equity upside after closing on the property snd then can decide if you want to refinance ect based on your business plan. Again…multiple exit strategies. Using this example, with an ARV of $250k you could refinance out 65% …get close to 160k out of the deal recovering most of your partners capital while still having 35% equity in the property and having positive cash flow.

I hope this example helps and best of luck on your journey!