Starting or Saving?

Question

I've been following and listening to a lot of experts on real estate investing (specifically BRRRR method) and I'm getting mixed signals as to whether it's better to buckle down and save a higher amount of capital before making your first purchase (something like $30,000 cash or more), or just starting with little to no cash just to get in the game. I've listened to Brandon Turner's The Book on Investing in Real Estate with No (and Low) Money Down, but I also read in David Greene's BRRRR book that seemed to imply using your own cash is the best way to scale and build wealth quickly. I don't want to be one of those investors who "runs out of money".

Looking for opinions of people similar to both Turner and Greene who started out blue collar and built wealth from scratch. I know there are pros and cons of both, but if anyone has advice that relates to the current market in 2023, that would be helpful. Thanks!

Looking for opinions of people similar to both Turner and Greene who started out blue collar and built wealth from scratch.  I know there are pros and cons of both, but if anyone has advice that relates to the current market in 2023, that would be helpful. Thanks!

Corby Goade · Answer

The current market is irrelevant. People have been asking this question since the beginning of time- there is no perfect time to invest or amazing deal that you'll miss out on. Taking action is the only thing that matters.

You didn't mention what method you are planning to use- that strategy matters if you want specific advice.

The bottom line is that everything is relative. When the market is "crazy" it may be more intimidating, but you can also make "crazy" money. If you think there is a crash coming and you'll be able to buy something for 50 cents on the dollar, you'll be waiting forever and be kicking yourself in five years for not buying now.

Finally- if you plan to buy and hold, as long as the numbers work today, the chances of regeretting any purchase in five years are almost non-existant.

Don't be afraid, the water is fine, jump on in!

Edward Zachary Samperio · Answer

Both approaches have their advantages and disadvantages, and ultimately, the decision depends on your personal financial situation and goals.

Starting with little to no cash can allow you to get into the game and start building your real estate portfolio faster. You can leverage creative financing strategies such as wholesaling, house hacking, or seller financing to acquire properties with little to no money down. However, this approach also carries more risk as you may be more vulnerable to market fluctuations and cash flow issues.

On the other hand, starting with a higher amount of capital can provide you with more security and stability, allowing you to weather downturns in the market and build a more sustainable portfolio. It can also allow you to invest in higher-quality properties that generate more stable and predictable returns. However, it may take longer to save up the necessary funds, delaying your entry into the real estate market.

Ultimately, the key is to strike a balance between risk and reward that aligns with your goals and financial situation. Consider factors such as your income, expenses, credit score, and overall financial health when deciding how much cash to invest upfront.

In terms of the current market in 2023, it's important to keep an eye on interest rates, housing supply and demand, and overall economic trends that can impact real estate investing. Work with a trusted real estate agent or investment advisor who can help you navigate the current market conditions and make informed investment decisions.

Nathan Gesner · Answer

Jenn, the truth is that saving money is a better option. Anything of great value in life (fitness, wealth, raising children, etc.) requires sacrifice and time. What seems to be a shortcut actually hinders or delays progress and is more likely to fail.

Increase earnings, decrease expenses, sacrifice, and save. Build a solid financial foundation and invest from a position of strength. Slow and steady wins the race.

You'll often hear investors brag about growing quickly, but many of them took risky loans and will crash when the going gets tough. Dave Ramsey had $4 million in real estate, $1 million in equity, and he lost it all because he built it fast with high-risk loans. I suspect we'll see that happen to many in the coming years as things shake out.

There are opportunities to invest with little money down but those opportunities are few and far between and should only be used if you know what you are doing and can handle the increased risk. Brandon wrote the book but he rarely uses those techniques himself.

Carlos Ptriawan · Answer

When new investor is asking this kind of question by following such guru's name like Turner , Greene or Michael Jackson , it just shows you are not ready.

Investor that's ready to invest in BRRR must know out of hands:1. the comps in your area2. which plumber you should use3. which insurance is the best4. where to buy kitchen cabinet for cheap.5. when Home Depot is selling their appliance for good.6. You can guess-estimate 80% of the rehab cost just by reading the property inspection. It's about "resourcesfulness" and not such "guru's name". If you have done and read 100 inspection report per month than I would say you may be ready, it's not about the money, it's more about the analytical and resources.

Alli Breighner · Answer

Hi Jenn!

I agree with Corby, there is no perfect time to invest. Taking action is one of the most important steps when getting started on your real estate journey.

Numerous investors hesitate to take action and wait for the "perfect time" when time and opportunities will continue to pass by.

Take action! That being said, you will want to make sure it is also financially responsible.

Nathan Harden · Answer

Yes, Capital is nice. But with inflation right now, saving money in the bank is actually just losing money in the whole scheme of things. There are ways that you can get into a property with low money down. You said you were interested in multifamily. House hack with only 3.5% down.

Keira Hamilton · Answer

Whether or not it's better to save and make an investment later or invest with what you have now really depends on your goals and what markets you're looking at. Generally speaking, real estate investments will appreciate over time, so any time that your money is not invested is time that it's likely not appreciating at the rate it could be were it put into real estate. Of course, that doesn't mean just throw all of your capital into one deal, especially if you want to make multiple investments in the next few years.

Have you done any research into particular markets yet? Do you have a sense of how much capital you would need to get your foot in the door?

Jennifer Dargento · Answer

Thank you!! I guess in hindsight I should have phrased it as more of a poll as opposed to "which is better".

Jennifer Dargento · Answer

BRRRR and/or multi-family.

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