What would you do?

[Adam Eckhoff]

Hello everyone,

I'm looking to purchase my first rental property (preferably a duplex). I purchased a home back in 2020 for $360,000 (rounded). The home appreciated in value, to north of $550,000 (rounded). I currently have liquid savings of $70,000 I was looking to invest. 

Here are my thoughts: Do I continue to save and invest for the next 5-7 years; as such, I would have around $200,000+ saved, or do I just pull the trigger and purchase my first duplex (assuming a positive cash flow) for 80.0% of my current savings... I'm really in the mindset of investing in an index fund and building that up; however, I also want to own multiple rental properties... 

If you guys were in this situation, how would you proceed? 

Thanks,

Adam.

[Scott E.]

Well since you're on a real estate forum, most of us would probably choose to invest that $70,000 into real estate versus an index fund. A few notes...

-Even though I love real estate, it is good to be diversified. So if you have ZERO exposure to the stock market right now, I'd consider putting some of that $70k in.

-It's also important to have an emergency fund. And that emergency fund needs to be bigger the more properties that you own. So if ALL you have is $70k liquid right now, you probably want to hold back ~$20k in an emergency fund. Meaning you actually only have $50k to invest.

-Consider where you're thinking about investing. $50k wouldn't go far here in my market. But in St Louis you could buy 2 single family homes with that amount, putting 20% down on each.

No matter what you decide to do, don't rush it. Set a goal to deploy that cash within the next ~6 months. But do plenty of due diligence before you buy.