What would you do/suggest doing?

Question

Hi guys, first post here.

I want to get into real estate. I have 400k saved. I'd like to know what you guys would do to learn and make the most out of the 400k. There's so much out there I don't know. I'm still young but I don't want to become a broker or realtor since I like my job. I like the idea of doing a BRRRR. But I also like the idea of refinancing, selling, and 1031ing a new property. Itd be great if I could find like a partnership or something. Not even sure where to get started with that. I like most, the idea of learning the world, and also seeing if there's opportunity for me to make a move at the same time. I mean I don't even know about basic construction 🙄.  I'm also be open to taking book recommendations.

Thanks a ton guys.

TLDR; ideas for investing 400k(cash flow would be ideal), learning basics and intermediate info quicker if possible.

Bryce Jamison · Answer

Wow! 400K saved up, good for you!

The more you're on websites like this and the more you educate yourself by reading books, listening to podcast, and meeting new people at meetups the clearer an investing strategy that appeals to you will become. Finding a local realtor and discussing your goals with them can help you pick a strategy that's right for you too and they can help put you in touch with lenders to figure out how you want to finance your deals.

You didn't say how old you are, but if you're saying you're young and your income and life style have allowed you to save 400K you have tremendous room for error. I tend to be cautious though, so If I were in your shoes after I picked a niche I want to start with, learned how to run numbers to determine a "good" deal, and found a realtor I like and trust I'd start making offers on low risk, training wheels on properties. An example would be a LTR single family home in at least a B / B+ area that would have a mortgage that you can easily cover for several months if you run into problems. The more you do this the more about investing you'll learn and the more you'll better understand if you've picked the right strategy or if you want to pivot.

I don't think this will be an issue for you, but also be sure to keep a healthy emergency fund in case things go wrong.

Dan H. · Answer

My suggestion is to attend some local RE related Meet ups.  this may help define your strategy.  The Networking may allow you to find a mentor or a partner.

I want to iterate that residential RE is not passive.  It takes work even with the use of a PM.  It typically is not a get rich quick scheme, but the previous 10 years have made many RE investors a lot of money.

If you are looking for passive RE options, maybe look into RE syndications, NNN, REIT.  There is some risk, but good due diligence can reduce the risk.  There are other (Non RE) passive options (Stocks, bonds, mineral rights, crypto, etc) with various levels of risk/return.  I have each of the above except crypto.

Good luck

William Collins · Answer

Magi,

money without a strategy doesn't really help you. I would recommend doing some learning on a couple of fronts before you invest that money and anything other than potentially some bigger pocket glasses (which I am not affiliated with).  You need to define what your crystal clear criteria are. What are you going to do where are you going to do it and what is the outcome you're looking to have? I would immediately caution against any type of partnership. Until you have a better understanding of what you're trying to do you'd won't know which partner you could potentially be investing in that would align with your goals and not take advantage of your cash.

First, you need to set a goal of what you're trying to do with the money. Are you looking to invest in syndication and be part of the upside on a bigger lower hands-on investment? Do you like being a weekend warrior and want to do DIY renovations and do a value add live in flip. Do you want to have a vacation home in a different part of the world where you can earn money on the side in the time period that you don't use it?  I there are so many ways that you could go moving forward.

Second the one nugget you said is that you're looking for cash flow. Cash flow is the Holy Grail for everyone you haven't mentioned what your current living situation is. If you are looking at house hacking a multifamily for instance a quadruplex You could save money on your housing expenses which reduces your after-tax expenses. It also potentially could cash flow depending on your market see my first point that you don't have a firm strategy or a market.

I'm not advocating for analysis paralysis, but I think we need a little bit more information from you to help guide you.

First I would read Rich Dad Poor Dad, yep everybody reads it.  Second I would recommend reading The Cash Flow Quadrant which will help you decide where and how you want to make your money. Third I would read The Richest Man in Babylon which I think you've learned the lessons I've already. Those are foundational books the next thing I would do is read through the Rental Property Investing by Brandon Turner, the 30-day Stay by Zeona McIntyre, and Short-term Rentals Long Term Wealth by Avery Carl. This will help you set your crystal criteria of how you want to go through and achieve your cash flow goal through what strategy. Then I would recommend realistically looking at what market you're going to invest in. Yes, I know that's lots of homework but this is a measure twice cut once type juncture in our market where the high-interest rates and high cost of entry at this point make it more valuable for you to really understand what you're looking for and buy correctly.

Nathan Gesner · Answer

You like the idea of...

There are too many unknowns. Real estate is a great investment, but it takes work. It's not just an idea. You need to really dig in to see what it involves and then determine if that's something you want to pursue or if you prefer a different vehicle.

1. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by Brandon Turner or The Unofficial Guide to Real Estate Investing by Spencer Strauss.

2. Get your finances in order. Get rid of debt, build a budget, and save. The idea that you can build wealth without putting any money into it is a recipe for disaster and the sales pitch of gurus trying to steal your money. A wise investor will not try to get rich quick with shortcuts. If you can't keep control of your personal finances, you are highly unlikely to succeed in real estate investing. Check out my personal favorite, Set For Life by Scott Trench , or The Total Money Makeover by Dave Ramsey.

3. As you read these books, watch the BiggerPockets podcasts. This will clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes.

4. NETWORK!!! Get out of your comfort zone. Stop hanging out with your deadbeat buddies that spend all day drinking, talking sports, and otherwise wasting away. Go to BUILD YOUR TEAM at the top of the screen and look for local investors or meetups in your area. You can also find real estate investing groups through meetup.com, facebook, or a Google search. Birds of a feather flock together!

5. Now you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books for this or you can learn by watching podcasts, reading blogs, and interacting on the forum. There is a handy search bar in the upper right that makes it easy to find previous discussions, blogs, podcasts, and other resources. BiggerPockets also has a calculator you can use to analyze deals and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, it will be much easier to recognize a good deal when it shows up. Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice. It doesn't take long to learn how to spot a good deal.

6. Study the market. You can learn to do this on your own or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR that works with investors and knows how to best help you.

7. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. The truth is, you could read 100 books and still not know enough because certain things need to be learned through trial-and-error. You don't need to know everything to get started; you just need a foundation to build on and the rest will come through experience and then refining your education.

You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g. "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is a pretty forgiving world and the average person can still make money even with some pretty big mistakes.

Jerry W. · Answer

@Magi Sempai, welcome to Bigger Pockets.  You have received a lot of great advice here.  It would be hard for me to improve on most of it so I will take another avenue.  You first need to learn, which you are doing.  Knowing the market, rates of return, etc. are key to buying.  Next you need to learn how to manage or how to hire managers, then you need to develop the courage to take the first step,  Overcoming fear is one of the hardest things to do.  Then you need to develop the grit to hang in there even when it is scary, even if it gets boring, even when you just want left alone, you keep on going.  Most importantly you need to let yourself dream.  You need to tell yourself that you can do this and that you deserve to do this.  One of the biggest factors I had to overcome was gaining faith in myself, and give myself permission to succeed.

So get educated, work hard overcome your fear, hang in there, and believe in yourself!

Ian Ippolito · Answer

There are lots of way to invest $400k to earn cash flow. There's 2 main ways to do it. And I personally invest in both direct real estate (via residential rentals) and syndication/crowdfunding passive investments. In my opinion, both have their pros and cons and neither is 100% superior to the other. And I feel the ideal portfolio can benefit from the diversification of both.Directly owned properties are great because they give you maximum control and the ability to tweak them exactly how you want. So for example I'm very conservative and don't want any debt on them because I feel this hardens them in case of a severe recession. That's unusual and it would be very difficult to find a passive investment like that.Also direct control means you know exactly what's going on. And, for those people who have more time than money, they can put in sweat equity into directly owned real estate. This will increase the return above what can be obtained on a passive investment.The flipside of having the power to control everything is that can be alot of work (and a full-time job if you are putting in sweat equity). Not everyone wants that or is willing to put up with that. It also requires gaining a level of sophistication and knowledge that not everyone has the time, inclination or ability to do. And someone jumping into this as a complete newbie can expect that they have a decent chance of making some expensive newbie mistakes. On the other hand, one of the main advantages of passive investments (via syndication/crowdfunding) is that you can hire a manager who has years more experience than you can ever hope to obtain yourself. And once you finish the due diligence, your work is done: it's completely passive. Also, rather than taking a large amount of money and investing into one single directly owned property, you can split it up into much smaller chunks across many different passive investments. This can allow a person to get much better diversification protection across geographies, asset types, strategies, investment subclasses etc. Versus putting all the eggs into one basket.The downside is that someone has to be comfortable with turning over control to someone else. That means learning how to vet a manager. Not everyone can do that and not everyone feels comfortable turning over control. So it's not a fit for everyone. Also there is a management fee to pay for all of the above. So someone who is looking purely to maximize potential return (and has unlimited time) is unlikely to find this a good fit.In your case you said you like your job, and presumably you are making good money from it. So perhaps it may make more sense for you to lean more passive versus active. Ultimately that's something that only you can determine.Whatever you choose: good luck!

Bryce Jamison · Answer

@Magi Sempai your current goal is almost word for word what most people on this site say is their goal when they first join BP and start posting. Honestly, it's mine too, but I think you'll soon discover that even once you acquire enough properties that will cashflow enough to replace your income you'll still have work to do. Even if you have property managers take care of your properties you'll still have to watch over them to ensure they're managing your portfolio the way you want, you'll still need to ensure you're building the right business structure to protect yourself and ensure you're avoiding as much taxes as possible, and you'll still need to ensure you're curating your portfolio over time to adjust to an ever changing market and ensuring they're still meeting you goals. David Greene talks about this a lot and how everyone wants to sit on a beach sipping drinks. Yes this is possible, but it's very difficult, if not impossible, to be completely hands off.

Brett Deas · Answer

First you have to establish why you want to be in real estate, and then what the end goal is. Once you have those 2 things you will find certain strategies work better than others for what you want, But we can't answer this question without more details.

Aj Parikh · Answer

Hi Magi, I am a huge fan of out of state investing and Long Distance Real Estate Investing was one of the first books I read before I built my portfolio in Cleveland. One of the strategies I used was working with a couple of turnkey companies and getting started in a mid-west market. I would love to connect and help out so feel free to reach out.

What would you do/suggest doing?

Most Popular Reply