125k to invest, where to start?

[Brendan Bouffard]

Hi everyone. I'm generally new to this community but have read a few bigger pockets books and have been interested in REI for years. My wife and I are currently digital nomads and we have about 125k that we saved up and can invest. If you were me and just getting started, what would you do? We have transitioned from past careers and are in a place where we have the time to do this as an active investment. We don't need to be rich by any stretch, but it would be nice to eventually own enough rental properties to live off a modest passive income and start growing a decent portfolio. A few specific questions: is it even worth starting right now with the market so high and headed for a down cycle? How would I go about finding a way to get the most out of our cash and finance our first few deals without needing 20% (it took a long time to save that 125k and saving another batch isn't going to happen lol)? When average families can't even find a house to buy for themselves at a decent price, how on earth are people finding deals that are 20-30% under market value after rehab costs? And finally, a random one, we split our time between Puerto Rico and Michigan right now, how are those markets? I know this is a huge rambling question, but I just thought it would be nice to get some general responses about what other experienced investors would do if they were in my shoes! Thanks!

[Paul V.]

Welcome @Brendan Bouffard!

A couple of initial thoughts from someone who takes a long term approach to wealth creation with RE.
What is your primary residence situation? Do you own? Rent?  If you have flexibility on your primary residence you might want to look into this strategy: 
1. Buy your primary residence as owner occupant with a low downpayment (5% down?)
2. 1 yr later purchase another home as your primary residence with a low downpayment (5% down).  Convert your home from #1 to a rental.
3. 1 yr later purchase another home as your primary residence........ You get the picture.

If you are buying in a healthy market, after a couple years, the first properties will have built up equity at which point in time you could do a cash out refi.  This would provide you with a return that should significantly outperform what you would get in the stock market.  When you have enough equity and need cash flow then you can sell these properties and 1031 them into income focused properties.

Hope this helps.