Seeking Guidance: Best Ways to Utilize $20k in Today's Market - Opinions?

[Phil Avery]

Hello to all, I hope you'll indulge me as I ponder some thoughts and seek the collective wisdom of the infamous BiggerPockets community. I'm on the hunt for general insights about optimizing a limited pool of resources ($20K)  in the current market, which, as we all know, is filled with complexities and various angles to explore. Here's what's on my mind:

1. Considering an FHA Loan for Primary Residence: Since I don't own a home and am presently renting, a 3.5% down payment through an FHA loan is appealing, even though it does mean higher monthly installments. My dilemma is the conflict between buying a place I'd enjoy living in versus something that makes for a solid investment. Should I consider converting it into an investment property after a year?

2. Acquiring a Duplex with an FHA Loan: This option would involve renting both units after a year, with the hope of a small positive cash flow. The fact that I might continue renting elsewhere doesn't bother me, provided the duplex doesn't drain my finances.

3. Aiming for Lower Cost Properties ($80k-150K): Going for a conventional loan on an SFR in this price range is tempting, but the difficulty in achieving cash flow in the current market makes me uncertain.

4. Exploring Distressed Properties (Foreclosures): Is it wise to hunt for under-market-value properties and handle title issues myself to boost profits? I recognize that I might need a partner, as full payment at the time of sale is typically required.

5. Holding Off on a Purchase: This option means continuing to analyze deals and building up my buying power for a 25% down payment on a pricier investment property. My hesitation here is the concern that I'm stalled and not moving forward.

6. Focusing Solely on an Affordable Primary Home: I could look for a reasonably priced home without considering profits and then save again for a second property purely as an investment, thus having more flexible criteria.

With these options in mind, I'm eager to hear your opinions on the most prudent entryway into real estate investing. If you have suggestions beyond these, particularly regarding what might be achievable with $20k, I'm all ears!"

~Phil Avery

[Ricardo R.]

@Phil Avery nice break down, okay here are my thoughts:

1. If it's that pressing to move and you are still serious about investing, then yes, I would aim for a property that you could would meet 80% of what you want in a home and that would still meet your investment property criteria (most of your home criteria will likely overlap those for a rental too, BUT not all) - I don't prefer this option

2. I like this option best out of all the ones here because it give the most options with the most immediate impact: A) You can move in one side or continue renting (depending on your rent vs. your rental unit's rent) ; B) You can still attain 'normal' financing with favorable terms i.e. FHA ; C) If you live in it you can 'monitor' and 'go to school' learning the ropes of your investment; D) If you don't live in it you'll have more cashflow

3. SFR's are 'king' in the 1-4 space meaning that almost everyone will seek to attain or move towards an SFR - tenants included, they are more stable and they are also much easier to exit as compared to a duplex while still holding value for ex. you would sell an SFR to an owner occupier whereas 2-4 units you would sell to someone that is trying to be savy and possibly hammer your down on price. Also SFR's can be treated like a portfolio of multiple to units to mimic 2-4 units - HOWEVER, it still think a duplex, or 2-4 unit for YOUR situation is still best at this moment, because it does allow you check off almost all of your personal, financial and investment boxes.

4. Yeah you should keep your eye out for it but you should also pursue other routes the danger with this one is that you will just keep spinning your wheels while not getting anywhere as you watch the world pass you by.

5. Nope, don't hold off... time in the market ALWAYS beats timing the market, I know it's cliche but I have lived it and its so true. Go back two years and some people would prob tell to 'hold off' until covid rent restrictions real estate keeps plummeting, then 'hold off' until the market cools prices are going up, then 'hold off' rates are going up..... buy now, screen your property and ensure it cashflows and don't look back.

6. Same as #3 and #4 - still prefer 2-4 unit option. 

I hope this helps.