Just starting out..how to invest $50-$75K?

Question

I would like to start my REI and not sure how to move forward. I have access to $50-$75K to start. I own my own home for the past 15 years. Have 780+ credit. I am self employed though so not consistent income.  I'd like to get into a duplex or something, but don't want to live at the property. I'd like to invest in my own area (So Cal), but if not feasible I'm willing to find something out of state. Also I am open to either start doing wholesaling too if that gets my feet wet and start bring in some cash. My goal is to get good cash flow and  possibly flip short term to cash out. I

Travis Biziorek · Answer

Hey Khu, I live up in the Central Coast of CA but invest in Detroit. I have 12-doors there and am very active in the market outside my own stuff.

We're typically doing cash BRRRR's in the $75k-$95k range right now. That's buying something for $50k-$60k and putting another $20k-$30k into rehab. The properties are in solid C class areas that have potential to transition to B. So staying out of D class.

My point is, if you were looking to do something similar you have just enough to do something like that. A bit more and your options (in terms of deal flow) open up significantly.

All that said, if it makes sense for your goals you should absolutely stay local. But I know how hard that can be for us Californians :-)

Happy to help more or send some Detroit specific resources if you'd like.

Jason Wray · Answer

Khu,

You can easily get into more than just (1) Duplex 2 unit with $50K to $75K in cash reserves.  My biggest piece of advice would be to focus out of the state of California.  May states ca provide a good return/cash flow on a purchase price of $175K to $300K.  Now those prices do not exist in Cali for the most part but in states like OR, AZ, IN, OH, FL, TN they do in many counties.

Most of my investors who live in CA buy in those states above just to avoid the taxes, HOA, and over priced homes.  Buying out of state can seem a little out of your comfort zone at first until you see it can be managed.  You also do have to always hire a management company there are other options.  For the most part you can buy a home that needs a little TLC or a home that is run key.

I would rather buy a duplex for $200K with solid rents versus a $800-$900K duplex in CA.  even with higher rents once you calculate in the taxes, insurance and PITI based on the price its little to No cash flow.

Alfath Ahmed · Answer

Hey Khu! I recommend looking into the Columbus market. A lot of out-of-state investors from the east and west coast are investing here due to the crazy growth over the last 3-5 years. Columbus has become a major tech hub in the Midwest with large companies like Intel investing $20 billion, Amazon investing $3.5 billion, Google building 2 new data centers: one in downtown Columbus and the other in right outside of U.S. 33 in Lancaster.

I would work with an investor-friendly agent who focuses on cold-outreach methods like cold-calling, cold-texting, etc to bring you off-market deals. That is where you will be able to buy deals that are 70 to 80 cents on the dollar.

Zeke Liston · Answer

I don't know much about your market, but from what I've heard, you likely won't be able to find a property for $ 50K-$75 K (I could be wrong). I would consider OOS investing.

Jimmy Lieu · Answer

Hey Khu, I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!

Zeke Liston · Answer

Hi Khu, if you wouldn't mind moving, I would suggest doing a house hack. If you'd like to stay put, I would look into a DSCR loan and potentially invest out of state. Ohio has some great options.

Michael Smythe · Answer

@Khu Far everyone wants to wholesale - until they find out how hard it actually is!

You typically fall into a deal or two at the start, but then you have to really go to work to keep it going.

Biggest mistake most investors make is assuming all properties perform the same, regardless of location, tenant pool, etc.

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

When investing in areas they don’t really know, investors should research the different property Class submarkets. If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

Here’s our OPINION for the Metro Detroit market (always verify each area for yourself!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

What else can we assist you with?

Caleb Reits · Answer

Absolutely, here's a draft response:

I appreciate your insights, and there's definitely a lot to weigh here. I do believe, however, that wholesaling, when approached correctly, isn't the toughest part of real estate. It does come with its own set of challenges, of course, and I agree that the market in Calif can be highly competitive.

I see where you're coming from about wholesaling and flipping, especially for someone just starting out. The risks are real, and the need for caution can't be overstated. That said, I think with the right strategy and a bit of patience, there are ways to navigate even a tough market successfully.

Your suggestion about looking into duplexes in out-of-state markets is a solid one. Using the funds for a down payment and some rehab, followed by renting it out, seems like a prudent approach. The DSCR loan program does sound like a fitting option for someone self-employed.

I’m on board with the idea that real estate is more of a 'get rich slow' journey. Quick gains can be tempting, but they often come with higher risks. It’s the long-term commitment that tends to yield meaningful returns. Thanks for the honest advice! It’s a good reminder that real estate investing is indeed a long game, but one well worth playing.

Lyn N. · Answer

Hi Khu,

If you haven't already, I'd suggest attending REI meet ups and events. Even if they're SoCal local meet ups, there should definitely be some out of state investors or people similar to your situation. Maybe you'll pick up ideas along the way and have a clearer idea if you want to wholesale and/or flip. As for self employment, there are other financing strategies as well! You can check out hard money lenders and private money where they focus more on the deal itself than your employment.

Tim Ryan · Answer

Hmmm. This is a lot to contemplate. First, you have 50k to 75k and want to invest in Calif - that's going to be tough. Secondly, you'll be interested in wholesaling (which by the way is the hardest thing to do in real estate investing), and finally, you are open to flipping houses (which is the best way for a newbie to lose all of their money).  Sorry to be so brutal and (actually honest).  My advice is find an out of state market where you can by a duplex. The funds you have to be a down payment and some for rehab to rent the property. Use the DSCR loan program since you are self employed.  And here's the kicker: "this is a get rich slow scheme". Don't think about making a quick buck. That's how you lose. Real estate is a long game. And will pay off - in time...

Just starting out..how to invest $50-$75K?

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