newbie with a little cash - what to do

[Jon Lafferty]

So I have a bit of a dilemma without even begining my great REI career. Just a bit about me:

I earn an above avg income

Owe 245k on my personal residence (married 3 kids). No other debt.

My long term REI goals are to build enough passive income through buy and hold rentals to quit the day job. I really want to build a business that my wife and children will have the ability to join me in long term.

the dillema: I have around 40k in cash and am not sure where to begin. I'd like to stay within an hour of my primary residence while staying within the 30-40k cash deal. I am thinking SFR or duplex. Does it make more sense for me to pay cash for a property and pay in full or should I be looking to buy as many properties as I can for the 40k and leverage loans to pay the excess amounts.

example

SFR @ $40k - put 10-15k down and finance the rest through HML or personal loan - cash flow @ 200 / month

multifam @ 120k - put 20-30 down and finance the rest through HML or commercial loans- cash flow @ 100-200 / month

That would be three doors of cash flow and I would be out 40k in my cash. The plan was at this point level out, learn to landlord and a year later do a heloc or refi on these homes to leverage equity into new homes. Wash rinse repeat. Maybe this puts me at 6 rentals in 2 years and a decent cash flow.

Thoughts? Is this a newbie way of thinking this through? Should I wait and save more cash?

Thanks all

[Annette Hibbler]

Using OPM (other people's money) is always the better way to stretch (or leverage) your investment dollars and quickly grow your portfolio. I prefer to keep the mortgage portion below 50% that way I have the greater ownership but that is my own personal take on it and neither right or wrong.

There's nothing wrong with 25% down and mortgage the rest provided the numbers work to cover fixed expenses & payments and still leave you with at least $200 in cash monthly.

Keep in mind there are many other ways to invest in real-estate that are known as "armchair" investments too. Use a variety of investment methods and in several different market to diversify your portfolio. Staying in your backyard may seem "safe" initially, however, there are many good markets out of state that can prove lucrative. Just keep an open mind.