Saved up $15K... What do I do?

Question

I'm a newbie investor who has educated himself through books. REIA meetings, and Biggerpockets podcasts and blogs.

I've been able to save up $15K and I am ready to take action.

I am interested in two niches specifically.

Wholesaling for instant cash flow and small multi-family/single-family for appreciation and long term cash flow. Then finally apartments.

I am in the Houston market which is on fire right now

My question is for seasoned/experienced investors. What would you do if you had $15K to invest?

Gilbert Dominguez · Answer

The first thing I would recommend is that you continue to save until you have $20K. Then you can look around for a 4 plex thinking you will use a 203K loan which will provide you money to purchase and fix up a place. I am thinking you will want to buy something under market cost so you can work on it and gain some sweat equity in the place.

However before you do anything carefully consider how much you can afford to pay each month for a loan. Better if you can afford to pay a loan all on your own but you can also consider that if you buy a 4 plex you can use the rents to help you pay for you loan.

You would analyze a property so that you are sure it will cash flow meaning if will leave you a net profit after all your expenses such as your monthly mortgage payment, insurance , PMI, and maintenance costs. If you will use a property manager then add that cost in your determination of net profit as well.

Do not be a afraid to actually calculate what all of your expenses will be and to determine your net profit or cash flow as we call it.

I would not spend every penny you have saved up on your very first deal. Always try to keep or build up a cash reserve. Do not stretch yourself thin when it comes to finances.

It was suggested you might partner up with someone and I think that is a good idea although partnership can be difficult in and of themselves still there is safety in numbers.

I know its not the same as owning a piece of property but you might consider investing your money with far more experienced people maybe doing a fix and flip. Get as involved in that process as you can so you learn how these construction projects go and what all is involved including observing what can go wrong.

Its sorry to see that allot of people get in over their head right from the start and then it becomes increasingly difficult to be a real estate invest and enjoy it.

I always recommend to people that if they have 10 dollars they spend 3 working to earn the next 2 dollars because if you spend all you have and things do not work out well for you then you expose yourself to a hard experience.

Yes wholesaling is one thing you can do but its not fee either and you have to work very very hard at it. Its allot harder to succeed at wholesaling than allot of people think and to be effective you do have to spend money for marketing materials and your marketing system in general . It takes time to break into the industry no matter what your strategy is.

Some get lucky but do not count on luck just work hard at it and in time you will develop your business. I am simply saying all this to give you things to think about and consider. Its not my place to tell you do this or that or do not do this or that. I am just watching out for you in my own way for a distance.

Darius Moody · Answer

I'm in the same boat as you my friend. Saved up a great amount and looking to dive in. I figured I'd get started in multi's first. I found that it would be a good idea to us a FHA loan to get a 4-plex, live in one unit, and rent out the rest. I figured that's the best way to start out for me. It only requires a 3.5% downpayment which is great, but you have to pay PMI, which really isn't a big deal. To me this is a great way to get started, while at the same time you can be wholesaling.

Definitely worth your consideration, this may be perfect with your 15k.

Definitely worth your consideration, this may be perfect with your 15k.

Frantzces Lys · Answer

Hi Account Closed

First congrats on your savings! It takes a lot of discipline. I'm also a newbie therefore I'll be watching this post as well. From what I've been learning it's important to remain focus on one niche (which I'm learning to do). You can take that $15k and find some owner financing deals (which aren't that easy to find but they are out there). That could help you build your portfolio. But if it's instant cash you want (and I use the word instant very lightly) then that's what wholesaling is there for. But you would have to be ready to dish out $1k per month for possibly 1 or 2 deals (depending on your market of course) but that one deal (again depending on your market) can net you $5-10k. But wholesaling is very difficult, you put a ton of money out there.

If I had $15k (to finally answer your question). I would probably partner with someone to do a rehab. And funnel a portion of that into my wholesaling business and then continue to recycle the money through investing strategies such as wholesaling. Wholesaling should always be done in the background especially if you are wanting to build up some capital.

Good luck!

Nhrai Jordan · Answer

@Darius Moody PMI can be an awfully big deal if one gets stuck paying for the life of an FHA loan, regardless of appreciation. Check to see if and how long the loan has to be 'seasoned' before you can refinance.  One alternative may be to pay an extra point so you're not stuck paying PMI.

With that said, Account Closed FHA loans aren't a bad thing, especially if they make you an instant landlord. Just focus on your goals of cash flow or appreciation and do your due diligence when it comes to loan terms.

Good luck!

Account Closed · Answer

I will evaluate all the suggestions given.

Thanks! @Brian Gibbons @Gilbert Dominguez @Nhrai Jordan-Ferguson @Frantzces Lys @Darius Moody

Richard Spooner · Answer

You can do a lot with 15k..

http://investfourmore.com/2013/10/how-to-make-one-...

Brian Gibbons · Answer

Wholesaling takes 4 to 6 months of constant marketing to really get reasonable results

Think about being a private lender to people that need to do rehabs, free and clear  properties, get a private first Deed of trust and note payable in full in 4 months, earning 10 percent annual interest

So in 4 months you earn $1000 on $10,000 or 10% in 4 months

That's a 30% APR

Go to your REI associations and let them know that there's 10,000 to 15,000 available for rehabs in first position payable in four months

With notes no one is going to sue you like owning property and a tenant getting a hungry lawyer

Good luck!

Saved up $15K... What do I do?

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