Where would you invest $12K?

Question

I'm new to REI but have $12K to invest and really want to begin investing in real estate.

I know there are limited options but I'm open to investing in less desirable areas as long as vacancy rates are reasonably low and it's not in a war zone.

I know there are lots of areas where you can buy a single family home for $10K and rent it for $500+ per month creating a decent positive cash flow.

I've looked at Detroit and ruled it out. Ohio?  Rochester NY?  Georgia?

In my shoes, where would you make your first purchase?

Thanks in advance!

Loc R. · Answer

Charley,

Sorry I did not see your question earlier.  A Lonnie Deal is a Lonnie Scruggs type deal:  buy a mobile home dirt cheap from a distressed owner at a discount b/c you have cash, then turn around and sell with seller finance.  Seller finance allows you to command top price and top terms.

To the OP:  I wasn't aware that you were an out of country investor.  Depending on timeline, I would probably lean towards notes to minimize your travel.

Curt Davis · Answer

IF you purchased a home for $10k cash move in ready I would be scared of this investment as your rent will be lower then $500 per month.  You will have more maintenance, theft and vacancy then you would ever want.  This is not a smart move  for a new investor. You would be setting yourself up to loose bad.

It sounds like you want to buy a home for cash flow buy and hold, not to resell.  Use the money for a down payment on an average home that will rent for around $700 in the $35K range.

Max Drizin · Answer

I'd start in somewhere where you can make that money into your down payment.  Something seller financed if you want to go that route, you could probably stretch the money towards $50,000 in property depending on the seller.

Honestly, at those prices, you'll have an issue finding the deals that aren't in the warzones.  The sad part is that those sorts of warzone Section 8 areas can make you a lot of money if you get lucky, or they can be the death of you (quite literally) if you try to collect rent yourself.

Ann Bellamy · Answer

$12K is not much to start with considering that you are not local.  And if you don't have reserves on top of that, you can get in trouble.

Here are three possibilities

1.  Buy tax liens online, but only if you find a contact in the area where you are buying to do the due diligence boots-on-the-ground.
2.  Contact me for a teacher (Moderator:  not an affliate, just a referral) who teaches you to buy at tax sales, usually 5K-25K all in.  This is for cash flow only, the properties are unlikely to appreciate. But to do it effectively, you need to be boots on the ground again, so this is probably not your best option.
3.  Find a hard money lender who will lend out your money as part of a fund.

Chris Martin · Answer

Seller financing deals are out there, but good ones aren't necessarily easy to find. I'm not calling this one a good one, but as an example of what I am doing with my SDIRA and you can find from other SDIRA sellers (or high equity seller financing) if you look. Moderators: this is not an ad since this property is not available... and besides, the OP is not in my target market.

- SFR, ranch, rented for $855
- all fixup complete
- property management in place if needed
- sale is pretty much retail (about $65/sq.ft., so right about at valuation for the neighborhood)
- 5.5% fixed financing
- 10% down ($7,500), no lender fees, but prepaid insurance, prorated taxes, closing attorney 
- 10 year amortization

It's negative cash flow because the principal payments are $423/month and increase by $2/month. But the buyer owns it in 10 years... or buyer can refinance. Like others have posted elsewhere on BP, SDIRA owners may rather carry the note in their SDIRA rather than the property.

Jeff S. · Answer

In your shoes my concern would be in what happens after you make a great purchase. Will you find a great PM to take great care of your low cost investment where he makes almost nothing in fees?

Joel Owens · Answer

I can show you a house for 8k but they are in war zones and are not rent ready and would need thousands or more to be able to rent.

Then the units go missing and repairs eat up any cash flow a long with high taxes in the city of Atlanta.

On the 35,000 there are areas in my state where you can absolutely land a house in a good area with strong rents.

I am not buying those currently as I am bullish on apartments.

Joel Owens · Answer

If you are wanting to rent it for 750 you will not get a Hard Money lender.They make more money lending and churning fast to make more points and the interest is constant.

They are not looking for long term loans to investors.One company pays all interest to the investors that give to the HML and the HML keeps the points for themselves.So the more they do a new loan the more they make.They have no incentive to hold the debt long term.

Why not owner finance a duplex with some down?? If all you have is 12k for everything it will be tough.

Richard York · Answer

I've found a property that looks to be in a decent area, selling for $30K and will rent for $750.  With my $12K and a bit of hard money, I could swing it.  Any leads on reasonable hard money lenders?

Richard York · Answer

What about seller financing?  I've looked into hard money loans but the charges are crazy.  I don't mind higher interest rates but having to pay a lot of cash on top of the down payment kills any deals that I've found.  What are the chances of finding seller financing with reasonable terms on a reasonable property?

As far as cash reserves, I would have a line of credit for unforeseen repairs if needed.  $12K is what I have to put in at this point though.

Where would you invest $12K?

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