I have over 75000 saved. What is the most efficient way to start?

Question

Hello,

Late last year my father and I decided to partner up to pursue financial freedom. We agreed that he would provide the funds and I would do all the work regarding looking for deals etc...

We have over 75,000 saved but don't know exactly how to approach our first deal. I was thinking about using the " Stack strategy" were we would buy 1 property per year and every year double the amount of units we had the previous year. I know that with this strategy it would be a great way to learn as I go.

With a good amount of funds available Im having a hard time figuring out  if i should leverage and use that for a down payment for maybe a 4 unit multi-family home or bigger and just start of big. ( still searching how big i can go with 75,000 down payment) or just buying a SFH all cash and make it a rental.

Would love to see what you guess think and maybe some advice on what i should do.

Thank you in advance for taking the time to read my post.

Frank Wong · Answer

Hi Randy,

With about $75k you should be looking at properties priced around $180-200k.  That is what that amount is budgeted for.  That will allow you to put 30% down which most lenders will require for investment and leave you money for reserves.   Now you know how much you can afford you can focus on what is available for sale in the areas you want to invest in.

Most important is how to evaluate the price of a property.  That, in my opinion, is the most important step.  You might be able to find a lender for 25% down.

2nd time I've heard of this "Stack method" its great in theory but I don't think its correct and will work in the real world.  Just think about it? At some point, you will run out of money and market dynamics change.  You also need to understand risk management and leverage before growing multiple units.  Hope this helps and good luck.

Frank Wong · Answer

The problem with the stack method is having a deal be properly leveraged.  I see so many people BRRR but the refinance kills their cash flow chasing another property.   I like my own STACK method.  Buy a undervalue home rehab it and increases my cash flow.  Take the cash flow and save money from my primary job and stack cash for my next deal.  That's a real-life STACK method.  Stack cash and wait till the pile is big enough to buy the next property.  No timeline.

John Boychuk · Answer

I would recommend you start reading books on investing. The saying goes, "It is easy to make one million dollars, if you start with 10 million." Don't rush to purchase a property. Make sure you analyze it and it cashflows after budgeting out for repairs, capex, vacancy, utilities, tax, insurance, P&I. Depending on your market, cashflow may vary, but I don't buy anything that doesn't cashflow atleast $700/m.

The biggest headache you are going to have is tenants. Definitely go to your local landlord/REIA meetups, and find someone that is willing to mentor you. Tenants can make or break your business.

John Boychuk · Answer

I apologize for being so broad with my 700 cash flow example. Those are duplexes in my market with a purchase price between 50k-70k in C area neighborhoods.

Randy Lavaire · Answer

@Thomas S.

I really appreciate the honesty Thomas.

Part of asking the question was to possibly see what some opinions were from fellow members.

Will definitely sharpen up my finance knowledge before I start investing.

Thomas S. · Answer

Based only on the content of your question I believe you are not yet ready to invest.  Part of the financial education you go through will result in you being able to answer your own question. It's all about the numbers and it is education in finances and real estate investing that provides the answer. Numbers, it's all about numbers not opinions.

Bottom line is if you have to ask you are not yet ready.

Randy Lavaire · Answer

@Dorian Wood

Thank you for your advice , will definitely implement it.

Randy Lavaire · Answer

@Frank Wong

Thank you so much for you feedback it helped so much.

Dorian Wood · Answer

Hi Randy, Congrats on taking the first step towards financial freedom. I think the first thing you should do is continue to educate yourself using books, podcasts, BiggerPockets, etc. Then I would find a local mentor in your area that is doing what you want to do. I think if you want to reach financial freedom the fastest you will have to buy great deals and using smart leverage. I also would use the BRRRR strategy, this will allow you to use your same $75k on multiple deals. I hope this helps.

Randy Lavaire · Answer

@John Boychuk

Thank you so much for you advice appreciate it.

I saw you mentioned you look for properties of at-least $700 in cash flow. Are does Multi-Family homes or SFH ?

I have done a-lot of studying and learning from books. You are definitely right about finding a mentor to learn from. I feel I see alot of how to start investing with almost little to no money but I cant find much on what to with alot saved especially for a newbies that are looking for financial  freedom .

I have over 75000 saved. What is the most efficient way to start?

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