New member with 20k capital looking to invest out of state

[Vuthy Seang]

Hi!

My name is Vuthy Seang and recently discovered Bigger Pockets. It has changed my whole mindset about REI. I never thought it would be possible to do what I hear others have been doing.

I have been listening to as many podcasts as I can on my drive to work stuck in traffic and reading David Greene’s book on long distance investing. As much as I would like to invest in my hometown of Long Beach, CA, it is just not possible for me at the moment. So I am focusing on investing in an out of state market.

Currently looking at the Memphis, Kansas City, Oklahoma City, Detroit and Cleveland markets. Unfortunately I only have about 20k capital at the moment. Is it even possible to get started with that amount? I can get more if needed. I have a credit score around the 800 range, no debt other than my credit cards which I pay off every month and low living expenses currently.

I would love to connect with property managers, real estate agents and contractors in the cities I mentioned. So excited to begin this journey with you all!

[Daniel Kong]

Debt free with 20k, and an 800 credit score. Thats a good place to start out! It looks like you might be able to buy a turnkey from somewhere that has lower priced properties. Just a few tips starting out that you might find helpful:

1. If you are planning to put down 20% on a house, you will probably pay about 4k in closing costs on top of that. So if you want to buy a house for 100k, and put down 20%, you will need about 24k in cash.

2. Most banks won't give you a loan under 50k, though there are many who will if you look hard enough. However, you pay the same 4k in closing costs on that 50k loan.

3. Most lenders will require you to have additional cash reserves beyond the 20%+closing costs to cover potential issues (like no tenants or repairs), and still be able to make the mortgage payments. 

4. You can't use borrowed funds for any down payments or cash reserves (Lines of credit/loans/friends/family). However if you borrow money and it sits in your bank account for 2 months, then it is considered "seasoned" and the lender wont ask where it came from. 

Just a few helpful tips as you start your journey!! :)