New here and have cash...what should I do?

Question

Been reading during the quarantine like a madman about all sorts of real estate investing.  I'm glad I found this site.  Been lurking a few weeks but now have a genuine albeit novice question...

My day job is a decent 6 figure salary.  I live however in one of the more expensive parts of the US.  I'm also divorced and pay a nice chunk of child support.

In order to rent a decent place until my kids are a little older (14 and 17 right now) I rent a 3 bedroom unit in a rental complex.  Its more than a mortgage.  But over the last 3 years my side gig has allowed me to pay for the apt.  Annually my side gig can bring me an extra 30k to 60k.  30 to 40 each year has gone to the rent.  This year I'm guaranteed at least 60k probably more from my side gig.  By August I potentially may have 60k in cash.  I'd need about 30k of it to live in this apt for another year (if I had to).  I can't make the same mistake and use it just to live here.  The other years I spent it on rent and the rest on trips and crap.  If this side gig ever dried up   I'm screwed.  I put into stocks, gold, and other paper investments.  But I want to do something with my excess funds and real estate seems to make sense.  I'm still learning and expect to make mistakes.  Whether it just creates some cash flow so I don't need to rely on my side gig or I can do more...I just don't know.  So what in your opinion should I do with at least an extra 30k, probably 10 to 20k more?. I can't squander it again.  Or even though it buys me another stress free year or two...it could dry up after that and I don't want to live year to year when I have that kind of cash on hand.  Any ideas would be appreciated.

John Warren · Answer

@Greg Pasquale you are personally positioned to follow either the house hacking strategy or the live in flip strategy. Either one allows you to put very little money down. The house hack strategy works great if the idea is to build up a small rental portfolio with very little out of pocket. The live in flip strategy can be great if you buy a mildly distressed place, add value and then sell after two years to get the profits tax free. A lot of your decision will depend on the housing stock in your area. Where I live here in Chicago, there are a lot of good opportunities to buy a 2-4 unit in a good area. Not so much in other areas where there isn't the right housing stock.

Anthony Angotti · Answer

One of my clients moved form Long Island to a bit further out of town to house hack.

Greg Pasquale · Answer

Anthony - Yes, it is a consideration for sure.  See my post above yours.  Since I am super new and still absorbing everything I have lots of questions and want to make sure I put my focus in the right spot that fits my situation.  I am going to start looking at numbers in my areas to see if hacking is feasible.  Long Island prices are high but so are rental units.

Anthony Angotti · Answer

@Greg Pasquale this will probably be mentioned a lot, but have you given any consideration to house hacking? It's literally the cheat code to personal finance in my opinion. My wife and I have done it 3 times moving from duplex to duplex and it's been a huge boost to our financial situation.

Greg Pasquale · Answer

I'm still new and still learning and would need to crunch numbers so forgive my ignorance but isn't price all relative?  Especially on Long Island.  Housing is sky high...yes.  But so is rent.  Couldn't I use an FHA loan, purchase a duplex or triplex and live in one of the units? (If the math works out).  Could always sell it in a few years if I'm able to force some appreciation into it also.  This isn't my final answer...just brainstorming still.  Alot to learn and remote investing is not out of the question.  Overwhelmed at all the different options I have with real estate investing so aside from 5 books and tons of research I've done you are truly seeing me on like day 2 of going public with my real estate journey.

Crystal Smith · Answer

Since this is a Real Estate forum I should give you a Real Estate answer but you live on Long Island and the last time I checked there's not much you can do w/ $30K there. (We have lots of family in NYC) I'd continue to explore stocks, bonds,.... paper investments that throw off cash and on the real estate side start exploring tax liens on Long Island. Study up on the rules for Nassau and Suffolk County, then see if you can either find a tax lien broker or how you can invest direct yourself. Dependent on location some liens throw off cash in excess of 10% per annum.

Alexander Bacon · Answer

@Greg Pasquale I just sent you a message. Long story short, I am new to this game as well and am planning on making a move with the same amount of cash ($30-40k) in about 3ish months. I would be more than happy to share the journey with you as far as what I am doing. Then you can have a good idea of how it was for a new guy to get involved on a play by play basis. Then, after about 6 months or so, you will have already (virtually) gone through the process. To be clear, I am not asking for any money or work from you, I could just explain my personal experience through here or on the phone for you to maybe ease some of the hesitation.

Greg Pasquale · Answer

Thank you to all.  This was all very helpful and encouraging.

Jaysen Medhurst · Answer

@Greg Pasquale, financing through your LLC would most likely hurt for these reasons:

• Financing will be more difficult as the lender will want the LLC to have a strong and profitable track record.
• You won't get as favorable terms since it will be a commercial loan.
• You're increasing your risk by exposing your property to your side hustle and your side hustle to your property. Generally not a good idea to mix different business types in one entity (there are varying opinions on this).

Nicholas L. · Answer

@Greg Pasquale in general, when you're getting started, it won't help or hurt.  Some hard money lenders will only loan to LLCs... but that's not because they give LLCs better terms, it's because they only loan to LLCs.  If you go for FHA or other house hack type financing you can apply as yourself - the trick there is you have to intend to owner occupy.

Yes, just @so and so and when their name comes up click it.

New here and have cash...what should I do?

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