Working with $200k-$300k Cash

[Paul Berard]

Good afternoon Bigger Pockets forum. This is my first post, and of course I'm looking for advice. My wife, and I are taking the plunge into real estate investing, and I wanted to consult like minded individuals on a couple key items.

1) Location, location, location. I am fully aware that location is of the utmost importance. We have narrowed down are search to Austin, and Nashville. Both areas seem to be booming, and could quite possibly offer a good ROI. We would be investing long distance, and I wanted to mitigate as much risk as possible. Between these two locations which offers friendlier landlord laws, and the best opportunity in these uncertain times?

2) Price Point. In either location is 100k per unit doable?  I would prefer to purchase a couple units in cash instead of getting financing. I understand loan rates are currently at an all time low, but I feel safer about this strategy. We are not risk adverse, but once again mitigating as much risk as possible. I would like to try to find a multi family, or a couple houses that need minimal work. In either location is my goal possible? I want to go after steady cash flow vs appreciation over time. In the next five years I will adjust my strategy to incorporate appreciating houses, but I need to see the housing market even out.

I want to thank anyone that takes their time to respond. I understand time is money, and you spending even a minute on me is a blessing. GOD BLESS. 

-Paul B. 

[Greg Scott]

Paul:

Good luck on your journey.   I had a few reactions to your post and am hoping to help.

Buying a property for cash, no mortgage, is a bad idea. First, it absolutely destroys your ROI. Second, it makes you a target for lawsuits. Third, it concentrates your risk in a fewer number of properties. (e.g. if you have two properties and one gets hit by a fire, it is worse than if you have 6 properties and one gets hit by a fire) With debt, you improve ROI, reduce lawsuit risk, have a greater number of properties to reduce other risks.

Austin is a great MSA.  Be careful of Austin proper, as it has enacted several tenant-friendly laws that will hurt returns.

Also, if you restrict yourself to $100,000 properties because you don't want a mortgage, you are basically forcing yourself into either bad parts of town, very small properties that will be hard to resell, or your are going to have to buy pieces of junk that need a lot of work.  You will have a harder time finding nice properties, of typical size, in middle class areas that are in good shape.