Updated about 5 years ago on . Most recent reply
Getting started - sold our home, time to invest profits
Hi BiggerPockets fam!
I'm looking for some advice and input on where to start. I'm new to the forum & podcast, but I've been listening to as many episodes as possible. I've always had an interest in real estate, but the BP podcast made me realize that property investments are actually possible on my income.
Background:
- Bought my first home with my wife in CA 5 years ago, it's currently being sold and is in escrow, it should profit over $100k on the sale.
- I'm moving near Pensacola, Florida, we're currently in escrow for a smaller/cheaper house for $265k with 5% down.
- Current savings around $25k.
- Debt is a single mortgage ($265) and a single auto loan with $25k balance @ 3% apr.
- Spouse owes $15k in student loans.
- Income: $85k/yr
- Credit score: 800+
Based on the podcast, it seems like the BRRRR method with duplexes (single story 2br with a garage per Dion Mcneeley) is probably the best option for me to get started, maybe mix in a small vacation rental. I'm going to be living near a tourist location (beach), two different military bases, a hospital, and two colleges. Both long-term or vacation rentals should do well.
Concerns:
- I have 4 young children, I'd rather not house hack.
- Taxes: I'm clueless on this topic and worry about capital gains.
- LLC: how do I protect my family?
Books: I just bought Flip: An Unconventional Guide and Investing In Real Estate with No (and Low) Money Down, but haven't read them yet (because of moving). Any other books or materials I should read?
Summary: I'm trying to decide what I should do with approximately $150k capital.
Most Popular Reply
BRRRR seems to be the most popular investing method these days and while I am a fan of the BRRRR strategy it is not for everyone. If you work full time, have a family and are not interested in spending a significant amount of time hands on in real estate then you may want to consider more turn key properties. It's also much easier to find move in ready properties than it is to find properties that fit the BRRRR model. The primary benefits of BRRRR are replenishing your working capital through refinances and creating equity through your renovation. Buying move-in ready properties is a slower process but ultimately much more passive. With $150k cash you could buy between $600k - $750k in properties(assuming 20-25% down payments). As your properties generate cash flow, go up in value and the mortgages get paid down they will generate additional available funds for downpayments even if you don't save money from your day job towards new rentals. So, still a very nice strategy over the long term. The questions I encourage you to ask before choosing your strategy is what is your ultimate goal, how much time do you have to dedicate to real estate and how hands on do you want to be in your investments? The best strategy is the one that fits the answers to those questions. Welcome to Pensacola, it's a great place to live and a great market to invest in!