Newbies with $700K Cash

[Sarah Schmidt]

Newbie here! My friend and I are looking to get into real estate investing. We are in Austin, TX. She has $700k cash and is unemployed. I have experience running a business (successful passive income biz on Etsy), am a CPA, and have a FT job (sales so its flexible not 9-5). Both 700+ credit and desire to build a successful long term real estate business together. 

$700K buys a duplex in Austin or possibly a SFH with ADU to BnB. We were thinking we'd house hack one unit and rent the other. Are we starting too small?
Also how would you split equity/cash flow? She has cash and time during day, but I would do bookkeeping + set up/run BnB site + have reno skills. I am approved for $450K mortgage (SFH not sure if that will increase for multi) and can bring that to the table as well. 

If our goal is to acquire a portfolio of properties how do we best start and use the cash available? Go big or go home right! TY

[Ronald Allen Barney]

I would start with the formation of the partnership LLC/LLP after a thorough discussion that you will both be on the same page for the strategy and tactics of investing, and that the partnership is a relationship of mutual trust and there should be gentle and considerate exit strategies for both of you, in the partnership contract.

Then with the partnership formed get the house hack with the minimum cash outlay required to get into the deal, which is to say using the maximum amount of mortgage funds.  Analyze the house hack to make sure the numbers make sense for cash flow as it won't just be a residence but also an investment set of units.  Think of yourselves as virtual renters when calculating cash on cash return.  Some cash beyond the typical down payment amount (or rather gap between loan amount and appraised amount) will also be needed for closing costs and the gap between appraised amount and sale price.

After that first house hack take a look at what cash there is left for the LLC/LLP and evaluate what sort of a deal that can get you guys into, be it a small MFH or a turn-key SFH. There will be an adjusting dial based on that post-house-hack cash position.

At a high level, one at a time with minimal cash outlay each time, careful vetting of each deal particularly for cash on cash ROI, and new assessment of where you've landed cash-wise after each deal.