Saved up $15K... What should I do?

Question

Hey BPer's

I'm a newbie investor who has educated himself through books. REIA meetings, and Biggerpockets podcasts and blogs.

I've been able to save up $15K and I am ready to take action.

I am interested in two niches specifically.

Wholesaling for instant cash flow and small multi-family/single-family for appreciation and long term cash flow. Then finally apartments.

I am in the Houston market which is on fire right now

My question is for seasoned/experienced investors. What would you do if you had $15K to invest?

Jonathan Bonck · Answer

HI Account Closed

I would think about growing your savings about another $10K. For me starting out I am looking at SFH. I want quality products in order to attract quality tenants. I don't want my first couple of acquisitions to cause issues. Down the road I plan to leverage more and take more risk. .So I would think about buying your first SFH but looking to put down 20-25%. That would require about $25-30K with closing cost included. Remember, your first deal is a building block for your next deal.

Mike R. · Answer

great start and while i don't know the Houston market at all, i would encourage you to  move slow.  Run some numbers on what $ you will have remaining after the downpayment and closing costs.  i suspect that there will be very little left for the fixing the things you didn't know about that will no doubt surface after you close.  I'm not trying to scare you, but it is just a fact of RE investing, that there will be small things that didn't get picked up in the inspection.  also, my experience is that tenants use the idea of a new landlord as an excuse to say this or that needs fixing.  an old saying when you go to Vegas is "don't gamble scared", which essentially means make sure you have enough money to bet big when the odds are in your favor….i would modify that quote to fit RE to "don't invest in RE scared"…have the nest egg at the right size before you jump.  use the time to do more research about your target market, etc.  it will build your confidence and you will make better decisions when the time comes to pull the trigger.

Skyler Smith · Answer

That's some great cash to have saved up. I got started on a house hacked 4plex, and I think that's a great foot in the door. How long do you think it'll take you to save up another $15k? If you're at a very high earning job, I would keep funneling the money into long term buy and hold assets.

If you don't expect to get another $15k anytime soon, think about the ROI of a wholesaling direct mail campaign. A great return on a SFR or duplex is still going to be very low compared to a marketing budget for a good wholesaler. There will be work involved, but if you put a few thousand dollars into mailing postcards and picked up the phone right when it rang, you could make your money back in just a few months with little risk, and it could help give you a lot of experience. Once your marketing is going well, you'll be selling more houses and when you're ready to get into your first long term rental you'll already have the deal pipeline in place to get wholesale price for it!

Curtis Rumel · Answer

I'm a Realtor in Utah and I'm not a RE investing guru so what do I know especially about Houston, full disclosure... That said, I have many clients in your situation. I think a lot of it depends on your housing situation. If you need a place for yourself or not. If so, look for a duplex or triplex live in one unit and try out being a landlord. If not, try a duplex. A duplex gives you limited drama in terms of tenant management but a safety net in terms of liability. If one tenant is out the idea is that you are only responsible for half of a manageable payment. If for some strange reason both are out you can manage the whole payment while you repair/plug in new ones. I think as a newbie don't become a slave to your mortgage payment. Make sure you can afford it on your own so you don't put yourself in a desperate situation.

Travis Frenchak · Answer

I agree with @Jonathan Bonck , definitely don't want to jump in too early and have your first purchase to more of a headache than its worth.

Account Closed · Answer

Thanks for the advice @Jonathan Bonck

Marquise Crampton · Answer

also if your not afraid of the inner city you can grab a home pretty cheap and fix it up with the right contractor, then you wont have much maintenance to worry about. good luck

Marquise Crampton · Answer

just to add on jonathan's reply. if that's the route your going to go. look into an fha loan. you would have to live there for at least a 1 year, but only putting 3.5% down on a property up to 4 units. that way you can live rent free or even pull in a couple extra dollars and save towards your next investment.

Saved up $15K... What should I do?

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