What would you do with $30K???

Question

If you had $30K to invest in real estate how would you use it and why?

Account Closed · Answer

I would use part of the $30k as a down payment on a 2 to 4-plex with a VA/FHA/USDA loan, fix up one side and rent it out and live in the other side while you fix up.  I won't dissuade you from wholesaling here, but it might be a while before you find a deal as the market is saturated with flippers and wholesalers (unless you know the secret sauce for finding those deals).

VA: no down payment needed.

USDA: I think it's no DP but you have to be in a "rural area," which includes the city of Sherwood and Yamhill counties.

FHA: 3.5% down plus mortgage insurance for the life of the loan (or put 10% down and you can remove PMI after 11 years)

Conventional: 15% down on an owner-occupied duplex plus PMI until LTV is at least 80% and you have the bank reevaluate the loan, or 20% down to avoid PMI.

You can find a duplex in Portland for $250k and in outlying areas (Columbia county, Clackamas county, Yamhill county, East Portland etc.) for $200k.

There's also private lending and hard money, but that depends on your network, your means, and your tolerance for risk.

Another option is to partner with someone with more money than you, and you can contribute to the project in other ways (managing, finding the deal, etc.).

All that said, for your first property, buying it simply with a bank loan and living in it for at least year is, in my opinion, one of the best ways to learn.  You don't have to know each and every RE investment strategy before you start.  Once you gain some experience, it will make it easier to find people willing to partner with you.

Whatever you do, just make sure that you're getting decent cashflow (I aim for monthly rents covering 1% of the ARV) and that the repairs won't bankrupt you.  Pretend that the unit you live in will be rented, and then do the calculations based on market rents, taking debt service into account.  https://www.biggerpockets.com/buy-and-hold-calcula...

Do your research and buy in an area that has a better than average chance for appreciation so you can trade up later for a "better" property (whatever that means to you) using a 1031 exchange or owner-occupied tax break for capital gains (if that's what you want to do).  Or hold onto it if the cashflow is good and look for your second property when you're ready.

At least, that's what I would do.

Jay Hinrichs · Answer

@Shane Forrest   Dani Z.  Dani has given you solid advice for this market if you are not a home owner at present .. and looking to buy your first home or property.

buying the 4 plex FHA is hands down the best alternative on the West coast.

you can refi in a year.. or two .. as market dictates then you can move to another one owner occ do this 4 times over about 6 to 8 years and now you own 16 doors in the UBER solid PDX market.. and now your tenants will pay your proeprties off your properties will be worth 300 to 500k each and in 25 years your sitting on 2 million plus of paid for real estate that's figuring no increase in value.  If you can handle being a landlord ( and not every one can I am in that not every one can category) then this is your best bet in this market to take 30k EXCELLEN T credit and income and leverage up.. No need to go anywhere else.

Steven Gesis · Answer

Shane, great question! You want to be able to use this as your platform to building your future wealth, this is a great start and enough to be a little dangerous with.

1) You can by a duplex, triple or quad up to $300k using a 203k loan - live in one unit and rent the others - save money while you live for free, use your new found savings for your next investment

2) You can attempt to get an investor renovation loan using 20% down payment, up to $150,000.00 flip

3) You can attempt to finance (1-2) SFR or Multi Family Turnkey Buy & Hold for Cash Flow

4) Your creativity and ambition = no limits to the potential

It all depends but at minimum you seem to be heading down a good path, do your homework, weigh your options, consider doing the things that will help you build your wealth and align with your goals/strategy. At minimum this is a good place to begin and the plethora of information on here, will assist you in reaching your goals.

Much Luck!

Stan K. · Answer

@Shane Forrest, the way you phrased the question makes it difficult for people to help you. Every person is different and what works for one, might not work for others. In addition, recommendations can be different based on your goals and abilities. For example, if you are very good at patching things up, then maybe flipping houses is something that you can start with. If you want to be completely hands off than maybe buying a turn-key solution is for you.

A better approach that you can take is before you start investing, put together a plan for your investments. You need to figure out what your goals are and how you plan to achieve them. Once you have that, it will be clear how to invest your $30k. Alternatively, you can post your goals and ask for advice on achieving them.

Hope this helps!

Scott Carson · Answer

Thanks @Jan Pontius.  @shane forrest feel free to reach out to me!

Stan K. · Answer

@Shane Forrest Check out The BiggerPockets Ultimate Beginner's Guide to Real Estate Investing. It explains the basics of real estate investing, describes different niches and strategies, and helps you understand and create your real estate investment plan.

Shane Forrest · Answer

Guys thanks for all the input. I'll definitely check out the links you sent. You're right I should have been more specific here. My goal is to generate capitol quickly, to use toward purchasing properties for the BRRRR strategy. Portland is tough for beginners as Jon mentions because our property prices are so high. I can't buy any kind of house for $30k other than a tear down. The issue with flipping houses for me is finding the additional capitol needed to purchase and rehab the property. I'm considering wholesaling to grow our available capitol funds, but I'm still learning about that and how to do it. So I guess the real question is how would you use $30k to generate capitol returns in a more expensive market like Portland?

Jon Behlke · Answer

There are so many factors that go into answering that question.  My answer here in southwestern PA won't help you in the least if you're investing in Portland, OR where property prices are drastically higher.

And like everyone else has said/will say, it depends on your goals.

Personally, I could take $30k and buy a home in a C neighborhood, renovate it, and then either flip it or rent it out.  But my market is kind of a honey hole for those starting out in real estate.

Simon Shih · Answer

I agree with @Stan K..

Here's an example. I want residual income from rentals, but I also want properties with equity. So I do a BRRRR (Buy, Rehab, Rent, Refinance, Repeat). I buy distressed properties at wholesale, remodel them and then put renters in them.

So determine your goal first and then you can figure out what form of real estate investing is the best fit for those goals.

What would you do with $30K???

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