Don't start investing until you have $100,000.
Van Nuys, CA · Member since 2016 · 89 posts · 23 votes
Once of my favorite entrepreneurs would have to be the one and only Grant Cardone. So naturally I listen to his podcast and follow a lot of his material. One number that he continuously brings up is $100,000 and once you have that kind of money in the bank, its time to start to invest. Which in some aspect I do agree. A 10%on $5000 is just $500 where the same on $100,000 is $10,000, which is much more interesting.
This ideal comes up quite a bit with other motivators and entrepreneurs, to get first things first and make the money before you invest it.
This website clearly breaks that mold so the question is, what do you think is the best route? To make all the money and then figure it out or to make some small amounts and work with that? What experiences can you provide with both ends?
I would have never started investing, if I had followed that rule. huh!
I think that is a "nice" idea but unrealistic for most people, especially if you have student loans, families or other responsibilities that require you to pay for them. It is important to save a couple of thousand dollars, but a $100k, then most people would have never been able to get started.
@Daniel Cuevas, I've learned when people give advice... ask if you want to be on the path they are guiding you along.
If you want to be debt free, follow Dave. If you want to be an entrepreneur, follow Kiyosaki.
So if you want to be just like Grant Cardone, follow his advice!
But maybe you want a different investing method, lifestyle, or balance sheet. And that's when you listen to the people on the forum coming from all walks of life with different opinions :)
under that rule a lot of people would be still working their 9-5's
@Daniel Cuevas My first deal (all of my deals) were buy-and-hold. If I had leveraged I could have bought my second property faster or a larger first property. So I basically missing out on the additional depreciation that I would get on a larger (or multiple properties) and don't get to write-off any mortgage interest (in a low-rate environment). Yes, I might be losing out on some additional income but really the "hurt" is in paying ordinary income taxes.
I bought my first house paid in full for well under that near the bottom of the market just south of Seattle. Now I have A LOT more than that. I spent all my money to buy a paid off place to live, still to this day, one of my wisest moves. Alas, lot's of deferred maintenance coming up, so going to have to flip eventually and repurchase elsewhere.
sorry double post.
You may never get 100000 in your bank account if you wait, did this guy start with a trust fund first???
My advice? Quit procrastinating about stuff and go out and get some deals done. As far as I'm concerned......if you use any of your own money at all, you're behind the eight ball.......You will run out of your own money quickly if you aren't good at this..:).
To this day my main rule is to not use ANY of my own money in this business, its easy to track because when I started doing this many years ago I had very little money, so using my own was not going to get me far.
Stop trying to save and go get to know a banker...........leverage is magic.
Not sure if I'm 100% correct on this and didn't read all the replies thus far to see if anyone pointed this out but the message is a little different. I believe Grant's point was to save $100k to show that you can, not necessarily that you need to not invest until you have $100k. His logic behind this is that many people just can't handle having money. One of his tests to see if you have what it takes to invest successfully is that you are "able" to save that kind of money. I certainly invested way before I had $100k in the bank and have been very successful thus far, but for most, people just can't handle having money. They just have to spend it. It's the whole "lottery winners going broke" scenario. He says if you can't save that much, you probably don't have the aptitude to invest successfully. I think the "number" of $100k is not as relevant as being able to determine whether or not you are one of those kind of people.
Disclaimer again, I'm going off an article I read a few weeks ago. So it's not just cut and dry that you have to save $100k before jumping in. It's more of a "can you do it" type thing.
I believe Grant's whole philosophy is about increasing your income. The reason he picks the arbitrary number of $100k is that he wants people to prove to them self that they have the discipline and focus to save that amount before making any investment. His main focus is on bigger deals and suggests you don't buy anything less than 8 units because there isn't enough scale. It doesn't necessarily mean he is right or wrong but the man does have over $500 million in commercial real estate.
There's some context missing based on the article I read. First of all, Grant was talking about the steps to being rich. The first few steps were to invest in yourself and put yourself in a position to make big money. As @Justin B. said, Grant's point was to prove you can make and keep $100k and then invest the rest. The notion being that if you had the restraint and discipline to do that, you'd be ready for the path to riches.
Daniel, great topic, great point of discussion! It may be difficult to accumulate $100,000.00 in cash on hand for a first time investor simply starting his portfolio or path to long term wealth. $100,000.00 is a great figure to kick off with, but something in smaller increments may be more achievable to ultimatley result in over $100,000.00+ in cash equity. For example: begin with $20,000.00 - saving is hard, if you made it to $20,000.00 you may have enough for a down payment on a TK cash flow property under six figures or even perhaps a duplex (RE Hacking 101) - to build your way up to that next $100,000.00 goal perhaps, to do it bigger and better. My advice is always baby steps, but the earlier you get in, the sooner you will be in route to long term wealth and success. Do not let a number get in your way of expanding your investment horizon, but most importantly make sure to consider the risk involved, regardless of the level of participation.
People start where they are. This is the reason SFHs is where most people start and some stay there for good. I started in SFH and I'm still there, and I don't have a day job because of it. I do work on my business so just because I said I don't have a day job doesn't mean I don't work during the day. I have never bought a multi family unit, maybe because I didn't have enough cash reserves to feel comfortable. I didn't invest a lot of money in SFHs at the start, I invested my time and knowledge and did mostly creative finance deals with the sellers and then turned around and sold the houses on a lease option or owner carry in order to get my down payments back.... So I was a real estate investor, but not because I had lots of money to invest. At this stage in my game I may never do anything different. It works for me, my wife's happy, my children's happy and I'm happy. If I keep buying SFHs the way I have in the past my monthly cashflow will continue to rise every deal. I still don't have $100,000.00 in the bank, but my equity and Cashflow keeps going up and up and up.
What.... I would have never started. True 100k will give you a good start in the LA market and buying right will quickly build on your investment. But can you afford to save and only make 3% or less on your money when you could be getting close to 8% on your investment. I took my money out of town (not out of state) to get into the market. Was able to build equity faster than I could save it alone, of course my ability to save money improved with others contributing to my bottom line . To this day I have never lived in any my properties.
I would calculate how long it will take you to save the $100K and how much will you have if you just start with something within your current buying power. You'll probably find that borrowing against this property in the future will get you into your desired market quicker.
Sure, everyone should wait until they have $100K+ saved... That will save more deals for the rest of us!! That's the dumbest advice I've read to date. I started with only $30K to invest and within my first 10 months turned it into over $160K in equity and receivables!!
Day 1: ONLY $30K Cash available to invest
Day 300: $30K Cash + $90K in Notes Receivable + $25K in Interest Receivable + $95K equity in paid off property recently listed FSBO - $48K in Notes Payable
There are other considerations. Do you have a steady stream of income from stable employment separate from your R/E investment? I would tell you what I tell my other investors....your hardest property to purchase is your first property and you won't know how good of an investor / landlord you will be until you try and see. I feel if a person cannot make a purchase until they have this sum of money they most likely still won't if and when they reach $100K. If a person isn't creative enough to find a way without any or at least without a ton of money...they likely also won't be creative enough to manage the risk of being an investor in general.
Don't crush me to hard I am still trying to figure out the path that I want to take for financial freedom. I've been following Grant for a couple years now and he is a huge motivation boost for my morning drives to and from work. I am 24 years old and Jan 24 I will close on my first live and flip and it will put me over the 100k mark everyone keeps talking about. But in the mist of saving and grinding my way to this(2 years) i have no idea what to do with my money I just keep wanting to horde it in the bank knowing it is doing nothing for me. I don't know if I should keep saving to pay off my next primary house then continue to save, pay off my little debt I do have, buy TK property, or start with small MF. Can anyone help me steer my mind in a direction that best fits my goal.
Savers are losers! Money is currency which means it always needs to move, when it stops moving it eventually becomes worthless. Why not leverage other people's money by acquiring good debt and keep streams of money coming in and eventually you will get to 100k liquid cash in no time.
The amount of time it would take the majority of people to save that amount of money would be years, especially with little to no interest from the banks while it sits there doing nothing. At least you would have built a ton of equity in properties while you reach your goal. Find more ways to NOT work for money, but let money work for you!
Agreed!
Don't crush me to hard I am still trying to figure out the path that I want to take for financial freedom. I've been following Grant for a couple years now and he is a huge motivation boost for my morning drives to and from work. I am 24 years old and Jan 24 I will close on my first live and flip and it will put me over the 100k mark everyone keeps talking about. But in the mist of saving and grinding my way to this(2 years) i have no idea what to do with my money I just keep wanting to horde it in the bank knowing it is doing nothing for me. I don't know if I should keep saving to pay off my next primary house then continue to save, pay off my little debt I do have, buy TK property, or start with small MF. Can anyone help me steer my mind in a direction that best fits my goal.
TK can be cashflow
MF house hack your fist investment, live free (intent) - save more money, buy more real estate, buy passive TK, build portfolio and wealth.
@Daniel Cuevas of course there are many paths to success. I purchased my first rental property with 100% financing from a bank, but that was a different time than we are in today.
The GC strategy has a psychological aspect too. You really need to have discipline and hustle to save up $100,000. By doing this first step, you are building self confidence. The other aspect is that lenders and partners will take you much more seriously if you have $100,000 in the bank. Getting started with nothing is possible, but arguably you are playing in a different league when you have $100,000 to bring to the table.
The GC strategy is also very specific on the type of investment. He advocates large multi-family, so having $100,000 is really needed to play that game. He really frowns on single family homes, which happens to be my strategy. I don't want to get off on a tangent, but both have different strengths and weaknesses.
With the way the housing market has rebounded, prices are inflated. I would support a strategy to bank $100,000 today, which means you will have money to take advantage of buying opportunities in the future. Some of those buying opportunities will be investors who got in over their head by overleveraging. That is the risk of no money down and BRRR. You can pull every dollar out and then when you get hit with vacancy, repairs, taxes or other life hardship, you have no money to ride through.
I started the post saying that my first property was no money down, so you may wonder why I am warning of the risks? I had to really hustle on my first few properties and I did EVERYTHING myself to keep costs down. Many people are not willing to do what it takes. Lots of talkers who say they will do things and never follow through. If you can save up $100,000 then you probably have what it takes. I would guess 99% of the people on this forum couldn't come up with $100,000 cash my next week, without taking a loan.
Either way good luck.
Don't crush me to hard I am still trying to figure out the path that I want to take for financial freedom. I've been following Grant for a couple years now and he is a huge motivation boost for my morning drives to and from work. I am 24 years old and Jan 24 I will close on my first live and flip and it will put me over the 100k mark everyone keeps talking about. But in the mist of saving and grinding my way to this(2 years) i have no idea what to do with my money I just keep wanting to horde it in the bank knowing it is doing nothing for me. I don't know if I should keep saving to pay off my next primary house then continue to save, pay off my little debt I do have, buy TK property, or start with small MF. Can anyone help me steer my mind in a direction that best fits my goal.
First of all, great job saving! If you want to do flips, then having $100,000 of working capital will be a huge advantage. The best deals are going to require you to act quickly which means having cash. What I mean by that is auction sales or buying homes from desperate sellers. You can walk into a deal, offer a super low price and tell the seller you have cash to close within a few days. It takes weeks for other buyers to underwrite deals through the bank. I would attend auctions and do a mailing campaign to look for good deals that you can flip. Still be a little careful. There is a foreclosed home in my city that I bid on and lost the bid. I was shocked at how much the person paid. They did purchased it as a flip and it has been sitting on the market over 6 months. They overpaid and now they are stuck with it. You can do better, just be careful and be ready to walk away if you cannot buy low.