Rental Property Investor · Thousand Oaks, CA · Member since 2017 · 147 posts · 48 votes
Good Evening Friends!
I am selling my truck and will have just over $22,000 cash to invest freely. I have no debt and excellent credit. I am stationed in Washington D.C. and will be transitioning out of the military in about 9 months so I don't necessarily want to buy here and then have to move across the country and attempt to manage while in California.
The area I will be moving to is in Ventura County where the price of real estate is pretty expensive! My college education will be covered by the Post 9/11 GI BILL and I will be living at home for free during the remainder of my college years. I estimate that by the time I leave the Marine Corps I will have about $42,000 cash and roughly $16,000 in my Roth IRA (no debt).
I am looking for some advice from people who were once in my shoes are are dealing with the same questions currently.
Become a landlord and be patient because your wealth will grow over time.
or Buy and flip a property.
Or lend the money to an experienced RE investor at 10-15% interest.
All have their pros and cons and all are very risky if you dont know what you are doing. I have been involved with thousands of transactions so my risk is limited and its calculated whenever I enter into a deal.
take your time and educate yourself and surround yourself with people smarter than you.
I am from Pittsburgh so I am not much help for you in your market but the basics never change.
Real Estate Agent · Pittsburgh, PA · Member since 2014 · 821 posts · 255 votes
9y
@Jonathan Jaime Velarde Hi Jonathan, sounds like you are off to a great start with having a plan of action, plus having no debt with great credit is certainly a bonus. I agree with @Alex Deacon on the part about taking the time to educate yourself further. Listen to the podcasts, read the member blogs. Find articles that relate to those in the military who are investing in real estate as you may find some great tips that relate to your specific situation. Though a few years old, I still like this blog by Brandon Turner:
After working with many Investors, most of those who are new to it find that househacking a multi-family unit works best for them. Becoming a landlord while gaining experience and income is a great way to start in REI. Sometimes you can find a deal where the tenant will be paying most if not all of your mortgage. Of course, by doing so, you will not be living at home. You will be residing in one unit while renting out the other(s). And as far as cost of entering into an area market, you have to find a city that is not so inundated and costly but still offers you a great return and has steady growth. So I like the idea of taking your time now, acquiring cashflow, and increasing your knowledge of REI. Continue to reach out to others as we are all here to help.
And as a veteran, I thank you for your service.......Gary
It sounds like you are in a good position financially. There are many ways you could use those funds to help grow your wealth. Since you are so young and have extra cash, maxing out Roth contributions could be a beneficial thing as the funds will grow tax free and when you take distributions later in life, those will also be tax free.
Did you know that you could use the funds in your Roth IRA to invest in real estate? This is called a self-directed IRA, there are many posts about them on bigger pockets. I encourage you to do some research.
There are ways to structure a deal even if your Roth IRA does not have enough to cover the total cost, as you mentioned that the real estate prices are higher in the Ventura County where you will be.
I would be happy to connect and discuss some options with you.
Rental Property Investor · Thousand Oaks, CA · Member since 2017 · 147 posts · 48 votes
9y
@Carl Fischer I have been maxing out my Roth IRA for the past two years and I plan on continuing to do for the duration of my life. Thank you for the tips I will definitely look into using my Roth IRA to invest in my real estate purchases down the road.
Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
9y
I don't know the costs of 2-4 units in Ventura county, but think about doing an FHA owner purchase of a 2-4 unit. The FHA loan limits are listed below.
The amount of money that you will have will be more than enough to cover the 3.5% down payment and the 3 months PITI reserve requirements.
Do you due diligence and buy something that will cash flow after all expenses, CAP X, vacancies, maintenance and management fees along with any utilities that you are covering for the tenants.
This will kick off your investment career and grow from there.
Rental Property Investor · Thousand Oaks, CA · Member since 2017 · 147 posts · 48 votes
9y
@Gary Swank Ideally this is what I would love to do when I move back to CA is to find someone to live with me and pay half of if not more to cover the expenses. I am about to read that article and hopefully it will provide me with some good information! Thanks for the comment!
Rental Property Investor · Thousand Oaks, CA · Member since 2017 · 147 posts · 48 votes
9y
@Kevin Romines Thank you sir! That is something I am very interested in doing. Even if I break even I am still getting free equity and the opportunity for some appreciation in the long run.
Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
9y
@Jonathan Jaime Velarde Best of all is that when you buy a rental property you can count the rents coming in on that property as part of the deal. So given the right property, it basically doesn't add to your debt ratio, or it could even add to you income. If it does add to your debt ratio, it typically is pretty minor, so in most cases not a big deal.
I would house hack using the $22K as a down payment on a multifamily unit and live a frugally as possible for several years until I had enough money to rinse and repeat (possibly several more times). The fact you are military opens a door using VA loans. Your 401k is cool but not significant enough to use with only 16K in it, keep that thing working in the background for you at a later time. Then proceed to take over the world one multifamily unit at a time. BOOM
Real Estate Agent · Farmington, UT · Member since 2017 · 3 posts · 3 votes
9y
I second the househacking recommendation. This is how I got started and I learned some valuable lessons about landlording by living close to my tenants as a young investor.
Rental Property Investor · Thousand Oaks, CA · Member since 2013 · 69 posts · 16 votes
9y
Househacking is a great way to get started; that said, it's very difficult to find Multi-Unit properties here in VC, especially one that is in decent condition and at a sales price that makes sense. They do pop up occasionally, but you'll often be competing with cash buyers with deep pockets.
I'd recommend looking into some real estate-adjacent opportunities. Some mentioned already such as loaning that money to an experienced professional to do a rehab or something similar. You should definitely read up on notes and being the bank, or explore out of state buy and hold opportunities.
Feel free to message me with any questions on the area or anything I mentioned, I'm happy to help if I can.
Louisville, KY · Member since 2015 · 166 posts · 83 votes
9y
I just wanted to congratulate you on being so responsible at such an early age. You are getting some sound advice here. At 22 I would have had a really really good time for about two months. Guess that's why I didn't have 22000 dollars at 22. Luckily I grew more responsible, but there are a lot of people that can never handle having extra money at any age. So congrats once again.
Investor · Bronx, NY · Member since 2015 · 52 posts · 22 votes
9y
I was in the same situation when I left the service at 22 with the exact same money saved up from Afghanistan.
I went through trial and error with many investment vehicles.
1st was CDs, Mutual Funds/ very slow returns
2nd was investing with people who say they can give me great returns/ Works but not every time.
3rd learning to invest in ETFs, Stocks and Options contracts/ Worth the journey.
4th was passive income business. I acquired ATM machines and Rental Properties
Rental Property Investor · San Jose, CA · Member since 2016 · 114 posts · 54 votes
9y
Jonathan Jaime Velarde Ventura county I believe is in CA and it's hard to find a decent REI option in that area. I would suggest you to start with an out of state Turnkey (low risk) and spread your money in 2-3 properties in different Geo areas. Be aggressive though since time is on your side and the more calculated risk you take the more you will be rewarded.
Real Estate Agent · Sequim, WA · Member since 2017 · 64 posts · 39 votes
9y
@Jonathan Jaime Velarde My first financial mentor gave me some very good advice as far as starting out.
1. Dont make any acquisitions that will break you if the"worst" happens.
2. Save $100k before you decide what major route you want to take (Stocks, realestate, business ect.)
3. Make sure when you do jump into (realestate, stocks, business), make sure your first deal is an excellent deal. Dont settle for a mediocre deal, be patent and find one that will make you the most money possible. Investment sequence is very important, For instance if you decided to flip houses and you have $100k to spend, if you flip a house and it takes you 6 months to buy,rehab and sell, and you make $15k, your next deal can only be a $115k deal and it will have taken you a year, and your next one after that $130k. ect. But, if your first deal is a $100k flip that makes you $45k in 4 months, this allows you to scale and do a bigger deal the next time around in less time. Or even even work on getting multiple deals going at the same time. This is true for each of the 3 investment options. Its worked well for me, so dont settle for mediocre investments.
The $100k savings before you start investing is important for 2 main things, 1. You will have $100k to do your first deal, your options are going to be more open then finding a deal with $22k. 2. The most important thing about the savings goal is the fact that you saved $100k! if you can set your mind to accomplish that kind of saving, working a normal job, you can do anything. This took me about 4 years since i graduated highschool 18-22. Since then i have bought and sold 6 properties and have exponentially grown my wealth (now 25), along with making great stock investments.
before you know it, you will be 30 and have a cool Mil in the bank! money growth is very exponential from $22k to $1000000.
Rental Property Investor · Thousand Oaks, CA · Member since 2017 · 147 posts · 48 votes
9y
@Benjamin Winokur Holding notes was something that looked intriguing to me. I'm going to do some more research on that. If anyone knows someone who is an expert in that field please let me know!
Rental Property Investor · Thousand Oaks, CA · Member since 2017 · 147 posts · 48 votes
9y
@Mandela Muhammad I've been investing in stocks and mutual funds since I was in high school and they have done well for me which is how I was able to buy my truck in the first place!
By the time I am out of the Marine Corps I will have roughly $40,000 cash which will make it easier to find deals than if it were just a mere $22,000.
Rental Property Investor · Thousand Oaks, CA · Member since 2017 · 147 posts · 48 votes
9y
@Rich Lopes I've been looking into turnkey, but I think I want to be within an hour or two drive from my properties to start out. I don't want to have to rely on a random person to handle my investment and spend "x" amount on labor, plane tickets, etc. This is only initially, but once I am more seasoned I think turnkey investing would be a decent option.
Rental Property Investor · Thousand Oaks, CA · Member since 2017 · 147 posts · 48 votes
9y
@Clancy Catelli I agree and disagree. Obviously the more money you have to start a deal can be more beneficial assuming you use it wisely, but to save up $100,000 cash would take a decent amount of time and I think I can do more and learn more while trying to invest to reach $100,000. I think it just depends on whatever market you are in and what investment vehicle you are trying to pursue. Maybe for me $100,000 doesn't sound to bad being in Ventura County lololol!!
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
9y
Buy good return REIT mutual funds. If you are in Ventura, CA with that kind of saving no realtor will be help you. Not even 6X the amount unless it is used for a down payment with a mortgage.
Investor · Ridgecrest, CA · Member since 2017 · 246 posts · 120 votes
9y
$22000 cash is almost exactly what I am starting with now. I currently have a $106k house in escrow which I plan to rent out for $1000 per month. Mortgage insurance and taxes will cost about $570 per mo. If I put away 100 per month for repairs I will net $330 per month. I've had borrow from my 401k to pay the closing costs which are about double what I was expecting so its going to take about 6 years to earn back my initial costs but in that time I can purchase at least 6 more properties and if they have the same cash flow as the first that's $2300 a month in passive income.
Real Estate Broker · LA & ORANGE COUNTY CA -Multi Family · Member since 2016 · 374 posts · 132 votes
9y
Non Performing Notes all the way. Low capital investment required, higher ROI's. Beats being a landlord, flipper anything else out there, just blows it out of the water. You will not regret it man. Good luck