What to do with 200k??

Question

Hello All! Long time lurker here and avid podcast listener. I have been fortunate enough to have saved 200k and am wanting to put this into real estate. My goal is to get to 10k a month in net income through rentals. I want to focus on multifamilies for scalability, but don't really know the best way to start. From what I have been told by a mortgage broker is that if I buy a 4plex, I will need to put 25% down, so I could buy around that 800-850k range. Should I consider a 4plex cashflowing $1500 or so a month and put all my money into this one 4plex and wait until i save enough to buy another complex or are there more creative financing routes to expedite the pathway to my goal of 10k a month?? I will continue to work a full time job and have access to another $100k I will keep in the stock market, so there is access to additional capital if absolutely necessary.

Any inputs/advice would be greatly appreciated!!

Steve Babiak · Answer

You forgot to state that it will net over $10K per month ;)

Steve Babiak · Answer

Broken record here  - oops, many of you here are too young to know what that is ;)

But I will repeat advice I have posted on BP previously - do not post on the Internet how much money you have. You are likely to be besieged by various people soliciting your funds, or offering "advice" on how to deploy your funds (with them of course). And they might just take advantage of your naivete and inexperience.

Sorry if I am repeating myself here ...

Sherwin Gonzales · Answer

@Charles Rogers, congrats on saving capital for your deals! With that much capital, I agree with @Juan Jackson in that I would look for commercial multi family properties with 5+ units.

10k = 100 units/ $100 cash flow each

Maybe start with 25 units and grow from there.

Four (25) unit complexes are easier to manage than Twenty-five 4-plexes or 100 single family homes.

Unless you partner or syndicate and go for One (100) unit deal!

Good luck!

Brian Garrett · Answer

There’s a gazillion posts identical to this already here on the forums with tons of input and feedback. I’d suggest you dig around here and you’ll get plenty of insight on different approaches you could take. Furthermore I would not advertise having $200k cash laying around for a variety of reasons. Be prepared to get colleague requests and messages from people looking to explore your funds now.

John Warren · Answer

@Charles Rogers you didn't give any details on the market you are in, but I would definitely not put down 25% on a 4 unit. I would focus on getting as many units as you can get. You might consider partnering with an experienced operator and getting right into the apartment game. 200k is enough to get into some real properties.

Can you give some more detail? What market are you in? What markets are you close to?

Mike V. · Answer

I’ve got a bridge I can sell you.. and what a coincidence, my asking price is exactly 200k! It’s large, in San Francisco and orange.

Paige Kelsey · Answer

I actually disagree with some of the advise you were given. just a guess but I think you like multifamily. I would go with a value add 4 plex  where you are at or within easy driving distance. The goal here would be to live in one and rent out the other 3, "aka house hack". The bigger goal is not sooo much to live in it but......... getting at that mortgage is waaaaayyy cheaper than trying to go with a commercial loan.  If you can get in with 3% or VA:) 0 % of a primary residence you are well on your way to 10k a month and haven't used much if anything of your 200k. Also, 200k is NOT going to get you 10 k a month. It will take you a couple steps to get there but it is a scalable and easier way to go about things so that you are not wasting you hard earned money.

As for squiring this four plex in the first place start driving the streets. Run the numbers on the calculators and get good at analyzing everything. I literally have found a house / houses on Craigslist or by just going up and knocking on someones door. Be patient, buy well, be careful with your numbers and be ready to pull the trigger at a moments notice. Good luck and yeah probably not the best idea to say how much capital you have to spend.

Beware of sharks:) Cheers!

Juan Jackson · Answer

Hi @Charles Rogers, I would look for a value add opportunity on 5+ units. You can get a commercial loan that will be based on the asset income, when it's 5+ units. You may need more than one property to reach your goal of 10k net.

Charles Rogers · Answer

Thanks for the responses and yes I have read several other similar topics via the search function.  I am originally from Atlanta, lived in Denver for a few years, and have been over seas for the past 3 years and relocating back to NYC in ~2 months.

I am open to investing across the nation, but have been doing most research in Atlanta (I believe Denver is overpriced at the moment)

With my goal of netting 10k a month in rental income, what strategy would you take?  Put it all in one multi family @25% down or look at multiple duplexes with a lower percent down?

I will continue to work while I invest and make pretty good money, so income verification shouldn't be an issue.

Thanks again!

What to do with 200k??

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