I have $20,000 in hard cash, advice on next steps?

Question

I am a newbie in the RE market looking to continue my journey however I don’t know where to start. I’ve managed to save $20,000 but getting a loan from the bank might not work in my favor being that I work as a freelance contractor without a consistent record of work history. However from my research here are a few things I think would be a good start:

1.) I like the idea of house hacking

2.) wholesaling is also an option

Looking for advice on how to move forward and what the best options are.

Two markets I would like to invest in are Tulsa, OK and Washington, DC.

Jan Kerr · Answer

@Brandy Bruce Congratulations! You are way ahead of a lot of new investors who start out with no money and no credit. Since your income is not officially verifyable, you will likely need to use more creative financing such as seller finacning, private money or hard money, in that order of preference. Study up on those three things and ask a lot of questions. My favorite is seller financing. I have done it several times with great success. Your $20,000 is enough to give the seller a reasonable down payment and pay your closing costs. Any rehab, etc anc be funded the other two ways. Run all of your numbers carefully and make sure you are fully funded before jumping in and you will do well. I am happy to answer any questions you may have.

Dakota Adney · Answer

@Brandy Bruce I see cheap properties in north Tulsa for $20k-$30k every day. You’ll need to come up with a few extra thousand for repairs and closing costs, but you’re very close to doing an all cash buy in certain neighborhoods of Tulsa.

Ron Gallagher · Answer

@Kevin Leahy is right about how to house hack in DC and he's also right about me crushing it :]

If I only had $20k and wanted to house hack in DC I would buy a one or two bedroom condo with a low fee in a nice, easy to rent neighborhood (Logan Circle, Shaw, etc.) and partition off part of the living room area with temporary walls and sleep there myself and rent out the real bedrooms with the goal being to cover your PITI and condo fee, maybe even make a little money in Year One if you buy right.  Then you're in the game, you're living in a great area for free, your roommates are paying your mortgage, and you can move out in a year and maybe move up to a rowhouse when you've saved up the down payment for your next property.  Then a couple years later move up to a detached, single family house in DC, and then repeat until you are as wealthy as you want to be. I will be stopping this year with only 5 properties.

My first property was a condo in DC- I was 22 and inexperienced and didn't know much about real estate investing, so I put only $7,000 down (all the money I had at the time) and had to pay PMI for a few years but buying that condo got me in the game. Today that condo is worth 4 times than what I paid for it 20 years ago, and I liked living in that condo so much I moved back into it in 2016 and paid off the mortgage. That allowed me to slap a new, super low interest rate (2.85%), owner occupied mortgage on that condo which in turn allowed me to totally pay off the mortgage on another DC rental property that I owned. So having that "starter condo" in the portfolio allowed me to play around with my properties like a real life Monopoly game by swapping out the mortgages, having my choice of which of my properties I wanted to live in, etc. Life has been pretty sweet since buying that first condo!

Marian Huish · Answer

The DC Market is a pretty tough place to start as difficult to fund something under $300K and investor competition is tough-  Also tough to find Seller financing in the DC market- particularly if you're looking at distressed properties which would be the most affordable.  Perhaps you can partner someone who can help you get qualified for a loan.  ie., unless you can do some creative financing as mentioned above.  Best of luck!

Kevin Leahy · Answer

@Brandy Bruce to house hack in DC you won't be able to buy a duplex or small multifamily and rent the other units. The optimal strategy is to buy a 4-5 BR house on the outer edge of a great neighborhood with a basement.. and live in the basement while renting by the room to young professionals for $750-900/room. @Ron Gallagher does this and crushes it. Buying this kind of property requires more capital than you have available but you might be able to partner with someone.

Diana Jing · Answer

Have you looked into out of state markets where the market is more affordable?  I just closed my first couple turnkey properties in MO & AL.

Brandy Bruce · Answer

@Dakota Adney Thank you! I will continue researching options in Tulsa.

Toben B. · Answer

Im in Tulsa and own a bunch of duplexes. The prices are higher now, but house hacking will still work if you live in one side and rent out the other.

Your renter will pay for the entire duplex and you will live rent free.

Brandy Bruce · Answer

@Kevin Leahy that sounds like a good option as well. Thank you for your feedback.

I have $20,000 in hard cash, advice on next steps?

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