Best ROI for $20,000 without a lot of work

Buying & Selling Real Estate
6yFollow

Best ROI for $20,000 without a lot of work

Brad Bellstedt
Real Estate Agent · Las Vegas, NV · Member since 2017 · 279 posts · 133 votes

Lets pretend for a minute that you're me. (You lucky devil you...Lol) 

You live in Las Vegas where the median home sale price is $300,000+ and your wife and her mother (who rents a room in your current home) don't want to leave your current home to continue investing. That means, you need 20%+ for your next down payment. In Las Vegas, that's going to be $40,000-$60,000. (Then there's closing costs, repairs, etc. etc.) Waiting around to bank that kind of money will take WAY too long to achieve your goal of owning 5 SFRs free and clear in the next 23 years. (Currently you owe $75,000 on a rental property and $275,000 on your primary residence) 

You have equity in property #1 but your wife and her mother who also own that house, don't want to touch the equity. (So that's not an option. Remember, the goal is to have 5 paid off properties in 23 years.)

You have about $20,000 in the bank earning next to nothing in interest that's ready to be deployed. You're aware that there are multiple ways to get a return on that money without the obstacle or inconveniences of $40,000+ down for a down payment, moving, or self managing a rental. Some of the options you are aware of include:

1. Lending that money to fellow investors as a hard money lender or within a crowd funding portfolio of an established hard money lender. 

2. Buying land and selling it with seller financing. 

3. Buying inexpensive properties (possibly condo/townhome or SFRs in a less desirable neighborhoods or in one of the smaller towns with an hour of the city) and selling it with seller financing. 

4. Getting involved with a real estate syndication company. 

5. Buying tax liens.

(If there are better options I have not listed here, please feel free to make suggestions)

So what do you do? 

(Notice "Leave your $20,000 in the bank" is not a listed option.)

You're ready to let that $20,000 start working for you but which option is best? Which is most profitable? Which requires the least amount of your time/effort? And which one can be used most effectively to move you closer to your goal of owning 5 properties free and clear in the next 23 years? (You'll be 50 by then and ready to retire) 

In an effort to give you a more full picture of the situation you find yourself in, lets add to this that you make about $60,000/year after expenses as a licensed real estate agent. What do you do now?

2Reply
38 views

Most Popular Reply

Andy Freeman
Rental Property Investor · Orange County, CA · Member since 2019 · 37 posts · 23 votes
6y
Originally posted by @Steven Edwards:

I would use part of that 20k to invest in your Real Estate profession IE website/marketing/promotion.  There is a lot of opportunities here and making only 60k in real estate in this city seems like you need to double down in work to get that income over 100k+.  

This might yield the biggest ROI. $20k invested into your profession and yourself, could mean going from $60k to $100k a year, and that would be a huge return. I know that's not on your list, so I'd probably invest into a deal with someone else if I didn't want to spend hours upon hours learning and researching a new sector.

4Reply
See this reply in the discussion

19 Replies

Jump to latestLatest
  • Bob Daniels
    Phoenix, AZ · Member since 2017 · 135 posts · 294 votes
    6y

    It depends on what you consider "a lot of work".  Many of these techniques listed have a fair amount of industry specific knowledge that you would want to familiarize yourself with prior to jumping in.  Do you have experience lending money?  Do you know how to spot someone worth lending to vs someone who is risky?  Do you know anything about tax liens?  etc etc.  

    The best returns will usually involve more work of some sort or another.  If you wanted to be more active, I would intimately familiarizing yourself with the ins/outs of buying and selling homes using owner financing.  However this takes time to both research, and a lot of time grinding the pavement trying to find sellers willing to do owner financed deals cheap enough to make it worth your time.  

    If you wanted to be more passive, and still get a very solid return on your investment and 'probably' avoid that dreaded economic crash that we keep being told is right around the corner year after year, is to invest in something like Fundrise, a crowd funded real estate platform.  I've been averaging 10-13% returns using them.  The down side is that your money isn't very accessible, so you would need to be OK with leaving it in there for at least 3-5 years while you work up the rest of the money for your next downpayment on another rental.  

    3Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    6y

    learn poker , get good , go down to the strip enter a event , win . Sit back on a beach 

    2Reply
  • Steven Edwards
    Henderson, NV · Member since 2018 · 2 posts · 4 votes
    6y

    I would use part of that 20k to invest in your Real Estate profession IE website/marketing/promotion.  There is a lot of opportunities here and making only 60k in real estate in this city seems like you need to double down in work to get that income over 100k+.  

    3Reply
  • Andy Freeman
    Rental Property Investor · Orange County, CA · Member since 2019 · 37 posts · 23 votes
    6y
    Originally posted by @Steven Edwards:

    I would use part of that 20k to invest in your Real Estate profession IE website/marketing/promotion.  There is a lot of opportunities here and making only 60k in real estate in this city seems like you need to double down in work to get that income over 100k+.  

    This might yield the biggest ROI. $20k invested into your profession and yourself, could mean going from $60k to $100k a year, and that would be a huge return. I know that's not on your list, so I'd probably invest into a deal with someone else if I didn't want to spend hours upon hours learning and researching a new sector.

    4Reply
  • Brad Bellstedt
    OP
    Real Estate Agent · Las Vegas, NV · Member since 2017 · 279 posts · 133 votes
    6y

    @Bob Daniels I should clarify that I don't consider research and learning as "work." The relative comparisons in my mind are direct mail marketing (as a wholesaler) or house flipping. Both require a tremendous amount of tedious and mundane "work." I don't mind research and the thrill of finding the deals, but I am trying to avoid having another "job." So to clarify, I mean more passive than being a wholesaler or flipper.

    @Matthew Paul Although that IS a pretty easy way to make some quick cash (especially on the strip with drunk tourists) it's not quite as consistent as a monthly rent check/mortgage payment.

    @Steven Edwards You're not wrong! We've been steadily working on that and it reflects in our numbers. I made about $75,000 total before expenses which is up about $20,000 from the year before and $100,000 is the goal for this year. It's not a very "safe" investment though. I believe (and could be wrong) that If I give my money to a hard money lender or crowd funded real estate company the likelihood of seeing a return is greater than it would be to pour that money into systems and marketing. 

    0Reply
  • Steven Edwards
    Henderson, NV · Member since 2018 · 2 posts · 4 votes
    6y

    @Brad Bellstedt with the need to have 50-60-100k in liquid to invest in your next project, investing your 20k one of those crowd funding projects that advertise returns of 10-15% it seems like a very long uphill battle to get the cash you need to invest in your project. A high converting website and some fresh real estate leads it would seem way easier to get a 20% ROI by just getting your business ahead.

    “A man who stops advertising to save money is like a man who stops a clock to save time.”- Henry Ford

    1Reply
  • Brad Bellstedt
    OP
    Real Estate Agent · Las Vegas, NV · Member since 2017 · 279 posts · 133 votes
    6y

    @Steven Edwards Absolutely true! I don't mean to give the impression that we are cutting our advertising budget. Quite the contrary. I've been considering doing some wholesaling through DMM, and creating a website and optimizing the SEO but I'm looking around for other options that are less labor intensive. The wholesale/expansive marketing route is the one I've put the most time and effort into (of the list above) but was curious if a 10-15% ROI with MUCH less work involved is a viable solution. But you are correct that working this angle from within my current business may be the most rewarding both monetarily and non-monetarily.

    0Reply
  • Kevin Smith
    Rental Property Investor · Denver, CO · Member since 2019 · 24 posts · 15 votes
    6y

    Sounds like you need a partner. If you could find someone to work with that was able to purchase as primary residency (maybe your mother in law??) then you might have close to enough to get your next spot w/ closing costs. Maybe you have to share some equity, but if it get's that $20k working and cash flow generating, it may open the doors you need quicker to reach your goal. Especially if it gives your family faith to keep investing, ie their current home equity. Furthermore, might be a double whammy with moving out your mother in law. Triple whammy if you can find a mother in law unit for her. She would be the ideal partner but not the only option. My suggestion is to find the right mutually beneficial partner that could help enhance you short term situation and reach your long term goals faster.

    1Reply
  • Account Closed
    San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
    6y

     I've been watching and listening to podcasts about AirBnB rentals and have been really inspired by Zeona McIntyre - she's here on BP.  She was asked on a BP YouTube video I watched for her advice on how someone should get started who didn't have a lot of capital and she said to start by listing what you have - whether that's your living room floor or a tent or whatever.

    It occurred to me that you live in a great town for AirBnB guests.  Could you put a glam tent in your yard for AirBnB?  Or put a glam RV or trailer in your driveway?  Then, you could hire Zeona's AirBnB management service to do everything related to renting out your RV or tent and she could even put in your co-hosted ads for the guests to please not disturb the "tenants" living in the house :-)  She takes care of everything for a percentage, if you want to be completely hands-off.  She even consults and she'll decorate and find furnishings, find someone to meet and greet and clean, you name it.  She has different rates depending on your needs.

    I think she's brilliant and I hope to be in a position to hire her services in the next couple of years :-)

    I am not able to tag Zeona, so maybe someone with Pro status could tag her here?  Maybe she'll have some ideas for you. 

    1Reply
  • Justin R.
    Developer · San Diego, CA · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    Second what @Kevin Smith said.  The most valuable asset in your position is an *opportunity* - if you find a local property with large potential, someone will pay you for it or partner with you to realize that potential.  Finding the opportunity isn't obvious or free, per se, but there's no reason you can't leverage your networking or dogged persistence to do it.

    Money, Opportunity, and Execution form the triad of a successful investment.  You just need one of them to get in the game.

    1Reply
  • Odie Ayaga
    Specialist · Delran, NJ · Member since 2016 · 2k+ posts · 951 votes
    6y

    Gap funding. 

    As a loan officer a number of people come to us without money to get through closing costs and down payments and some come with small enough deals that 20K could go a long way for gap funding.

    Just as a correction though it's unlikely to be "hard money lending". You'd likely be providing the money unsecured with a lender in first position.

    1Reply
  • Phillip Dwyer
    Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
    6y

    @Brad Bellstedt put the money back in your business. Based on the numbers you mentioned of $75k gci, that’s probably less than 1 deal a month.  There’s nothing wrong with that, but you probably have the bandwidth to handle more than double that amount. 

    1Reply
  • Brad Bellstedt
    OP
    Real Estate Agent · Las Vegas, NV · Member since 2017 · 279 posts · 133 votes
    6y

    I think you're right. For pride reasons, I have to mention that it's 2.5/month but yes, I believe you are correct. (I have a partner I split 50/50 with) That money will go further as a marketing budget than any ROI of the above mentioned list. Thank you for weighing in.

    0Reply
  • Phillip Dwyer
    Real Estate Agent · Henderson, NV · Member since 2011 · 1k+ posts · 550 votes
    6y

    @Brad Bellstedt If you're doing 2.5 deals a month for a total of $150,000 in GCI before the 50/50 split, we can estimate that your total production is roughly $5,455,000 (that assumes an average commission percentage of 2.75).  That would mean that your average transaction is around $181,000.  So there are 2 points to tackle here.  The first being the number of transactions:  30 for the year between 2 agents is ok, but you could kill that.  Second, your average price point is well below the median.  If you put effort towards moving up a price point, you wouldn't have to do more transactions.  That would leave you with more time to focus on investing or whatever you want.  Maybe instead of dumping more money into the marketing, you just need to allocate the current spend to a different target that yields higher commissions.  

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free