New investor with cash

[Sophia Maler]

I'm new to the world of investment. My goal is to break free from the "cubical nation" by learning real estate investment game. I looked at lien certificates and deed investments. I need some help understanding how to pick the investment strategy based on the amount of cash available and income goal? My initial goal is generating 2 to 4K a month. Is this realistic for a newbie? How much cash I need to achieve this goal?

[Jon Holdman]

Minimal risk, little time investment, little cash investment and an output of $2000-4000 a month. Sorry, its not going to happen. You don't say if you have cash to put in, but if you do, there are number of avenues.

You don't say where you are, but that are many locations in the US where you can buy very cheap houses, manage them yourself, do most of the maintenance your self and clear $200 or more a month per house. 10-20 houses would meet your goal. If you pay cash, you can do it with less than that. $20K houses that rent for $500 is feasible in a number of locations. If you don't have a payment and do your own management and maintenance, ten of those would spin off $3000 a month. But you would need the $200K to get there.

Wholesaling might generate that much a month. Not entirely sure, since it seems that most people who try it give up without ever doing a single deal. Guru's often offer this as a quick and easy way to real estate riches. As far as I can tell, the people who have success are the ones who bust their humps.

If you have cash, loaning money to rehabbers can return pretty good money, with less work than landlording. Generating a 12% return isn't too difficult. So, a $200K investment would return you $2000 a month. Unfortunately, its not that simple, because the deals are various sizes. And you have downtime between deals. Its impossible to get every penny of $200K invested every day of the year.

Fix and flipping can generate money, too. Again, though you need some of your own cash into the deal. The rule of thumb is that a purchase plus rehab cost of 70% of the sales price will return about 15% of the sales price as your profit. If you can borrow 70% of the sales price, and have about 15% of your own cash to put in, you can double your money with each deal. Its risky, and you have to know what your doing, and it will take a lot of work on your part, but its possible.

Generally I find that to be true. I've known a few CEOs and other high-ranking executives, and they are ALWAYS very hard working people. The idea that real estate or any other business can spin off lots of cash with no investment of time or money is guru hype. That's a story told by people with something to sell.