Looking for your experience: What do to with $60k?

Question

Ok, looking to pull from others’ experiences. I currently have 1 single family long term rental in the Nashville, TN area. I’m looking to get into my second deal. I can pull $60k from the current rental via a commercial line of credit—which is great, but it’s not much.

My question is for those of you who have done deals with around that much capital or less: how did you do it? Did you find a partner? Did you find an extremely cheap property and BRRRR it? Did you use it as a down payment on a high cash-flowing STR? I’m struggling with analysis paralysis and it would be helpful to hear how others got past this roadblock. Thanks!

Shawn Ackerman · Answer

@Vivian Nicastro DO NOT use the funds as  down payment.  In that case the funds will be "stuck" in the property.  Consider "delayed financing" i.e. buy cash, rent then put debt on the property.  This is  scalable model which allows you to grow your capital while growing a portfolio.  I used this model and it works.

First, look for a lender with 70-75% LTV or higher that will lend on lower end assets.  I have a recommendation for you just message me.  Also you would want to know seasoning requirements of the lender as this will dictate how quickly you can grow.  If no such priced properties exist in your market you may consider investing at a distance.  I'm in NY and buy exclusively in the mid-west.

This is a long term play, so nothing to jump into tomorrow but if you can put all of the pieces of the puzzle together you can make it happen.

A big part of making this strategy work will be the ability to go direct to seller, which is a job in itself but will benefit you greatly long term.

All the best.

Evan Polaski · Answer

@Vivian Nicastro

Have you done a rehab before? Do you want a high risk property or a low risk property?  Do you want to be in the hospitality business?  Are you simply trying to get this equity to work for you, or are you really wanting to build a larger rental portfolio?

The reason many people experience analysis paralysis is commonly because people don't have vision for what they are trying to achieve. I know you are on a real estate forum, but real estate is not the only way people make money.  And honestly, most wealthy and ultra wealthy people make their money outside of real estate and then maintain their wealth with real estate.

But back to real estate: If your goal is passive income, you need to make investments that generate passive income.  The most common ways for truly passive income (and even this is debatable given the work going into due diligence) is as a shareholder or LP.  Most commonly this would be buying publicly traded REIT shares or in a syndication.  Less common is the non-traded REIT route, which are commonly only available through registered Broker Dealers.

Then you get into the direct ownership route, which have varying levels of work involved: turnkey rentals with tenant and management already in place tends to be the lowest involvement in the direct route.  Then you get into rent ready homes in which you hire manager.  Then into flips, and more involved would be self-managed BRRRs.

Generally speaking, the more active of a role you take, the more you will make in return, but in reality you are compensating yourself for your time.  Any direct ownership will be work.  Good managers need oversight too, good managers become bad managers.  Tenants destroy properties, etc.

Nate Sanow · Answer

I guess I want to ask. Are you focused on that next property being in Nashville? If so I can see the challenge on what to do with $60k. Are you open to OOS or even out of town? I feel like you have a good amount of money and if your specific market was more affordable it could go further.

Besides that my suggestion is always creative finance. If a good brrrr was available to you likely the hard money lender could finance 90-100% of acquisition price and possibly some of the rehab and most of your $60k is still in your pocket. This is part of the “Rich Dad Poor Dad” voice in my head talking here, but whenever we only focus on down payments and such we often miss out on seeing other possibilities. That’s why sometimes a success story has one person who was almost broke but grew and someone else sitting on a lot of cash doesn’t scale.

Now I get brrrr’s, flips etc don’t often come up but when they do I’m just saying the answer to your question might be with even more leverage and leverage that is managed wisely and intelligently, of course.

Best wishes to you on your journey!

Seth Young · Answer

You can get a SFH cash flowing turnkey property for that downpayment. You wouldn't have to worry about any renovations and the home would be set up for the longterm buy and hold. It just depends on how active you want to be in the investment process.

Alex Talcott · Answer

Partnering/JV'ing, or maybe getting lucky on a cash buy of a duplex in a rural area where you have a trusted property manager, or investing $50k as an LP in an apartment syndication and seeing about lending the $10k for a promissory note.

Brock Mogensen · Answer

It ultimately depends on your long term strategy in RE.  If you are looking to scale quicker, partnerships are a great way. That will allow you to pool funds together and buy larger properties.  Otherwise, the house hack model leveraging FHA financing, it an easy way to add a property to the portfolio each year.

Keith Morgan · Answer

@Vivian Nicastro Clarksville is a smoking hot market within 45 minutes north of Nashville. Agreeing with what Alecia has said I would be interested in assisting with purchasing another property and also my property management company to handle the rest. There are endless possibilities, networking, relationships, and team building available here in Clarksville. I have my own contacts, resources, contractors, attorney, and other related that will be very beneficial.

I am open to meet in person, phone, text, zoom, email or any other methods you prefer

Alecia Loveless · Answer

@Vivian Nicastro I’m in a mid priced market, typically $200-300 for turnkey SFH or if you land a good MFH that’s possible too. I just closed on a duplex that’s not too thrilling but cash flows $400 a month and has long term tenants in it. They pay their own utilities including heat which is big in northern New England and also pay snow plowing and mow the lawn. All in with closing costs and down payment and everything needed to close I was right at $60,000.

I would expect that if you looked at a market 45 minutes from Nashville you could easily build a team and be able to purchase another property with your $60,000. It would be close enough you could check it once every month or two and you should be able to factor in a good property management company to handle day to day.

Anthony Phillips · Answer

I see you bought your first property in hermitage There are many places in Wilson county that will cash flow pretty well. The demand for renters is very strong. If you are interested in looking in that area I am an agent out of Blackwell in Lebanon.

Wade Woo · Answer

@Vivian Nicastro

With $60k you can invest $40k into $200k worth of real estate, another $10k in a sleep well at night account and another $10k left over.  These would be deals in the best market and in the best neighborhoods in those markets for cash flow.  After 5 years market situations may change, we can pivot to other markets that have a better cash flow base on specific macro and micro analytics.  The deals are optimized for risk mitigation as well having a recession proof strategy.  It is uniquely scalable.  DM me if you would like to know more.