I have $150,000. What would you do?

[Alex Kohler]

Hi there! 

I am new to BP and have a few questions as I am a new investor. I have $150,000 cash and my goal is to become financially free as soon as possible with having all expenses paid with cash flow as well as growing my wealth. How would you go about allocating these funds. Also, what areas are the best for house hacking/rental properties? Would you buy multifamily or single family?

[Michael Zane]

Alex, you should be very happy to be in such a strong position.

For any type of investing, it's really important to develop a framework to guide your decision making process. First, you need to understand the nature of markets (I mean this from a psychological perspective, in addition to the "know your market" adage). Second, you need to internalize the margin of safety concept - buying an asset for way less than you think it's worth. All successful investors understand these two things, whether they realize it or not. 

The interesting thing about real estate is that it's sometimes what you do after purchasing a property that determines whether you have a good investment on your hands.  For example, maybe you're a great flipper who knows how manage your way through a flip to hit your rehab cost estimates.  Or maybe you're a really good landlord who can generate top-of-market rents with lower than average tenant turnover.

My point is that as a new investor, it's less important to focus on a particular market for the time being.  It's much more important in the long-run to learn the basic investing principles and decide what type of RE investments you want to specialize in.  There's no right answer to the latter question - it depends on your strengths and interests.