25yrs old and need help investing 350k+!!!

[Drew Whelan]

Alright Bigger Pockets friends, I am in need of some advice desperately. This has been keeping me up at night every night and I can’t find the right answer for my unique situation. I’m going to get very detailed with the numbers.

Background info:

I just turned 25, I have been self employed for about 5 years now. My business model is similar to the sneaker heads who resell Jordan’s, so it can be volatile which concerns me. I graduated college (mistake) last year, I have -$16,000 in debt from the first year I attended. I payed out of pocket myself for the remaining. I STILL live at home and my parents are urging me to get out of the house but I don’t want to make a big financial mistake and purchase something out of emotion. They charge me $400 in rent. My only other bills are phone, insurance, gym, and student loan. I own my car. So about 1,100-1200 monthly expenses after groceries and other miscellaneous things I’d say.

This is what I own:

Bank: 35k

Cash: 7k

Inventory (business): 230k

Robinhood brokerage: 27k

Fidelity Roth: 5.5k

Roth 401k: 32k

Personal money market account: 15k

Business money market account: 42k

Total liquid cash: $393,500

Debt: -16,000 college loan

How should I go about investing this? I’ve pondered buying a cheaper 100k rental cash to essentially fund a personal home mortgage if I could find one. This way I can finally move out and get out of my parents hair, we’re all sick of me living there still. But then I keep going back whether or not a personal home is wise or not with all of the phantom costs/opportunity costs and how expensive it will be. I could house hack it though to help supplement some of those costs, maybe get into a home that needs some fixing up and then when rates come down and I get that forced appreciation I could refi and pull out some money if I’ve gained some equity? What I’m really intrigued on doing is getting a short term rental, mainly because of long term appreciation and I can depreciate the first year and potentially reduce my other businesses income so there would be a tax savings there on top of some monthly income coming in. Ideally that is what I’m looking for is some stable monthly cash flow to help me feel more secure since my current business could be volatile or fizzle out 5 years from now. With the short term rental property, I have the time to be active in it and I thought buying with cash or a very heavy downpayment would be a good idea so that way I can have a greater monthly cash flow. I think doing this in the next few months would be really good because eventually once the rates come down I think I would gain some equity from the appreciation and then I could refinance and pull some money out and throw it in another deal? Is there another strategy you would go for? If you’re experienced and read through this whole thing please share what you think I should do. Thank you everyone.

Drew

[Jason Wray]

Drew,

Good news is you are young and have a good start having some cash on hand. You do not need all of that cash to get started you only need a small fraction. If you play it smart and invest in a "Primary Home" first by targeting a Multifamily 2-4 unit home. You will be able to save money on the mortgage payment by having other units to help contribute. You will be able to exit that property and pull some cash out to put down on another property.

Few things you can do to ensure you can refinance the first home like buying an older home. Anything that needs a little renovation or TLC can offer an opportunity to pull cash out on the ARV. Pulling cash out through a refinance is the key to using the equity of the home and keep your cash in the bank or invested. Buying as a primary allows you to put as little as 3.5% to 5% down.

If you do have any issues with the business down the road you can always use a DSCR program which allows investors to buy an property without having to show income or employment. There is always a way to get into REI just need to find your comfort zone.