Starting With $100K, but still have a mortgage with 1% equity

[Allen Brouwer]

OK BP. I've been reading and listening to the podcast and I'm ready to make a move.

Background: Wife purchased a home last year (before we were engaged & married) with 0% down with Agricultural Loan plan. We still owe roughly $240k on our home.

I have about $100k in a trust that I can use for our home or to purchase assets. ie. shares, investments, RE, etc.

The question that I have is this..

How do I leverage this $100k the best way possible?

We have been attending Tax Auctions at the County Court House to learn the process and find out what is needed to buy these foreclosed and distressed properties. They are "cash only" deals with zero contingencies allowed. Title Search MUST be done prior to bidding.

We're targeting small single families that need some work. Ones we believe will still stay within our Cash limit of $100k.

There are some properties we know we can move on, if we have more capital.. but even still... I'm quite nervous to put all my eggs in one basket (property) and tie up all my liquidity and potentially lose some of it.

So with this said, what makes sense?

- Buy, fix, and hold(rent) with a refi to purchase second, third, fourth?

- Buy, fix & flip.. 2, 3, 4 times then do the buy and hold?

- Put the $100K into our home and HELOC a down payment (this would take the short sales out of the equation)

I'm doing my best to try and wrap my head around the best strategy to take.. just need some help and guidance.

Thanks.

[Ashley St. Gelais]

Hi @Allen Brouwer,

Great to see you on here again. I'd like to play the game: If I had a $100K.  : )

If I had $100K I would research local multi family properties and financing options.  I would try to buy 2-3 multi family properties with as little down into each one (if possible - it depends on the purchase prices.) I'd make sure that each property cash flows positive with a cash on cash return at the minimum at 10% (the higher the better of course).  

Then I'd leverage the rest of the cash left over and use that to secure a flip.  

I'd suggest checking out Patch of Land as they have a innovative crowd funding platform and they evaluate each deal to ensure they believe it will be successful (another set of checks and balances especially for a new flipper).  Then as long as you and your project is approved your request is funded.  If Patch of Land isn't your thing, perhaps you can partner with someone on the 1st flip.  You bring cash, they bring cash and you spend your time managing the flip and learning the ins and outs of it so you can replicate in the future.

I believe this strategy is the best of leveraging other people's money to increase your returns as well as having your eggs in more than 1 basket.

(On the other hand, I would never use $100K to pay down a bank loan. If you were to do this, you'd be turning the control of your money over to the bank. Which of course means you'd need to rely on them to approve you to borrow it back. Plus, they likely would only let you borrow back 80%-90% CLTV (combined loan to value) which means you probably won't be able to borrow back the $100K.)

Hope this helps! : )