Best use of savings

[Tatiana C.]

Hello, after learning valuable lessons here in BiggerPockets, reading books and listening to podcasts, I'm feeling ready to start investing in real state. I'm overwhelmed with the many options to start so I'm searching for advice, feedback, point of view, anything you great people in BiggerPockets could offer to help me succeed.

My ultimate goal as an investor is to buy and hold enough properties to achieve financial freedom (my freedom number is 20 properties cash flowing 500 after expenses). My short term goal is flipping houses part time until I'm comfortable transitioning to full time, use the income generated for my living expenses and down payment for rental homes. My question is, if you guys have about 40k in savings, what would be the best use of your savings to support the goals I've mentioned above?

1- purchase flips with hard money and use the 40k for the repairs, so you can save in interests?

2- purchase a low investment property in the middle west using a turnkey company for 40K cash, cash flowing about 450 dollars a month after expenses? I thought about after reading the J. Scott book on flipping houses where he discusses that you need a "good resume" so that you can borrow hard money to finance your flips.

3-purchase 4 low investment properties in the middle west (40K each), financed, cash flowing a total of 615 dollars a month after expenses, and use your 40K for the 20% down payment + closing costs? (again considering having a "good resume")

4-purchase 1 property locally in Houston for 200K, financed, use your 40K for a down payment? ("good resume" again)

5- keep the 40K in the bank and use OPM. Could this also improve your resume as it shows savings and low DTI?

6- none of the above? appreciate new ideas! :)

Thanks in advance for your feedback and help.

Blessings to all,

Tatiana C.

[David Veeder]

In my opinion buy and hold properties will be safer to invest in than flips and there are tax advantages.  If you  are thinking about buying a property in Houston I would suggest a sub 200K property.  My sweet spot seems to be in 120K to 160K properties.

I have purchase properties in DFW and have been satisfied but now that I am refinancing to pull cash out.  I must admit I am looking at some of those mid west properties because of the cash flow and low buy in cost.  There are a few issues I for see with these properties:

1) they probably will not appreciate much because they are in the lower end of the market.  

2) If you want to do loans on these homes it will have to be with private money or community banks.  Most banks will not lend less than 50K for a home.

3) My guess is these turn key properties are filled mostly with government housing assistance program candidates.  Although it is a noble cause to provide housing for these programs it is not for every land lord. There tends to be a bit  more drama with the lower end rentals.  Of course you would have management to handle this.

Hope these thoughts are helpful.