What would you do with 100k?

Question

Hey gang,

I saw this post last week (on BP) about Grant Cardone saying you should wait to invest till you have 100k, and I agreed with all of the posters regarding starting as early as possible with whatever you have. So, whatever Grant...

But it had me thinking, what would you do with 100k? Would you jump into commercial property with that chunk of change? Or go for multi-families? Or, like anything, it'll be an investor preference.

It just had my mind going, because the deals I'm getting into right now require no to low cash.

Best,

JTM

Scott Hollister · Answer

Hello @Joshua Martin, I have two quotes in front of my desk that I look at from time to time that might help you answer this question. Two Rules for Making MoneyRule #1 Never be Emotional Rule #2 The greatest opportunity for gain or loss come when other people forget rule #1True Wealth is turning $1 dollar into $2 dollars Before I can answer that question you must know my background. I have done a house hack, a BRRRR, and I am now working on a flip. So I have to make my decision based of the knowledge I currently have at hand. (Like you said, investor preference) I would buy 5 REO properties in my area at 100k each and leverage that money. I would partner with a hard money lender at 90% of purchase price and have them cover rehab costs. Once done, rent out the houses and have the tenants pay the interest to the hard money lender. Refinance out at 80% LTV and hopefully make some money. $$$ Now you have 5 Cash flowing properties in 6 months and over 100k in the bank. $$$Is it high risk? Yes. (Better have some reserves) Can a normal person or newbie handle 5 houses at once? Ehhhh better to start with 1-2Do you need connections? AbsolutelyAre people going to tell you it can't be done? YES, but screw them. If you're passionate enough and you want it bad. ANYTHING is POSSIBLE Keep building your cash reserves and then move it into large multis down the road!

Mike B. · Answer

It really all depends on your strategy and market Joshua. For example, $100k here in Los Angeles won't do much good. It could be used as a down payment, maybe pay for some rehab work, etc, but I'd be hard pressed to be able to purchase a property for that amount. In other parts of the country, you could fully purchase 2 or more properties all cash, maybe even including some repairs. Consider how soon you need/want your money back as well as how the market is performing for returns in the area you're looking to invest in. You'll also have to account for any marketing costs, holding costs, permits, closing costs, taxes, insurance, etc, etc...You might consider diversifying your investment by let's say just for example's sake:- Buy a $20k house with $10k repairs, and re-sell for $45k- Buy a turn-key rental for $40k for cash-flow and appreciation- Buy a private mortgage note for a property valued at $50k at a discount for $25 and receive cash flow payments and appreciation- Buy a $100k house on a lease option/purchase for a 3 yr term with $2k down, then sell it on a lease option for a 2 yr term, receiving $5k down and future sales price of $115kYour Options Are Endless

Ryan Arth · Answer

In my area that would either get you a starter home rehab for cash or a leveraged property(rehab/sfr rental/ mf rental). There is a lot of competition for entry level rehab houses, from all over the country, so I would avoid that at this point in my career. Whether I went leveraged rehab or rental really depends on the individual and whether they are trying to eat off of the returns on this money or just grow their wealth while working elsewhere to eat. Also how much time they have available will dictate the answer a bit. You could also partner to increase the available capital pile, but when you introduce that variable the answer becomes "you could basically do anything with 100k" So the moral of the Cardone story is that he says you should only invest when you aren't using every dime that you have and NEED(which is always easy to say when that time in your life is in the rearview mirror).

Jeremy Kuchenbecker · Answer

Love Grant Cardone and his sales training is phenomenal, but he's dead wrong here. It's important to have reserves and cash on hand, but I'd much rather learn from my mistakes on a smaller value home than a larger one. Not to mention I started with $24k down on my first sfh and has cash flowed $500/mo for several years while appreciating between another $30-40k, I would have missed that if I followed his advice and still be behind where I am now.

Breynan Hammons · Answer

Joshua Martin figure out what your goal is first. Are you looking for active income or passive income. Post above have touch base on strategies for both.

Joshua Martin · Answer

Thanks for the input everyone, I really appreciate the insights. And I guess posing the question it didn't occur to me how high the buy in in some of your markets is. @Manolo D., I feel like I would be a king with that cash! (In Milwaukee, that is).I think my play would be multi-families, the bigger the better. That's where I've wanted to be since I started this journey, but I thought all the perspectives would be good, and they have.Thanks gang.

Matt H. · Answer

Grant is of course wrong and he doesn't even believe that statement. These guys like Grant who have made a lot just like to say things to stir the pot. They get tired of explaining everything again and again so they make outlandish statements. I think he also said you shouldn't buy a primary house. He doesn't believe that either generally and I am willing to bet he doesn't rent. You start as soon as you safely can, maybe earlier. We can all agree on that. And as everyone here has said there is no exact right answer to what to do. Only several wrong answers. Depends on where you are located, where you are at in your career, how much you can borrow, what your skill set is, how much risk you want to take and on and on... Personally my first 100k was refinance money pulled out of my first house I bought. I bought a 4 plex with it l. And my most recent 100k was cash flow and I bought another 4 plex with that, with partners. Matt

Manolo D. · Answer

100k in LA, will be just.... a down payment for a primary, that is, if you qualify for a loan. 100k for out of state, you'll be like a king, when you talk, everyone listens. i don't know finance but to my business, 100k can be of different forms, a credit card, cash in bank, stocks, equity, accessible loans from anyone. I haven't heard his sales pitches or thoughts, but I don't think Grant is wrong.

Darnell Kramer · Answer

Wow.. 100k to start. Sounds high. My first house was bought on a VA loan, lived in it for a year worked on it on the weekends and after work.15 years later with 100k, and getting out of the military, I would buy a 4 plex where I am moving and leave one unit open I would rehab myself. I mean getting out of the military what else am I going to do with the extra 12 hours a day? The after those 4 units have all been turned, or while waiting for another unit to vacate I would look for a second quad. I could speed it up and use a team and really go high gear, but you know what. I just want to paint walls and put up dry wall and hang cabinets at my pace for a year.