Need advice on leveraging 100k

[Joshua Miller]

Hey all,

First post here! Time to put my hard earned savings to some use I think :) 

Need some advice . So I have 100k in the bank, have been approved through B of A for an investment loan @ 4.5% 75% LTV btw.

I'm considering 2 options,

1. Buy 100k home (Jacksonville, Vegas?) cash, and then pull equity out to use as deposit on a 400k duplex (Ann Arbor, Portland?). How hard is it to pull that equity out? Would most banks do the loan?

2. Simply buy the 400k duplex.

At this point as a first time RE investor I'm not sure if I should get my hands that dirty without too much experience, but I think that it would put me ahead in the long run.

And just a note I live in Los Angeles CA, and am looking at out of state simply because of the yields and prices. Feel like I have been priced out of CA. Maybe after I get the investment properties I could get a FHA 3.5% loan for my own place here? Does anyone think I would have a problem doing that?

Thanks!

Josh

[Mike Roy]

Originally posted by @Joshua Miller:

Hey all,

First post here! Time to put my hard earned savings to some use I think :) 

Need some advice . So I have 100k in the bank, have been approved through B of A for an investment loan @ 4.5% 75% LTV btw.

I'm considering 2 options,

1. Buy 100k home (Jacksonville, Vegas?) cash, and then pull equity out to use as deposit on a 400k duplex (Ann Arbor, Portland?). How hard is it to pull that equity out? Would most banks do the loan?

2. Simply buy the 400k duplex.

At this point as a first time RE investor I'm not sure if I should get my hands that dirty without too much experience, but I think that it would put me ahead in the long run.

And just a note I live in Los Angeles CA, and am looking at out of state simply because of the yields and prices. Feel like I have been priced out of CA. Maybe after I get the investment properties I could get a FHA 3.5% loan for my own place here? Does anyone think I would have a problem doing that?

Thanks!

Josh

@Joshua Miller - I'd be careful about announcing to a bunch of strangers that you have $100k in the bank.  Five replies in and you already have an offer to manage your money and another from a hard money lender which, let's face it, is likely not an appropriate option for a brand new investor who does not understand nor has the use for this kind of tool.  In this world, if people know you have money and sense that you're naive, they're going to try to take it from you. 

You said you worked hard to earn that money, and I'm sure you did!  If you look at money through the lens of accumulated labor , $100k represents an awful lot of work!  Keeping that money and making it grow is an even greater responsibility that requires specialized knowledge.

My humble recommendation is to get educated - about money, finance, market cycles, residential real estate or any other investment vehicle you're considering.  I'm by no means an expert, but I do know that if you're expecting to cash flow a $400k duplex in Ann Arbor, you likely do not have a high degree of financial or real estate education.  That is not an insult, just an observation.  The mere fact that you have saved so much money means you are doing a lot of things right!  If you can figure out how to save $100k, I know you'll be able to learn how to intelligently invest it! 

There are tons of free resources to get educated if you're interested, and I highly recommend the BP podcast and The Real Estate Guys podcast for starters.  I also recommend you connect with successful people that are doing what you want to do and try to find a way to add value for them.  Some people think the Robert Kiyosaki recommendation is trite, but I think his content is incredibly informative and inspiring to people who are just getting into investing.    

Good luck!