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Updated over 7 years ago, 08/01/2017
Need advice on leveraging 100k
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
Josh.
I think this is a great plan to invest out of state and that is what I have done as well.
I'm also in LA and would love to chat on the phone or meet up in person.
DM me and lets connect.
@Joshua Miller, I work with an investment company and brokerage that could help guide you through investing in Jacksonville if you are interested. Feel free to connect and send a private message if you are interested.
Thanks!
I don't invest out of state due to the risks involved. You are now at the mercy of people who are trying to sell you something and may or may not have your best interest in mind. I can't advise you as I don't know what your end goals are. However here are some suggestions:
Partner with an experienced flipper where you provide some of the money and they teach you what they know.
Buy a duplex or sfr and house hack
Buy a duplex/sfr in a lower priced area (inland empire high desert) and rent it out.
Good luck
If you going to pull money out you aren't getting more than purchase price for 6-12 months, plus you'll have fees to do so.... and you're going to have LTV limits too.
So say you bought 100k house, worth 125k, you aren't getting 100k back out of it. You're getting 75k sans fees. (generic example)
If you would like to use a hard money lender feel free to shoot me a message!
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!
#3 Contractors Contributor
- Contractor
- Los Angeles, CA
@Joshua Miller I'd go with @Account Closed, if it's your first time investing, you don't know what you don't know, there are people who want your money and make money up front then leave you hanging. Flipping is hot here, and if you want drip income, you can go around Santa Clarita, or Riverside and find a multiplex. Somewhere where you could drive if something goes wrong. Otherwise, you might be just buying yourself a job and lose money. CA is high, little to no cash flow, but appreciation is great and will throw away any cash flow property out the window.
@Account Closed
I appreciate the warnings, there seem to be a lot on this thread, which I will take in. I am in this for the drip income, and have considered Socal but having cash flow is really important to me as my income may fluctuate in the coming years and I wouldn't want to be the expenses of the property out of pocket. I've been trying to find somewhere that is a middleground between cash flow and appreciation
#3 Contractors Contributor
- Contractor
- Los Angeles, CA
@Joshua Miller Hmm. Then, you might consider just being the bank. Be a private money or hard money lender. You do not have to be the active partner on a flip just like @Account Closed. If cash flow, then the outskirts of LA should serve you best. If you go OOS, you have a lot of risk, earning say only a hundred a door, or your 20% gets wiped out when the market dips, or when a $1,000 repair will eat all your profit for the whole year -- meaning you are working for free for your property and only gain the equity/principal payments, or you have to fly there to take control over it, or signing a contract that has flowers that bloom gold that never really happens.
Joshua Miller can you share the numbers on the AA property?
Russell Gray always says you first need to identify you're personal investment philosophy; then you need to identify a compelling market with growing demand drivers and become intimately familiar with that market and its customers; then you need to build a team on the ground; and finally you find a property. The property is the least important part, and you can actually do very poorly on a great property if you don't first understand the product type, the market for that product or have a great team in place to manage and maintain it.
If I were just getting started with $100k, I would try to find a 2-4 unit with numbers that would enable me to live in one unit, rent the others, and live for as close to free as possible. House hacking combines the benefits of owning a great asset, an on-the-job lesson in property management, and a potential massive reduction in life's biggest living expense.
There have been numerous threads on in state vs oos investing. I suggest you do some research looking up previous threads and a lot of the risks will be outlined.
Good luck
@Joshua Miller welcome to BP!
As you can see everyone has an opinion. I take it you have made your decision of what you're going to do before you even posted your question.
Go and do it! I'm sure you'll learn something good and bad.
We will be here waiting to get a report from you.
I live in Ann Arbor. In short, to invest in Ann Arbor you needed to be in this market 5 years ago. For any new investor thinking Ann Arbor Michigan is easy money, think again. However, outside of Ann Arbor is another story.
Let's just say outside of Ann Arbor I can make a 25%+ return on a flip and command higher rents once add value is complete.
When I am done with my current flip project I'll share with you the project and every detail if you would like.
I'll share it with anyone in fact. Just let me know.
@Scott Matthew C. - interested to see how flip in Ypsi turns out. I may post some pictures of the one I'm doing in Ann Arbor once that's complete. Hope life is good and the deals are plentious!
@Joshua Birk - Thanks for inquiring. It took a while to get the right contractor to agree to our terms and conditions. Nevertheless, it's going well ---- so far--- you know how that goes. For now, we are on track and demo finished today. Next up city inspections.
Let me know when you're in town next and let's do lunch!
When your project is complete, let me know. I'm stoked to see the finished product!
All the best my friend!