Newbie wanting to do something smart with inheritance.

Newbie wanting to do something smart with inheritance.

Real Estate Agent · Glendale, WI · Member since 2019 · 11 posts · 10 votes

Good afternoon everyone, my name is Erica and I am based out of Milwaukee, Wisconsin. As described, my father passed away last June unexpectedly of a heart attack. Now that I am in the better parts of the grieving process, I need to face the fact that I will be coming up on an inheritance, and I want to do my best to do what he would do with it. My father did financially well in his life so to speak and was also a entrepreneur throughout his whole life. He was extremely creative on how he built his wealth and was even a college drop-out.

 I am 27 and for work I am a Graphic Designer a part of a marketing team, I understand this skill may come handy in the future. I am pretty set on the idea of trying out flipping one house, but I still keep an open mind. I am open to any input as of to where I get started and plan on listening to all the available BiggerPockets podcasts. I also have a landlord course that is offered for free through the state that I plan on taking as an exit strategy for me would be turning said flipped house into a rental if it doesn't sell in a timeframe I feel comfortable. I plan on using a realtor to help me walk through houses the first couple times and even obtain my first property, but plan on obtaining my own license in the process so I can eventually cut out that middleman. Any advice critiquing my path is much appreciated, I am happy to be here and am enthusiastic to meet people on BiggerPockets. Can't wait to meet you! 

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Rebecca KnoxBusiness Member
Specialist · Milwaukee, WI · Member since 2014 · 1k+ posts · 1k+ votes
7y

I agree with Joe. Be cautious as the vultures will come out and some people are very good at separating people from their money. Every con artist is charming. I think one of the most difficult things for a newer person is knowing the right questions to ask to vet a partner. 

If it were me, before doing a rehab, I would do what Joe said and buy a multi and live in one unit. You will get the experience of hiring and working with contractors on a smaller scale while fixing up the property. The other suggestion would be find a conservative flip for your first project--light cosmetic vs a full on gut job. This will also mitigate your risk while you learn some basic processes.  Where I see newer people get in the most trouble is over paying at the beginning, hiring people based off emotion rather than facts and over-doing it on their first project--knocking down walls in the older homes in Milwaukee can open a whole set of problems you may not have predicted. 

I work with many investors and most have an 'end' game of building passive income---either holding a nice rental portfolio or becoming a private money lender. The rehabs, wholesales and wholetails are all active income. 

You may find the BRRRR (Buy, rehab, rent, refi, repeat) strategy intriguing given your situation and your desires. You can still rehab while building financial freedom.

Also, speaking with an accountant that is seasoned in real estate investing might be helpful. My accountant is Eric Trost at SVA and he is amazing--knows every strategy used in real estate. 

The intriguing thing and what I love about real estate is once you start networking and talking with others, you learn so many different strategies you never would have thought of. 

Captain Save-A-Home LLC
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  • Rental Property Investor · Beaverton, OR · Member since 2018 · 88 posts · 155 votes
    7y

    Welcome @Erica Winship, sounds like a pretty good plan so far.  Since flipping is your goal I would definitely check out J. Scott's book, "The Book on Flipping Houses".  We don't flip homes ourselves but we do use quite a few of his strategies outlined in that book in order to find and rehab our rental properties. And we use his other one "The Book on Estimating Rehab Costs" even more.  But yea, there's a wealth of information here at BP.  

    Best of luck Erica.

    Ashton

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Erica Winship welcome to BP and sorry for your loss. Losing a parent at such a young age is very difficult. I know it is process and you never fully heal, but honoring his legacy is something constructive you can do to help.

    A couple things about flipping. First of all, it is a job. It is not investing, from the standpoint you are only deploying your capital short term. It takes time and ultimately your profits are taxed like regular income. It is also nothing like what you see on TV. I am not trying to talk you out of it, but just making sure you understand exactly what the business is. 

    Also a word of caution, when you post on a public forum that you came into money, you will get vultures coming and offering to help. I assume you are smart enough to not fall for this type of thing, but just wanted to throw out the caution.

    As a first step with the money, I would recommend paying down any debt you have. This will put you in a power position, so even if things go wrong with the flipping business, you don't have other debt that is pulling you down. 

    I am not sure if  you currently own a home or rent, but one option would be to buy a multi like a 4-plex, live in one unit and rent three out. Rental property is a great way to accumulate wealth. Unlike flipping, you don't need to keep finding more projects. You can buy a property and hold it 20 or 30 years, getting checks every month. 

  • Rental Property Investor · Jefferson, GA · Member since 2017 · 95 posts · 145 votes
    7y

    Erica, 

    Welcome to Bigger Pockets.  I'm very sorry to hear about your father.

    Assuming having a large sum of money at your disposal is new territory for you, unless you have some sort of crippling debt, my advice would be to do nothing with it for at least a year.  Put it in a high yield money market or savings account and let having that amount of money grow on you.  The reason most lottery winners and professional athletes eventually go broke, is they are not accustomed to being wealthy and are impulsive.  They want "things" and live in the moment, they don't plan for the future.  Let being wealthy become your new normal.

    During that year, do all the things you said in your post.  Learn.  Become financially literate, and find ways to make your money work for you.  That might be real estate, but it might not.  Everybody's different.  Explore your options.

  • Real Estate Agent · Glendale, WI · Member since 2019 · 11 posts · 10 votes
    7y

    @Ashton Levarek I've seen those books being talked about on the podcast. Thank you for recommending them because I've been writing down all these books people are recommending but not knowing where to start. 

  • Real Estate Agent · Glendale, WI · Member since 2019 · 11 posts · 10 votes
    7y

    @Joe Splitrock Thank you so much for your detailed post and the condolence, I really appreciate it. I understand that this will be a job, but seeing I want to try something new I figured I'd give my hand at it once and if it isn't for me, the multiplex idea sounds like a brilliant start. Thank you for helping me look out in regards to vultures, I will be careful and not state amounts or anything like that. I just wanted to stress that I don't want it to just sit there and not do anything or buy foolishly like spending it on a luxury car, I want to do something very practical. As for debt, I do not have any, I was the first one to get out of the student loan hole out of anyone I know, so I must be doing something right! Currently I rent with a roommate because I wanted to scale back on finances in order to accrue wealth to purchase a first home, then this happened. Thank you so much for your advice, I just love talking about this stuff as it really intrigues me. I think I'm more interested in this kind of education that I was when I went to school to grab two art degrees! 

  • Real Estate Agent · Glendale, WI · Member since 2019 · 11 posts · 10 votes
    7y

    @Morgan Klein Thank you for welcoming me and your condolence. Letting it cook for a year is a really good idea seeing I don't have any kind of debt and my job income is sustainable. I am very cautious about even touching it, I just pretty much live like it isn't even there. I'm not very materialistic either, I drive a very practical car and sometimes take a annual vacation, but that's pretty much it. But I know if I want kids and a future where I don't want to be behind a desk making magazines and logos my whole life, I need to take some sort of action. 

  • Ramsey, NJ · Member since 2017 · 26 posts · 9 votes
    7y

    Sorry for your loss, I would recommend spending a few months researching and talking to people before making any type of financial commitment. 

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y
    Originally posted by @Erica Winship:

    @Joe Splitrock Thank you so much for your detailed post and the condolence, I really appreciate it. I understand that this will be a job, but seeing I want to try something new I figured I'd give my hand at it once and if it isn't for me, the multiplex idea sounds like a brilliant start. Thank you for helping me look out in regards to vultures, I will be careful and not state amounts or anything like that. I just wanted to stress that I don't want it to just sit there and not do anything or buy foolishly like spending it on a luxury car, I want to do something very practical. As for debt, I do not have any, I was the first one to get out of the student loan hole out of anyone I know, so I must be doing something right! Currently I rent with a roommate because I wanted to scale back on finances in order to accrue wealth to purchase a first home, then this happened. Thank you so much for your advice, I just love talking about this stuff as it really intrigues me. I think I'm more interested in this kind of education that I was when I went to school to grab two art degrees! 

    Here is a perfect option for you. Find a duplex or 4 plex that needs some work. You can fully renovate the property. Kind of a flip, but then don't sell it. Move into one unit with your roommate. Your roommate pays you rent. Then rent the other unit(s). Not only will you live rent free, but this puts money in your pocket every month. 

    Just aside from this inheritance, you are obviously doing very well for your age just by being debt free. I can already tell you are highly responsible person and you will do well managing this inheritance.

    As far as the art degrees and your profession, you have a great option in your profession that freelance work is possible. So if you chose to not have a traditional W2 job in the future, you could work from anywhere in a freelance fashion. It is a great option if real estate becomes more time consuming. You can retire your day job and take on as much (or little) freelance work as you have time/interest for.

  • Justin WindhamPro Member
    Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes
    7y

    @Erica Winship

    Welcome to Bigger Pockets!

    You'll find plenty of friendly, knowledgeable people willing to respond to your posts. A lot of forum members are experts in their respective fields related to real estate investing, whether that is real estate sales, wholesaling, flipping, buy and hold investing, lending, self-directed IRA and Solo 401k investing, or tax and legal guidance.

    There are some pretty nice discounts on many products and services offered as Perks to BP members that you might want to check out: https://www.biggerpockets.com/perks/pro

    If you haven’t been to it already, the Bigger Pockets blog features links to their fantastic podcast and many great articles: https://www.biggerpockets.com/renewsblog/

    The site has quite a few tools that can be helpful for new members. For example, if you are looking to connect with other members near you, want to learn from people in a specific area you’d like to invest in, or have a desire to find people interested in certain topics, you could use the search feature here: https://www.biggerpockets.com/search/users

    I really like the alerts feature that can quickly guide you to current topics that may be of interest: http://www.biggerpockets.com/alerts

    There are a few self-contained guides that you can access here: https://www.biggerpockets.com/guides

  • Daniel HymanBusiness Member
    CPA · Milwaukee, WI · Member since 2016 · 2k+ posts · 1k+ votes
    7y

    Welcome to Bigger Pockets @Erica Winship. My condolences on your loss.

    If you are looking into flipping, you may want to partner up with another investor who has the experience. Some of the best partnerships that I see in my line of work is when partner A brings the capital and partner B brings the experience and does the work.

    Best of luck and wishing you happy occasions in the future!

    My Online Accountant572 Reviews
  • Real Estate Agent · Glendale, WI · Member since 2019 · 11 posts · 10 votes
    7y

    @Daniel HymanThank you for your condolences I really appreciate it. I see your formula working for something I was to do with me being partner A because I actually have a partner B in mind which is a local remodeling company which I can pay to do the work as well as come up with design ideas with me. Good to see someone else from the Milwaukee area on this network! 

  • Real Estate Agent · Glendale, WI · Member since 2019 · 11 posts · 10 votes
    7y

    @Joe Splitrock Thank you for presenting that option to me, and yes, doing Graphic Design on the side is the goal because the truth is I don't think I'm meant to be behind a desk forever and sometimes I feel working full-time, runs the creative tank on empty. The goal is to one day not have to have a roommate, but I understand I have to start small, but at least start somewhere. 

  • Rebecca KnoxBusiness Member
    Specialist · Milwaukee, WI · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    I agree with Joe. Be cautious as the vultures will come out and some people are very good at separating people from their money. Every con artist is charming. I think one of the most difficult things for a newer person is knowing the right questions to ask to vet a partner. 

    If it were me, before doing a rehab, I would do what Joe said and buy a multi and live in one unit. You will get the experience of hiring and working with contractors on a smaller scale while fixing up the property. The other suggestion would be find a conservative flip for your first project--light cosmetic vs a full on gut job. This will also mitigate your risk while you learn some basic processes.  Where I see newer people get in the most trouble is over paying at the beginning, hiring people based off emotion rather than facts and over-doing it on their first project--knocking down walls in the older homes in Milwaukee can open a whole set of problems you may not have predicted. 

    I work with many investors and most have an 'end' game of building passive income---either holding a nice rental portfolio or becoming a private money lender. The rehabs, wholesales and wholetails are all active income. 

    You may find the BRRRR (Buy, rehab, rent, refi, repeat) strategy intriguing given your situation and your desires. You can still rehab while building financial freedom.

    Also, speaking with an accountant that is seasoned in real estate investing might be helpful. My accountant is Eric Trost at SVA and he is amazing--knows every strategy used in real estate. 

    The intriguing thing and what I love about real estate is once you start networking and talking with others, you learn so many different strategies you never would have thought of. 

    Captain Save-A-Home LLC
  • Flipper/Rehabber · Milwaukee, WI · Member since 2016 · 153 posts · 84 votes
    7y

    @Erica Winship

    Welcome to BP!

    I’ll pile on with recommending that you consider purchasing a small multi family (2-4 units) and occupy one and rent others. This is how I got started in real estate and is a great way to reduce your living expense while building equity and starting learn more about what owning real estate means

    If you can find a place that needs a little work that might be even better. Doing some rehab projects on this type of property will get you exposure to the process of renovating a property, gain knowledge of how a renovation happens, and start building your network of contractors.

    One last tip is to stay engaged with local REI groups (brew city REI club, Milwaukee REIA, etc. ). You will learn so much being a part of these groups and create connections that will help you throughout your real estate investing career.

    Good luck!

  • Matthew PorcaroBusiness Member
    Lender · Long Island, NY · Member since 2016 · 456 posts · 336 votes
    7y

    @Erica Winship

    Hi Erica - very sorry to hear about your loss, but happy to hear you’re looking for your best interests in the future with what you’ve been given.

    I agree with Brett above me. If you’re already currently renting, why not buy a 2, 3, or, 4 unit property, live in one unit, and rent out the rest. Not only can you live potentially mortgage free. You may be able to cash flow as well.

    During this time; your tenants are paying your mortgage, and you’re putting equity into the property, that you can use to get into future deals.

    For your situation I think this is the best way to get started. You can use an FHA loan for this, which means you only need to put 3% down payment.

    The 203k Way
  • Rental Property Investor · Brooklyn NY · Member since 2018 · 263 posts · 469 votes
    7y

    @Erica Winship

    I agree with @Morgan Klein.  Do nothing for a year and act as if you do not have the money.  Managing this windfall is key.  Build a solid financial base and then explore options on growing the money, placing it in tax advantage accounts, etc. 

    I would suggest reading this article from Bogleheads on managing a windfall:  https://www.bogleheads.org/wiki/Managing_a_windfal...

  • Real Estate Agent · Glendale, WI · Member since 2019 · 11 posts · 10 votes
    7y

    @Rebecca Knox Thank you for such a detailed and thoughtful post and recommendations. You listed a lot of thoughtful options that I haven't even considered yet (such as the BRRRR, I've seen that term on here but didn't know what it meant). I also have interest for obtaining a real estate license to further education in this stuff.

  • Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    7y

    @Erica Winship

    Welcome to the BP family! Glad you joined the best real estate investing website!

    Wishing you the best!

  • Rental Property Investor · Portage, WI · Member since 2018 · 33 posts · 11 votes
    7y
    • Hello Erica,

    Welcome to the BP community. I have been a member of BP for about a year and was also a Graphic Designer, before my venture into RE. You sound like a smart young lady and have a great plan in place. The information that everyone has been giving is great. I agree wholeheartedly with what they have mentioned. The BP books are a great place to start. Last week I read J. Scott's book on Flipping Houses, Brandon Turner's book on Buying Rental Properties, and Josh Dorkin and Brandon Turner's Ultimate Beginners guide to Real Estate investing. All unbelievably well written. Of the 3, I recommend beginning with the Ultimate Beginner's Guide. 

    I wish you the best of luck with your journey into flipping. Milwaukee is a great city with some really phenomenal opportunities. The addition of the Amazon distribution center next year is only going to add to an already thriving market.

  • Retirement Accounts Attorney · Southfield, MI · Member since 2017 · 3k+ posts · 1k+ votes
    7y

    @Erica Winship

    Welcome to BP.

  • Real Estate Agent · Glendale, WI · Member since 2019 · 11 posts · 10 votes
    7y

    @Jason Ericksen Thank you so much for taking the time to write a thorough comment, I really appreciate it. As a little update, I have signed up with wra.org as pper recommendation when I was asking where to get educated in Real Estate and have also joined Brew City REIA per @Rebecca Knox recommendation. Currently I have decided my focus is finding a multiunit in the Menomonee Falls area and renting it out to gain experience as a landlord, and I heave learned that this is an exit strategy if a flip doesn't go as planned. What impact do you think the addition of the amazon distribution center will have in regards to real estate in our area? 

  • Rental Property Investor · Portage, WI · Member since 2018 · 33 posts · 11 votes
    7y

    I have been researching the impact on Oak Creek and the MIlwaukee market, for the last few weeks. If you would like, I can e-mail you my notes. I have heard nothing but great things about the Brew City REIA. Your on the right path with a phenomenal group of talented people to guide you through the process.

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