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Started By
Message
How should I invest my money?
Posted on 1/10/17 at 3:13 pm
Posted on 1/10/17 at 3:13 pm
$45k student loans at ~4.5%
$10k car loan at 2%
zero credit card debt
$1,200 monthly rent
$100k in IRA/Roth/401k investments
$20k cash
During my annual review and goal setting, I initially was determined to max out both my Roth IRA and 401k investments. However, I'm also sick about paying rent every month. I went online and found several duplex and even fourplex properties in the Raleigh area that currently have tenants. Since I don't have enough cash for an investment loan, I would likely need to move into one of the units myself which would eliminate my rent as well.
Running some numbers, I'm looking at Cash-on-Cash between 5-10% and Cap Rate around 6%.
Are these good enough numbers to consider starting into real estate or should I try to save up more cash for a year for a larger down payment?
Should I forget real estate and focus on paying off debt and maxing my retirement accounts?
$10k car loan at 2%
zero credit card debt
$1,200 monthly rent
$100k in IRA/Roth/401k investments
$20k cash
During my annual review and goal setting, I initially was determined to max out both my Roth IRA and 401k investments. However, I'm also sick about paying rent every month. I went online and found several duplex and even fourplex properties in the Raleigh area that currently have tenants. Since I don't have enough cash for an investment loan, I would likely need to move into one of the units myself which would eliminate my rent as well.
Running some numbers, I'm looking at Cash-on-Cash between 5-10% and Cap Rate around 6%.
Are these good enough numbers to consider starting into real estate or should I try to save up more cash for a year for a larger down payment?
Should I forget real estate and focus on paying off debt and maxing my retirement accounts?
This post was edited on 1/10/17 at 3:30 pm
2
Posted on 1/10/17 at 3:24 pm to seawolf06
I am no expert but how old are you? If you can get into a REI deal young and in a good area, I would definitely look into it.
Posted on 1/10/17 at 3:29 pm to stevengtiger
33 years old 
Raleigh area has been great the last few years and weathered the Great Recession pretty well.
Raleigh area has been great the last few years and weathered the Great Recession pretty well.
Posted on 1/10/17 at 3:47 pm to seawolf06
Personally if you were younger I may look into the multi families but at your age I wouldn't. Not going to be easy taking a girl home there, life can change quick at your age. Its one thing to bring an 18-22 year old girlfriend to a multi family but a 30 year old is a tougher sell on it being a "financial" decision.
I'd look for a cheap starter home in the $75k range, buy the house and live in it for a year or 3 and then rent it out. Fix it up over that time, maybe even get a roomate. Stop paying $1200/ month rent and pay $600/ month.
I'd look for a cheap starter home in the $75k range, buy the house and live in it for a year or 3 and then rent it out. Fix it up over that time, maybe even get a roomate. Stop paying $1200/ month rent and pay $600/ month.
This post was edited on 1/10/17 at 3:55 pm
Posted on 1/11/17 at 12:38 am to baldona
I'd concentrate on paying off the student loan. You can't get 4.5 percent at any bank. Paying this off ASAP is equivalent to getting that amount return on your investments. Wait to purchase any real estate after your student loan and car loans are gone.
Posted on 1/11/17 at 7:38 am to baldona
quote:
Not going to be easy taking a girl home there
Not really a concern at this point.
quote:
You can't get 4.5 percent at any bank.
I understand that and it makes the most sense for the safest return on my investment. I just want to make sure that I'm maximizing my return on both time and money.
This post was edited on 1/11/17 at 7:42 am
Posted on 1/11/17 at 10:03 am to seawolf06
You can't just concentrate on maximizing your returns. I agree you should pay off your student loans ASAP.
I was mostly joking about having a place to take a gf too, but my point was that real estate is not a liquid asset you really should be buying either to flip immediately or hold at least 3 years. I personally would not want a multi family property at your age before I owned a house. At that age I don't want to live next to my tenants every single day. Some people disagree and I understand both sides, but unless you want to have every aspect of your life involved in a rental you don't want to live where you work. What if you get a bad or violent tenant for example?
Yes the returns on a multi family where you live in one unit can be fantastic, but at the same time you are talking like $1000/ month hard money and that's not worth the possible headache to me.
I bet you could find a small house for $75k-100k that could live in for two years and make worth $100-125k. Then rent it out or sell it. You'd have $10k in it and could double or triple your money in 2-3 years. There's a bunch of houses in that range that flippers have a hard time justifying because of a small return but if you live there for 2 years and fix it up overtime can get $20k equity easily.
I was mostly joking about having a place to take a gf too, but my point was that real estate is not a liquid asset you really should be buying either to flip immediately or hold at least 3 years. I personally would not want a multi family property at your age before I owned a house. At that age I don't want to live next to my tenants every single day. Some people disagree and I understand both sides, but unless you want to have every aspect of your life involved in a rental you don't want to live where you work. What if you get a bad or violent tenant for example?
Yes the returns on a multi family where you live in one unit can be fantastic, but at the same time you are talking like $1000/ month hard money and that's not worth the possible headache to me.
I bet you could find a small house for $75k-100k that could live in for two years and make worth $100-125k. Then rent it out or sell it. You'd have $10k in it and could double or triple your money in 2-3 years. There's a bunch of houses in that range that flippers have a hard time justifying because of a small return but if you live there for 2 years and fix it up overtime can get $20k equity easily.
This post was edited on 1/11/17 at 10:07 am
Posted on 1/11/17 at 10:38 am to baldona
I agree on tackling the debt first. Personally I'd take 10k of your cash and pay off your car. Then set a plan to use that note payment that was going to your car plus as much cash as you can extra to payoff your student loans in 2 years. I don't mind the idea of multi family housing or a cheap house to live in and flip. I'd go talk to a banker and see what type of loan you qualify for. I think there are some FHA loans you could get into with no PMI and 5-10% down. It wouldn't be a bad idea to do that while you work the plan to finish off the debt. If you did that save that 10k for your down payment. At the end of 3 years you should be debt free except for your house with a potential rental property on your hands or a flip. The debt needs a payoff plan before you do anything so can understand and forecast your future cash flow.
Posted on 1/11/17 at 11:58 am to seawolf06
Being that you're in "The Triangle", I think that you're wise to be considering rental property investing - especially if you plan on staying there for awhile.
You mentioned your debts and liquid assets, but not your income. So I don't know what looks good for you from a financial standpoint. Personally, I'd start attacking the debts first. One issue with any sort of rental investment is being able to support the debt if/when you have a tenant issue - and you will have a tenant issue sooner or later. You do have a nice cash reserve right now, though part of that would be used to acquire the property.
Personally, I think that the concept of buying a multi-unit property, using owner occupied financing (in this low rate environment), is an excellent one - especially in the Raleigh/Durham/Chapel Hill area. That's how I built the foundation of my real estate portfolio at an early age. As for tenants bothering me... they didn't know that I was the owner. I formed a shell management company to handle the rent receipts. When the topic came up in conversation, I complained about "the damn landlord" right along with them.
That side of it depends on your personality. Not everyone has the personality for real estate. I was never affected by the whims and complaints of tenants, or anybody else, when I was your age or younger.
My outside income, my lack of debts and my personality made my owner occupied rental property investments great ones for me. And once you get the owner occupied financing, it's not like you have to live there forever - remember that too. But like I said, I don't know your personality, income or cashflow situation. And you do have some fairly substantial debt right now. Without knowing more, from 1000 feet, I'd probably suggest a two pronged approach: aggressively attack the debt and then carefully study where you'd need to be to make that move in property investing. If you could work a good plan, in 30 years time, man, would you be sitting pretty.
You mentioned your debts and liquid assets, but not your income. So I don't know what looks good for you from a financial standpoint. Personally, I'd start attacking the debts first. One issue with any sort of rental investment is being able to support the debt if/when you have a tenant issue - and you will have a tenant issue sooner or later. You do have a nice cash reserve right now, though part of that would be used to acquire the property.
Personally, I think that the concept of buying a multi-unit property, using owner occupied financing (in this low rate environment), is an excellent one - especially in the Raleigh/Durham/Chapel Hill area. That's how I built the foundation of my real estate portfolio at an early age. As for tenants bothering me... they didn't know that I was the owner. I formed a shell management company to handle the rent receipts. When the topic came up in conversation, I complained about "the damn landlord" right along with them.
That side of it depends on your personality. Not everyone has the personality for real estate. I was never affected by the whims and complaints of tenants, or anybody else, when I was your age or younger. My outside income, my lack of debts and my personality made my owner occupied rental property investments great ones for me. And once you get the owner occupied financing, it's not like you have to live there forever - remember that too. But like I said, I don't know your personality, income or cashflow situation. And you do have some fairly substantial debt right now. Without knowing more, from 1000 feet, I'd probably suggest a two pronged approach: aggressively attack the debt and then carefully study where you'd need to be to make that move in property investing. If you could work a good plan, in 30 years time, man, would you be sitting pretty.
Posted on 1/11/17 at 8:56 pm to seawolf06
quote:
How should I invest my money?
Wisely
Posted on 1/13/17 at 9:00 am to baldona
quote:
I bet you could find a small house for $75k-100k that could live in for two years and make worth $100-125k. Then rent it out or sell it. You'd have $10k in it and could double or triple your money in 2-3 years. There's a bunch of houses in that range that flippers have a hard time justifying because of a small return but if you live there for 2 years and fix it up overtime can get $20k equity easily.
Technically I have already done this. Bought for $250k in 2014 and sold for $292k in Dec 2016. The problem is I had to split the proceeds with the ex.
Your suggestion is to forget about the rental property and just go for a property first.
Posted on 1/13/17 at 9:02 am to Jag_Warrior
quote:
ou mentioned your debts and liquid assets, but not your income.
I'm around $100k annual, but I like to spend money.
quote:
My outside income, my lack of debts and my personality made my owner occupied rental property investments great ones for me. And once you get the owner occupied financing, it's not like you have to live there forever - remember that too.
Is it just 1 year or 2?
quote:
Without knowing more, from 1000 feet, I'd probably suggest a two pronged approach: aggressively attack the debt and then carefully study where you'd need to be to make that move in property investing.
Would you suggest going in with a duplex to start or save up more and hit the bigger, nicer quadplex asap?
This post was edited on 1/13/17 at 9:05 am
Posted on 1/13/17 at 10:15 am to seawolf06
There is no real set date for owner occupied financing that I found. I'm refinancing my current house to buy a new property and then rent out my current home and I was honest about moving in 3-4 months and there is no fine print saying I can't do that. Everyone at the bank said the same.
I'm not trying to beat a dead horse, but just be careful because not everyone likes to be a landowner. With an duplex or quad your money is usually only in the rent and little to nothing in resale appreciation. The only buyers are investors. So if you hate it you could be stuck. If you buy a single family, worst case you sell it for a profit if you buy it right. You aren't going to buy a house that has rental numbers that make sense but you can't flip for at least a small profit. The rental income won't be as great though obviously. I just have a hard time recommending someone dive in head first to a new industry.
I'm not trying to beat a dead horse, but just be careful because not everyone likes to be a landowner. With an duplex or quad your money is usually only in the rent and little to nothing in resale appreciation. The only buyers are investors. So if you hate it you could be stuck. If you buy a single family, worst case you sell it for a profit if you buy it right. You aren't going to buy a house that has rental numbers that make sense but you can't flip for at least a small profit. The rental income won't be as great though obviously. I just have a hard time recommending someone dive in head first to a new industry.
Posted on 1/15/17 at 3:34 pm to baldona
Thanks for the advice. I do believe multi family homes will appreciate, especially as rental values increase. I would not include that in my valuation, though. I do agree there is a limited pool of buyers for investment properties, but the idea would be to keep it and build my estate portfolio to 5-10 properties.
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