Those are great questions.
The answer involves your goals and objectives, and timing.
BTW, I misunderstood. I now understand you have $25K, to burn, not $45K.
I think you can kill several birds with one stone, if you’re willing to be creative and open minded. That is, create equity, cash flow, and a place of your own to live, all at the same time.
For example, you find a motivated four-plex owner near where you would prefer to live. He wants out. He doesn’t know how to manage property, and has no equity, and has two vacancies, and is sucking drain water financially.
You offer him $25,000 as a down payment, and offer to take over his first mortgage of $225,000, and pay him off in ten years. He says, “Great!”
[ Two years later, you discover that some four-plex sellers will just let you take over their loans without a down payment. You kick yourself. ]
Meantime, you take over the payments on the four-plex, you get the deed, you move into one of the vacant units, and quickly rent the remaining vacant unit. Now, you own the place you live in, and your tenants help pay your bills, and you’ve got 100% occupancy.
In six months, after you’ve got a lay of the land, you determine that the rents are about $150/mo low, and so you raise the rents $100/mo on each remaining unit, which brings in another $300/mo, which now covers your portion of the mortgage 100%.
If three years, the rents will have climbed another $600/mo, and there is now $900/mo in cash-flow.
You now offer another motivated four-plex owner a down payment secured by your current four-plex, instead of cash, and do the exact same thing you did with the first one. Move in, raise the rents, and in three years, you now own eight, cash-flowing units.
Then things get interesting.
You start seeing 10-unit and 15-unit buildings in the same situation as the four-plexes you were buying, and you begin making creative financing offers to buy those, from owners that have no business in the multifamily business, and you trade down payments, secured by other properties for ownership, and keep doing this until you own enough units that your income exceeds anything you’re making at your j.o.b., and then literally opportunities seem to come out of nowhere, as other owners want to sell to you, agents bring you sweet deals, and you continue weighing options on deals that make total sense, using creative financing techniques.
Does this seem like pie in the sky? Apart from buying four-plexes, this is exactly how I started.
I jumped from ghetto houses into seller financed multifamily units.
I did have an advantage.
I had extensive property management experience, and I loved managing people, which is the essence of property management, and a fair must for successful real estate investing anyway.
I’m sure there’s successful real estate investors that hate people, but I don’t know them.
I could say more, but suggest that if you can think bigger, think ‘leverage’, think creative financing, and think further ahead, you’ll turn that first $25k in to a small gold mine in no time.
Of course, the devil’s in the details, but that’s why I also suggest buying training. Robert Allen’s book “No Down Payment Formulas” and anything you can find from the late Barney Zick on options and negotiations would be a start, and certainly John T. Reed’s book called “How to Manage Residential Property for Maximum Cash Flow” would be a must. “Subject to” training would be extremely helpful.
That’ll get you thinking. And yes, this is more about cash flow, and less about equity build up. Equity buildup comes naturally, but cash flow needs to be forced.
Equity investing is for people who like to park their money in pretty properties, and are delighted with 4% returns. Maybe later, but not with only $25k to work with.