First Timer w/ Cash - Where to Start?


I am 24 and live in Massachusetts. I have $100,000 saved. 50,000 in paper investments and 50,000 in cash. I would prefer not to liquidate my investments and just use my 50,000 cash. I have excellent credit. Real Estate investing excites me and I’ve begun to do some preliminary research of the different types of deals out there.

What is the best way to spend my money? Here are my thoughts:

Buy a rental property (2 or 3 unit not owner occupied in metro Boston) - I’ve looked at homes w/ strong rental markets but the ones I’m interested in are over 400,000. This would eat up most of my cash by putting the minimum 10% down.

Subject To Deals - Is this the way to go given the current real estate market and the amount of homes that are being foreclosed? This seems like there is a big learning curve and as a first timer I’m not sure this is the best idea.

Fixer-Uppers - I find that many of the homes I’ve looked at in the 400-550,000 price range are easily rentable but need some minor renovations to really shine and yield their full potential. Is it possible to roll a construction loan into the primary mortgage?

I feel kind of lost but I also feel like I’m in a good position because so many people are trying to sell but can’t and I’m ready to buy!

Thank you for any advice you could give me!


The rental property business is ALL ABOUT THE NUMBERS. You would need monthly gross rents of about $8,000 to even make a $400,000 rental worth considering. Do rentals in your market have that type of rents?


Are you looking to start a new buisness or just build reitirement

if your looking to build ret. then subject to is best for you. You can close at a title company and you do get the deed. Your just using their credit, no down pmt. you just pick up where they left off.

1-5 yrs into loan, means you only have however many left… more twords principle…

most of the time no money down, docs are easy to do
(sometimes you end up with all money back when someone puts dep and first month rent down)


thank you for your post. Here is one example

425,000 purchase
42500 cash down
42500 Fixed Rate HE Loan
340000 primary mortgage

2380 Mortgage payment (assuming 7.5% interest)
430 HE Loan (assuming 15 year 9 %)
275 Taxes (3300 / 12 months)
66 Insurance (im not sure how much this would be i guessed 800/12 months)

3151 are the total regular monthly expenses. How did you arrive at 8000?

thanks again

Basically what propertymanager is saying is that you must not pay retail for rental properties. You must buy at at BIG discount. The basic formula is the cost of market rent multiplied by 50. The figure you get is the max purchase price allowed for the property. If $400,000 is the price, your market rental rate should be $8,000 a month for it to be a deal (dividing by 50 in this case). Seems crazy? Yes. Possible? Depends how hard you work. Good luck.

if you cant cash flow a property then your bottom line is : you
will end up as a broke & bitter landlord. most landlords only pay
80% of FMV. and not even that if it wont cash flow get some education & read all you can on this site & boards.
there is a ton of free info for the taking. for a short sale forum try 100k wont last long if you dont use it to work for you.
also it is almost impossible to cash flow properties in the range you speak of. think working class. why pay 42kdown & only do 2 deals or so , when you can maybe do 15 or 20 deals ’ subject to & only have to catch up back payments & taxes for example.
DO NOT :flush YOUR FUTURE before you even get started.
harriet(fl) just my 2 cents worth of advice.

3151 are the total regular monthly expenses. How did you arrive at 8000?

If that were only true…

Unfortunately, throughout the United States, operating expenses run 45% to 50% of the gross rents. You only included taxes and insurance. In the real world, you will also have management, maintenance, vacancies, advertising, entity maintenance, legal fees, damage done by the tenants (beyond the deposit), lawsuits, evictions, capital expenses (although not technically an operating expense), utilities (at least during vacancies) etc, etc, etc. I could go on and on.

BTW, this mistake is EXACTLY why the vast majority of newbies fail in a short period of time. They pay retail for a property; think the only expenses are taxes and insurance; and then lose their butt when reality strikes. Fortunately, you now know better and you shouldn’t make this mistake.

Good Luck,



thank you, this makes a more sense to me now. How do you not pay “retail” for properties? By buying forclosures? I’ve just been looking at listings online so far (I’m assuming this is “retail”).

It seems to me that doing a subject to deal might be the best way to go unless i can find some deeply discounted rental to purchase.

thanks for all your posts!

You need to go out there and talk to people, network out and make contacts that know you’re looking for distressed property. That doesn’t necessarily mean that it has to be distressed financially; any reason to sell quickly makes it so. For example - divorce, job transfer, death, etc. are just a few of many reasons that create desperate sellers which in turn create deals.

Now that is a very usefull info for me as well: monthly cash flow X50, Thanks.
I think it will be very hard to find that type of deal, but I guess have to be patient and eventually it’ll come.

Is it possible to go with 5% down instead of 10%? and this would be for multi apartment building (50-70 families). Will this depend from credit score or other factors as well?


I think it will be very hard to find that type of deal, but I guess have to be patient and eventually it'll come.

That’s right, it is very hard, especially when you are first starting. The point is to do the hard work and take the time to do it right. 'Just Do It" might be good advice if you’re buying tennis shoes, but it is TERRIBLE advice when it comes to buying rental property.

Is it possible to go with 5% down instead of 10%? and this would be for multi apartment building (50-70 families). Will this depend from credit score or other factors as well?

Yes, anything is possible. However, it all depends on a lot of factors. Using a small local bank is often the best way to get a low percentage down based on a purchase price that is significantly lower than the appraised value (low LTV). Of course, your credit history and business experience will also enter into the equation.

Good Luck,


Possible but not likely. With 4+ unit multis you have to get a commerical loan and the first thing they look at is debt coverage (how rent is broughtr in versus monthly payments). Small local banks do work well for this type of lending as they hold this in their portfolio, but as you go above 70 or 80% LTV the rate will get rather striff plus these loans are going to be amortized over 20 or 25 years with rate adjustments ever 3-5 yrs.

So the local banks are the place to go, can you please explain “local bank”.
Also LTV, not sure I understood this.

LTV = loan to value. In other words, how much you borrow as a percentage of the value of the property.

Small Local Bank:

Small = not big
Local = in your town and only having a few branches


And for the lender, the Value of the Property is the lesser of the purchase price or the appraised value.

I don’t know what banks will do in your area. In my area, the mortgage balance and the equity credit line on my investment property can not exceed 80% of the appraised value of the property.

Instead of getting an equity credit line on the investment property, are you planning to use another property with sufficient equity?

Don’t forget that when you do 90% financing, you will have mortgage insurance too.

I would say to start by keeping your cash safe and learning all about the business before letting it burn a hole in your pocket…

I’m thinking of getting my real estate liscense and working in a brokerage so that I can learn the business and the market. What do you seasoned pro’s think of this idea? Once I have much more knowledge then I will do some deals on the side. Seems like a good place to start for a first timer.


Being a real estate agent and being a real estate investor are two completely different careers. One does not relate to the other, save for the fact that they both deal with real estate. Kind of like saying, I’m going to be a car salesman so that I can learn to be a mechanic.

Nothing wrong with being a RE agent. Just note that you will NOT learn how to be an investor by becoming one.


Getting your RE license will be educational. A person just needs to be open-minded that being a REI takes more creativity than what the traditional way in purchasing property is. I think it’s a good start for a new investor to learn one side of the business firsthand (get into the mind of a realtor); then use it accordingly as an investor.