HELP...$185,000 to invest

Greetings everyone! Well, I have just recently sold my home and I now have $185k in the bank. Also, I have purchased a home in Texas (will be built in Oct.) for $300k. I was thinking of putting a large down ($140k) to keep the payment low because of the high property tax. But I would also like to put only 20% down so I can use the rest for RE investments. My plan is to invest in real estate full time and would like thoughts on what one would do if in my situation. Thanks in advance.


ALWAYS put as little down as possible. Mortgage funds are your cheapest source of money.

Da Wiz

What kind of investments are you naturaly drawn to?

putting down more than 20% is a waste of money.

also, you have a nice bit of cash to invest, but doing it full-time with that amt of money is a bit of a tall order unless you already have a good bit of experience at real estate investments like rehab/flips, preforeclosure buyouts, etc. Doing RE for income is a bit of different game versus buying to build your investment portfolio. Both pathways can work quite nicely but it depends on your goals, resources, etc.

Real estate investing is a vast universe. There’s people working the game at all different levels. I’d suggest poking around the forums here and finding what interests you the most. Then write up a list of questions you have about it. Find the answers then go find your 1st deal.

I think where everyone fits in the big picture is different based on their interests, experiences, and background. However, it seems there is enough room for all of us and we all need each other at some point.

Thanks for the responses. I figured mostly everyone would suggest a lower down. The question I have is: What if the difference between a 20% down and 30-40% is what’s not affordable or affordable, then what? I’m not in that situation, but it’s something that will cross a home buyer’s mind.

I have been lurking on RE forums for a couple of months now getting ideas so I can’t say I have a preference for investing because I have yet to jump in. It seems there are so many ways to make money in RE that’s why I was curious what someone would do if in my current situation. Thanks.

I’ll try to explain why you put 20% down. Essentially, if you can afford the monthly payments then you want as much leverage as possible. Why put down an extra 10-20% that is only saving you 6-6.5% in interest? What % return do you think you can make on your real estate deals? If it’s greater than 6-6.5% then only put 20% down and invest the rest.

Now realize in your real estate deals you’ll want to use leverage as well. Let’s say you follow the 70% rule (your all inclusive costs should be no more than 70% of the ARV). The ARV is $100k and your costs are $70k. You have to put 10% down so you put your $7k down. Things go well, you hit your cost target, project is done in 4 months, and you sell for the full $100k. That leaves you with a $30k profit on your investment of $7k in a 4 month period. You can see where your ROI is huge based on the money you invested out of your pocket.

You might want to investigate tax leins since you will be in Texas and Texas is a great state to invest in re: tax leins. Texas led the nation in foreclosures in March so another good avenue there. You will have to decide whether you want a passive or active REI income.

Any other opinions on this? Thanks.

Marcus so you are saying your 70% of ARV should include materials and labor?

That’s the number everyone here uses. They include all costs. Formula is:

-rehab costs
-holding costs (including financing)
-transaction costs (commissions, transfer taxes, etc)
=offer price

That assumes you plan on flipping. If you want to hold for income then it’s completely differently. You care about montly cash flow, so what your payments are vs. what you can rent for is key.

There are ratios and rules of thumb for that as well. The numbers I see used here are the rent should be 1-1.2% of the selling price. So for a $100k house you need to be able to rent it for $1,000-1,200/mo to cash flow it. Granted, you can cash flow anything if you put enough money down because your payment would very small. That may make your ROI pretty poor though.

The 1-1.2% is just a rule of thumb though so you could do your own calculations for each property. Obviously a property 1 year old requires a lot less maintenance than one 50 years old. Some people use a property managment company which cuts into your cash flow and others do not.

marcus -

I always thought the 30% discount included ALL costs (except repairs). The breakdown was something like this:

30% = 8% Sell Costs + 2% Buy Costs + 5% Hold Costs + 15% Profit

marcus -

I always thought the 30% discount included ALL costs (except repairs). The breakdown was something like this:

30% = 8% Sell Costs + 2% Buy Costs + 5% Hold Costs + 15% Profit

me too, and i’ve seen 80% thrown around as well?

what is the basic formula for rental property then?

You may want to start a new thread asking about this. I’m pretty sure it’s 30% after holding and transaction costs.

In my world, flips, wholesales, and rental properties are all different cats.

Wholesale: Conventional wisdom says (I don’t wholesale!)

Max Offer = (ARV X70%) - repairs/holding costs/etc.

Flips: I try to make $10K overand above my total costs

Rentals: AT LEAST $125 per month per unit cashflow (I buy cash, rehab, put renter in, refi @80%).

As Elvis and Jim Reeves so elegantly put it: “Welcome to my world…won’t you come on in…”


How much do you normally put down on a rental?
A full 20%???

There is a 3unit apt house I have been eyeing up, they price has dropped 15k already… I am being patient and seeing if the price drops more. Thought about putting an offer for 260 or 255 in just to see if they would take it.

The estimated Market rent off the three uniuts would be 2,200, but my partner and I would live in the smallest so 1650 off the two units.

Its in good shape overall, and prob only needs minor cosmetics.

Estimated ROI is 6.5% if all three units are rented at market rate.

<<How much do you normally put down on a rental? A full 20%???>>

I buy CASH – I put down 100%. Then I rehab the property, then I put a renter in at market rent, then I refi at 80%. Using the appraisal AFTER rehab, I usually get back all or most of my capital so that I can repeat the procedure. When I’m done, I have a property with at least 20% equity, all (or most of my capital back, and at least a $1500 a year PCF.


Phatman5 please start your own thread. It’s not cool jacking a thread!

m95roadster you have to remember that all real estate is local. I am in Texas also. If you have $100k in cash, you can do a lot of good here. I am in Houston where you can buy houses retail, and make $125 to $250/month cash flow. I was doing that with $10k down per deal (just because I had the money and didn’t know any other way to make them cash flow) I have since gotten with a mortgage broker that understands investment real estate and am doing closer to what Keith is doing. I buy for cash (using HML) at 70% of AMV, this loan also includes fix up cash, fix it up rent it and refinance 80% and get my cash back out and redo. These houses still cash flow. Generally they rent for $950 to $1000 month and the PITI is around $600 to $700. I get a house that when all said and done has 10% to 20% equity positive cash flow and all or most of my money back. I was talking to my dad this past weekend and he said you mean there are free houses out there? I said if you discount my work on them, I guess so. If you contact me I can tell you which borkers I am working with.

Blue, thanks for the heads up, I appreciate it. PM sent.