I have $35,000 to invest in real estate. I live in South Florida and have fair credit. I have never purchased a property for invesment purposes and didn’t want to use the full amount on my first investment. I wanted to know where to start.
What is the best type of property to invest in given my profile and why?
I’d buy preconstruction and then sell the property right after it’s built. You’d get your money back in about a year with a nice return and you can turn around and do it again. Usually you have to give 10% down payment at contract signing and at least another 10% some months later. But by the time the community is halfway built and being sold, your property has jumped at least 10%-20%. $35,000 means that you can buy a property that’s $175,000.00 purchase price. But you probably want to buy less, like $150,000 so you’ll only have to put up $30,000.00 and save $5,000.00 for closing costs when you buy it. If the property sells for 20% more or $180,000.00 (because that’s what the other properties are selling for), and then you sell it, you’ll get your $35,000.00 back plus an additional $30,000.00 (less closing costs at sale). Now you’ve got around $60,000.00 and you can do it again. The problem is finding new homes in the $150,000.00 price range. You probably have to buy in a smaller town that is hopefully growing.
I will not recommend anybody to put that kind of money down in real estate investment in this day and age. In fact, your target should be for you to gun for 100% financing. It is too risky to put that kind of money into housing when you have other options. How fair is your credit? Get your credit scores, and enquire from the loan officers or mortgage brokers how much points you need to qualify for 100% financing. Use that $35K judiciously. I will advice that you use it to build your credit if your credit score does not meet the requirements for 100% financing.
There are several creative ways to build your credit fast and quickly. Ever had of a CD account, and borrowing the same amount you deposited from the same bank, and paying it off monthly? That’s a quick way to build credit. In building credit, you need atleast three current credit lines, and make sure you never owe up to 50% of your credit l lines.
You can also go through HUD loan programs. They have good programs for first time home buyers, and the can work with you if your bank statement verifies that you have up to that amount in your bank account. Get out there, talk to brokers or loan originators. Sit down with your bank or any other bank and talk to them about how to build your credit quickly.
Do not rush into investing. Be patient, and weigh and exhaust your options out there. JUst don’t tie up that 35K into some house, and get stuck. It is too risky. Feel free to ask me any questions you so choose. I myself, I am trying to get my foot on the door in real estate investing. Oh, I wish I have that k ind of money sitting in my bank account. Al l I have to do is show it to them just to give them a sense of security that I have the financial muscle to continue with my mortgage payment in case of any unforseen circumstances.
Good luck. May God be with you.
I have always been interested in buying pre-construction homes. However, I am concerned they would take too much out of my resources that I am skeptical about investing in one as my first investment home. After a few small transactions and a modest cashflow from other investments, I would love to venture into pre-construction homes.
I love the idea to networking and finding out my options before putting all my"eggs in one basket".
Here’s another thought. This is what I recommend to most people who seek my advice (personally)…
Determine what your end goal is first, then figure out how to reach it. For example: if you want to invest in a property that you’ll use for a long term rental - what do you need to do to get one?
Or, if your goal now is to turn that $35,000 into $70,000, what is the quickest and safest way for you to do it?
Once you determine what it is you really want out of your investing, then you’ll have better idea of which route to follow.
Here are some ideas:
check out “we buy houses” strategies. Ron LeGrand and Kris Kirschner are the two leading teachers of this across the country (in my opinion). Here you can “buy” real estate with virtually no money out of pocket.
Government tax sales are always an option too. This is solely what I do - buy real estate for 10-20 cents on the dollar from government auctions. The benefit here, is that not only do you obtain property inexpensively, but you can also get HUGE interest returns on your money. The government guarantees the interest you earn (i.e., 16, 18 24 %), and compared to banks where you’re only earning 1-2%, this is a great way to make your money grow quickly. These are not something to jump into blindly however, you really should know what you’re doing.
Other than that, perhaps talk to your accountant, and other investor friends you have. Join your local REIA group to start networking with other investors. They will become great resources for you as well. Good luck.
In my opinion, pre-construction is one of the best real estate markets to get into. I am in the MD area and I recently(last Year) put 35k down for a pre-construction home. Buy the time the house was built it had 90K in equity. I still own this property and can always take out a line of credit against my equity since the value continues to increase. In a hot market such as this, there is little to no risk and the returns are great.
See if your area has new home developments were you could make a down payment of 25k and keep the remaining 10K for other purposes. Many of the new home developers can be flexible with the abount they require for down payment, since they need the cash to continue current and future projects. Some even offer payment plans for your down payment with no additional interest or fee. Hope this helps.
I have looked into investing in tax certificates. I read a number of articles on the subject but as you know it reading about it does not give you the experience. Miami Dade is set to have its tax bids on or after June 1, I’ll go there and see what its all about.
What tax bracket are you in? That is the first question I ask anyone thinking of buying real estate. The only thing guaranteed in a investment real estate purchase is the tax write offs for interest and depreciation.
Look to the rental market first, and see what rents are going for. in 2005, I find condo’s seem to get the best rent vesus my mortgage payment. And for $35,000 you could get a really decent condo, in a really decent area, with really decent rent. There is lower maintenance with condo’s, and I am looking to double my money in 5 years STRESS FREE.
Yesterday I put a contract on a 2/2 condo in the Doral area of Miami (very exclusive area of miami). The condo is overlooking the Doral Country Club Golf Course also known as the “Blue Monster”. I put 5% down and we are scheduled to close within 45 days. I purchased it for $174,000 and there are several new constructions projects expected in the area both residential and commercial. I expect my property value to go through the roof.