If you were 25 and had a half million to start???

What would be your approaches with 500k start up money. I was thinking to buy and hold 3 houses at a time to fix up and resell and take 100k and put down on a multi-unit property. I want to establish cash flow for steady monthly income while at the same time make quicker big money checks with the residential flips. So what would your approaches be?

I would suggest you purchase at least one multi-unit in your area (btw $140-$190K) outright. Why do you need a mortgage? Something that’s in a fairly appreciating area and nets at least $1000/month. It’s a buyer’s market now so you shouldn’t have any issues. This way, you’ll make money every month and can sell it for 3-5% more in a 24 months or so (if you need to).

I recommend using the rest to flip 1-8 properties at a time (depending on the market where you are).

I envy you!

500k cash?..I wouldn’t flip anything in this market…Buy some high ROI multi’s with no mortgage and take the difference and put it into some closed end funds yielding %12+…Then just sit back and collect…This is no time to start flipping or shoveling money in flip/projects unless you have the means to buy way below the bid…The market is flooded/filled with properties, don’t add more to what is the largest inventory in real estate history…Also keep in mind the average person who you would be marketing your flips to cannot obtain easy financing…

500k is a decent piece of change and I wouldn’t be so quick to jump into the real estate business without really crunching the numbers…

An approach I use is to buy properties all cash (multi’s) way below assessed/appraised value…Then take the clean title go to a bank and refi and take it all back out and keep the positive monthly cashflow thats left over…You will see how well this works and the banks won’t give you a problem refinancing with a 400-500k in the bank to show…You will have best of both worlds…You will have cashflow and you can get income from the 400-500k …

I would suggest you purchase at least one multi-unit in your area (btw $140-$190K) outright. Why do you need a mortgage? Something that's in a fairly appreciating area and nets at least $1000/month. It's a buyer's market now so you shouldn't have any issues. This way, you'll make money every month and can sell it for 3-5% more in a 24 months or so (if you need to).
I'll tell you why. Assume this individual takes your advice and buys a multi unit outright, no mortgage. 1,2,3 months down the road he finds himself in a lawsuit and the victims attorney sees an investment property free and clear. Kiss your property and your 200k goodbye! Whereas if you had a mortgage there would be practically nothing to come after as far as that property is concerned, so he keeps the multi-unit.

Also, you plop down 190k on a property netting you only 1k/mth or 12k/yr, that’s only a 6% ROI. And then sell it for a 3-5% gain, well whoopte freaking do! I’m not a securities guy but I’m positive you can do better than that buy putting your money in some sort of secure wall st. type of investment. rookieNYC I’m sure can back me up here.

Do you have any REI investing experience? By your own admission you want to fix and flip 1-3 properties and someone else has advised you to do 1-8. Have you ever flipped a house before? Do you see what’s going on in the capital markets? Financing is not easy to come by. I would not recommend exposing yourself to a handful of fix and flips, rentals or residential.

Good Luck!

I would put that $500K in a safe account and try not to spend even one cent. If you’re wanting to get into flipping, I would start with ONE small property bought at a huge discount. If you are wanting to get into the rental business, I would start with ONE SFH bought at a huge discount. Expand your business SLOWLY so that you thoroughly understand the business before you’re in over your head. Having a bunch of cash with no experience can be a recipe for disaster!!!

Good Luck,


Your getting some great advice here…

I just sold a flip I purchased in October. It took 5 people to sign a P&S agreement BEFORE 1 of them could actually close the sale. (and they all had pre-approvals) And…this was on a starter home priced UNDER MARKET. I sold it for $180K and the BANKS appraisal came back at $205K!

Financing is a big problem now a days. You can still flip homes but you have to absolutly STEAL them to make money. I bought the above mentioned home for $110,000 and spent $8000 during a 31 day rehab. Sold it in 4 months but I went through a LOT of potential buyers before I found one capable of closing.

The thing you have to remember now is a pre-approval IS NOT a commitment to lend. These people were all pre-approved but their loans got kicked out in underwriting. Banks are scared to death right now. The only people who breeze through are people with tier 1 credit and big downpayments.

I will continue to buy and sell homes because I can pay cash and can wait it out. I’ve been doing this for a long time. But I have to say… this is when new guys can get crushed.


Congratulations on your decision to get involved with Real Estate Investing.

It can be very challenging and very rewarding at the same time. I have done fix and flips as well as
bought many properties to hold myself over the last 5 years and love it!

Before I can really give you any advice I really need to know more about you and your background.

  1. What is your background? Meaning what kind of work do you normally do for a living? How did you get the $500K to begin with?

  2. How much Real Estate Investing Education or Experience do you have?

  3. If none or very little, are you planning to take some clases or do you have a good mentor or coach or teacher that can take you under their wing to help get you going?

  4. Are you a member of any or all the local Real Estate Investing Groups in you area? If so how are they? Do they seem well run and professional?

  5. What are you goals say in 1, 5, 10, 30 years down the road? You have to know where you are going to ever get there. :cool

  6. What is your tolerance to risk? If you lost the whole $500K would it be the “End of the world” etc. :shocked

I think if the Rei Club members knew more specifics a great number of the “Seasoned Pro’s” can give you some solid advice.

One Word of Caution: No matter what advice you take, You have to be the one that “pulls the trigger” and no matter what you hit you are responsible for your actions.

The hole that you would need to close is the experience hole. You could use the $500k as a 20% down payment on a $2.5 million multifamily. In Houston right now you can buy a fixed up with managment in place running well for about $20k/door. That means you can get a 125 unit complex. A complex like that in Houston will yeild you around $15k/month for your pocket.

Since this would have managment in place I would then go to the beach and drink pina colidas all day.

In otherwords, except for not knowing how to do it you are retired. So what I would do is find somone that can teach me how to buy and run apartment complexes.

Your opinion is a good one and while 6% + $12K may not be a HUGE return for some, there are still millions of people making investments into CDs, etc that give such returns and it’s a great strategy for a beginning investor with a lump sum of cash. Honestly, I know nothing about Wall Street and since he posted here on REIclub, I gave some REI advice.

I own a mortgage brokerage company and 96% of Americans are still paying their mortgages and refinancing, purchasing, etc. Flipping is very much alive in many parts of the country.

And sure … the building could burn down the day after closing or all of the tenants could fall down the steps in a freak carpet slide accident. All those types of situations can be covered by any one of 6 different types of insurance that I can think of off the top of my head. Besides, if he needed a quick lien, he could do a refi in a week or less with little to no problems.

freak carpet slide accident. :biggrin

Now thats funny, I don’t care who you are!

Thanks for the laugh!

LOL great

The main issue is where is the 500k coming from?..If it’s a loan then the money needs to be handled differently than if it came from a sale of a business or a property etc or an inheritance…

And yes jbaldwin I do agree…Thats why I like my idea best…Because I implement it myself and works very well…Cash is king but cash + cashflow = 2 incomes…I take a good portion of my cash and put into high yielding bond funds or closed end funds…Take that 500k and its easy to get %8-%10 on that money…Then I still have my cashflow from the property and I also still have the cash to do what ever I want with investment wise…

I would never tie up that 500k in properties and be left with no cash…Doing it my way you can have both,call me greedy… :bobble

Bluemoon all the same that is one incredible return you posted…20k a door and a %38 ROI on the 500k annually is unreal…I’m not doubting you either…

Buy a little bit of Pepsico on a down day, (Dow drops +100).

Sell it after it achieves a +4% gain, (might take 3 days, might take a month).

Study charts, study companies.

Don’t limit yourself to the US market.

Risk little till you’re good at it.


Maybe I should move to Houston. :shocked Is the 15k/mth before debt service?

Wow got alot of responses. It wasnt fair of me to not tell you all my background. First off I am 25 years old with around a 600 credit score. I have a business partner with a 750 score for all my financial obligations to banks. The money is a business LOC at 9%. My family has owned a construction company for around 15 years. We build high end concrete swimming pools so I am used to working and managing 6 figure job sites. I have 6 months or apprenticing in appraisal with my ex girlfriends sister( she owned her own appraisal company.) I have also worked 2 real estate deals in my life and am alot smarter for it (always get everything in writing, never trust a friend.) I also have watched a company form in my area that has purchased 5000 units in the last 3 years so I have the dream of owning large apartment complexes like they do. I would like somone to give me advice on how to take this money and maybe not flip homes and just buy apartments while still obtaining big checks that will come in shortly instead of years down the road so I can obtain the life I desire right now. I will not bs anyone here I want the big house on the hill with the lambo and escalade sitting in the driveway sooner than later. I have no intention of slowing down in this business. I have a 20 year goal of being like TRUMP and having my name over vegas or owning my own sports team here in Cleveland. When I say this please understand that I am not just saying it to sound ambitious. Everyone who knows me will tell you the same thing about me. I think BIG, dream BIG, and want to be BIG. I want enough money to not only support my family but to be able to give back to the neighborhoods I came from that are less fortunate. So now that you guys know a little about me maybe you can help me obtain my dream. The only reason I wanted to flip homes was I know how to do that and make 25-50 thousand on each deal. If I had the choice I would take this money and start buying apartments and leverage it to purchase the next property. Can someone out there explain this philosophy a little better to me so I dont throw money into homes.

The money is a business LOC at 9%.

Ouch…This definitely changes my views of how to handle this money…You may very well be better off doing what Bluemoon advises…Those are hard money rates you are paying and that money will literally melt if you mishandle it…

Nice to think big but is that line of credit a locked rate or not?..On wall st we call those type of lines of credit set up loans…

The interest rate I think will be locked at 9% and the payments are interest only.

The LOC secured by my investment property is only prime + .25 = 6.25 right now. I could lower the rate slightly if I went fixed, but as long as the Fed seems willing to keep cutting rate I am content to let my LOC rate float.

I think BIG, dream BIG, and want to be BIG.

That and $6 will get you a cup of coffee at Starbucks. Unfortunately, thinking; dreaming; and wanting to be BIG won’t get it done.

As I recall from a previous post (correct me if I’m wrong), that isn’t YOUR $500,000. If that’s correct, then you REALLY need to be careful. You have a great opportunity to parlay that money into something great, but you also had a larger risk of failing and losing the confidence of that investor. Worse yet, if you lose that investor’s money, your reputation will be ruined.

Therefore, I think that you should really understand what you’re doing before you buy anything. This business is NOT easy and the vast majority of those that try, fail in a short period of time. While thinking, dreaming, and wanting won’t get you anything - hard work, persistence, and dedication will get you where you want to be IF you understand whatever business you will be starting.

Good Luck,


One last tidbit. Flipping properties won’t make you wealthy, you make get rich but to build and sustain any significant level of wealth you need to buy and hold.

Good luck with everything!