Dave:
Hey everyone, it’s Dave and today on the BiggerPockets Real Estate podcast, we’re bringing back one of your favorite all time formats. One we’ve tried before but is always popular, always on the top of people’s mind. We’re asking the question, how should you invest your first $50,000 into real estate right now? And if you’ve listened to the show or watched our YouTube, we’ve asked similar questions on the show before. So we’ve asked questions like, how would you invest $10,000 or a hundred thousand dollars? And it really changes the way of thinking about it depending on how much money you have. Obviously, if you have 10 grand to invest, there are certain strategies available to you, but as you have more and more money to invest, more strategies, more options become available to you. But I think regardless of whether you have 50 grand saved up or not, and trust me, I know saving up $50,000 takes a long time.

Dave:
It took me a long time into my career. Before I can invest that into a single deal, I think it’s going to help you understand what types of strategies work at different price points. So even though the headline here is 50 grand, my guest and I today are going to be talking about what’s available at 10,000, what’s available at a hundred thousand, and the different ways to think about resource allocation in today’s day and age. And as I alluded to, I’m bringing on a guest for this conversation. It is frequent guest on this show and the host of the BiggerPockets Rookie show Ashley Kehr. She’s an excellent investor, always very helpful when putting ourselves into the mindset of a new investor who’s thinking about making their first investment into real estate. So first and foremost, Ashley and I are going to talk about 50 grand.

Dave:
Is it enough to start investing in real estate in the first place? Then we’re going to talk about what strategies and markets make sense for that amount of cash. And just quick spoiler alert, house hacking is not the main subject of this episode. I know we talk about that as a great beginner strategy because it is, but we’re actually talking about totally different approaches to investing 50 grand for newbies today. So I think you’re going to learn a lot from that, and we’ll also give you a couple of options that can really sort of multiply the impact of your $50,000 to help it go even further than maybe you think is possible right now. Before we get into this, I just want to stress again, I hope you all have 50 grand burning a hole in your bank account in your pockets right now, but I then start that way. I know Ashley didn’t start that way when she was first investing, but again, I really think that the way that Ashley and I have framed this conversation and some of the things that we’re going to be talking about are applicable to any investor, whether you’re just starting to save money for your first investment or you’re working on your second, third, or 10th deal. So off of all my introductions, let’s bring on Ashley Kehr.

Dave:
Ashley, welcome back to the BiggerPockets Real Estate Podcast. How are you?

Ashley:
Good. Thanks for having me back again.

Dave:
Yeah, I’m excited to have you. We were designing this show, which again, we’re going to be talking how we would theoretically invest $50,000, and although 50 grand is not a rookie amount of money, it’s a lot of money, but it is a question we get from a lot of rookies. So I figured you were the perfect person to come on to talk about this with.

Ashley:
Well, I definitely have some ideas of what to do with that $50,000.

Dave:
Yeah, well, I mean, I’m just curious, your own story. Did you have 50 grand to invest when you first started?

Ashley:
No. So I had to take on a partner because I had no money. I probably had maybe $5,000 in a savings account, but yeah, nothing close to 50,000.

Dave:
Same. Yeah, I use partnerships as well, so we’ll probably get into that conversation as well. But just wanted to normalize this for everyone. We picked 50 K because it’s a nice round number, but totally recognize that people may not have $50,000 saved up. It’s a ton. But the ideas, and I’m guessing the ideas and some of the concepts that Ashley and I are going to talk about, we’ll help you regardless if you have $10,000 saved up, $20,000, $30,000, it’s not really about the specific amount, it’s more about maybe the mindset of how to use your first chunk of cash to get into real estate. Now, if you do a 50 grand though, do you think that’s enough to get started?

Ashley:
100%. Because Dave, if you and I were able to start without $50,000 and so on, with $50,000 can start.

Dave:
Yeah, absolutely. I think that’s plenty, and you should have a lot of options too. I think if you have five or 10 grand, your options are limited to partnerships, and maybe you could do a house hack in certain scenarios, but if you can get up to that 50 grand mark, you’re going to have a lot of

Ashley:
Options. And sometimes that makes it more difficult because now you have these options and you get caught up in what’s the best option going to be. And sometimes it’s okay if you don’t pick the best option. If you end up being wrong and it still works out okay, that’s okay. You started investing and you’re still making some money compared to not making any money at all, just letting it fit in your savings account or under your mattress, wherever you’re stashing that 50,000.

Dave:
That’s such a good point. Well, first of all, when I started, this is a true story. I didn’t really have a bank account. I worked at a restaurant and they paid us in cash every night and all my money was in my bedside stand. That was my money back then. But no, I think that that’s also a good point because when I first got started, I had so few options. It was basically like, do you want to work for sweat equity in this deal? And I was like, sure, yeah, that sounds great. But I think when you have a little bit of money, not only does it give you more options, but you also have something more to lose, right? Because you have 50 grand, and for most people, that takes a lot of time and effort to save up that money and you don’t want to use it or invest it irresponsibly. Whereas when I was just investing my time, I was like, yeah, if you wasted a little bit of time, it’s not as painful. Alright, so let’s get into some of the strategies and tactics that you would use. So when I sent you this prompt a week or so ago and said, Hey, you want to talk about this, what were some of the variables and things you were thinking about how to answer this question?

Ashley:
Well, when I first thought of it, I was like, okay, what would I do right now if someone just handed me 50,000 and it was like, okay, here’s 50,000 extra a little bonus for you, what would I do with it? Then I had to shift my mindset as to, okay, if I was starting fresh, this was my first investment, I was scared, I was nervous. How am I going to invest this but also have less risk? And actually when I compared the two, it kind of came up similar answers in a way as to what I would do and what I would suggest a rookie do first if they can.

Dave:
All right, so you’re one of the rare educators who actually is going to do what they advise other people to do instead of just telling people to do one thing and then doing something else themselves.

Ashley:
Once you send me the check for 50,000 Dave, I am going to do exactly what I’m going to tell everyone to do.

Dave:
Don’t be waiting by the door. You might be waiting a while,

Ashley:
But you know what? This is true. I’m flipping a house right now and it’s under contract and when it closes, I am taking that chunk of money and I’m going to do what I’m going to say that we should do first though, before I say that, I think we should kind of set a little background as to what you should actually do and think about before you decide where to put it.

Dave:
Yeah, let’s do that, please.

Ashley:
Okay. So the first thing is you got to figure out what your goal is, what your why is. Okay, because you could put the $50,000 somewhere and invest it, but you wanted cashflow and you’re not getting cashflow, or maybe this is your retirement and you’re just banking off. You want appreciation and mortgage pay down in 20 years so you can retire, sell that house, take that lump sum and that’s your retirement. So you need to establish what your why is. Okay. So Dave, when you first started investing, what was your why? What were you looking to get out of investing?

Dave:
For me, when I first started, I honestly just wanted cash that day. I was in a situation where I was struggling to pay my bills and I wanted somewhere between two and $400 a month was a really life-changing, lifestyle changing type of money for me at that point. That was my immediate goal, I think.

Ashley:
So I think that that would define how you’re going to invest your money is because even if you could see like, okay, I’m going to put my money into this property and then in five years I can sell it and make this, but I’m going to break even on it throughout those five years, it wasn’t worth it at the time for you to wait that five

Dave:
Years for

Ashley:
That goal to hit that money that you’re going to get from selling the flip. So that’s very important to figure out why you’re investing in what you need now. And mine was very similar, needing cashflow too

Dave:
And totally different. If someone has a ton of time and they have skills to flip a house, your goal could be totally different. And obviously that’s not what I did when I started because that wouldn’t have worked for me. So I think this is a great point to start sort of with the end in mind

Ashley:
Here, and you kind of named the second thing. So you’re looking at why you’re investing. The next thing is what are your opportunities or advantages? Maybe work in construction and you can actually do the rehab yourself. Then maybe not looking at turnkey properties is the best thing for you. Maybe you should be investing that money into doing a fix and flip or rehabbing a property for Burr and kind of strategizing that way as to what your advantage is in that market too.

Dave:
Well, you were a property manager, right?

Ashley:
Yeah.

Dave:
So was that your advantage?

Ashley:
Yeah, I knew the market. I bought a house within two miles of the property I was managing. That definitely was a huge advantage knowing the market and also how to manage a property.

Dave:
Wow, that is a good advantage. Looking back on it, I mean,

Ashley:
You

Dave:
Must have known a lot and avoided some of the painful mistakes of just starting to be a landlord when you don’t know how to manage properties.

Ashley:
Oh, there are still mistakes.

Dave:
And then I mean, I’ll throw in another criteria here. I think risk tolerance and risk capacity or things that people really need to be thinking about. People often confuse those two, but I’ll just explain how I see them at least. So risk tolerance is how comfortable you are with the idea of losing money. And so you talk about gambling and stuff, it’s like if you’re willing to take on a risky investment or place a risky bet in order to make a large amount of money, that opens up a lot of strategies for you. Or I think a lot of people are somewhere in the middle or some people are extremely risk averse and they don’t want their number one priority in investing is what they call capital preservation. So you want to just make sure you don’t lose money or maybe that you have some modest appreciation.

Dave:
So I think it’s really important as an investor to be able to sleep at night. And so you don’t want to take on risk that you are not comfortable with. And then there’s something that’s sort of the sister cousin of risk tolerance called risk capacity, which is are you in a position to take risk? Because some people just as a scenario say that you’re a new parent and you are making decent money and you’re able to pay your bills and you actually sleep fine with risk, but you might not be in a position to take on a lot of risk because you need to be using that money to raise your family, for example. Or maybe you have dependents, parents, cousins, sisters, brothers, whatever, who rely on you for money. Maybe you could be the most risk tolerant person in the world, but you don’t actually have the capacity to take on that risk. And so I think those are two things that people should really been thinking about when they talk about how to allocate capitals. Like am I comfortable with it and would a financial advisor tell me that I have some rube here because that will also dictate a lot of how you spend that 50 k.

Dave:
It’s time for a break, but afterwards I’m going to ask Ashley what specific strategy she would use with $50,000 to invest in right now in 2024. Welcome back to this week’s deep dish. Let’s jump back in with Ashley Care, with no further caveats and delays. Ashley, what would you recommend?

Ashley:
So my first recommendation would be to add value to a property you already currently own. So this may be your primary residence. So my suggestion would be to take that money into either turn a garage into a unit, your basement into an apartment or short-term rental. These could be, or even midterm rental. You have some little extra land build, a little cabin rented out as a short-term rental. We recently had a guest on the real estate rookie podcast that bought an RV and parked it in his driveway and rented out the RV as a short-term rental.

Dave:
Oh wow.

Ashley:
Yeah, so I would look at if you have the opportunity to actually take that money and invest it into a property that you already own, especially if it’s your primary residence, because you’re going to be adding value to that property, it’s going to appreciate over time and when you sell that property, if you lived there two out of the last five years, that’s tax free income that you can get

Dave:
Tax free baby.

Ashley:
And then also with having it as a rental, it can offset your cost of living for paying your mortgage and things like that. So that would be the first thing that I would do as to use that money to invest into the current property you already have because you’re not going to pay attorney fees, title fees or whatever and not have to do all the work that goes into purchasing a brand new property. Plus you’re going to have less overhead because you’re still mowing the same grass. You’re not going to have another property or you’re going to have to mow the grass at. So that would be my biggest thing. And parents actually built a in-law suite on their house, and I just texted my mom before this episode and asked her how much did it cost, and she said a little over 50,000,

Dave:
And

Ashley:
This was with putting a basement in, so the full foundation, this was having a living room, a bedroom, and then a bathroom and a little kitchen added on to their house. So you could definitely just do a little studio apartment and rent that out for less than 50,000.

Dave:
This is so smart. I love this. There’s so many good reasons, but I hadn’t really thought of it, and I’ll explain the numbers to one of my ideas, but if you’re buying a new property of 50 K, at least 10% of that is going to closing costs,

Ashley:
Like

Dave:
Appraisal, title of inspection, 5K maybe. I mean you can maybe get it a little less than that, but roughly it’s probably going to be five grand. And so that’s not an investment. Those are just transaction costs you’re basically throwing out

Ashley:
Plus the time of acquiring that

Dave:
Deal. That’s so true.

Ashley:
I mean, you will have time into managing the construction of your property too that will go into there, but the acquisition of the deal plus learning the new property as to like, okay, where’s the water meter and plus the repairs and maintenance of this unknown property that you’re getting. Even if you have an inspection, it still takes time to learn the ins and outs of what works, what doesn’t work within a property where this is going to be brand new built into your property too, so your capital expenses, your repairs and maintenance should be way lower than going in and buying another property that isn’t brand new.

Dave:
Wow, this is a great idea and the tax benefits are so good. That’s so true. Just so you all know, if you invest in any property that’s not your primary residence and you add value, whether it’s a burr or a flip, you can make tons of money. But when you go and sell those properties, it is one of the less tax advantaged elements of real estate. So for example, if you flip a house and you drive up the value and say you have a $50,000 profit, you’re going to pay depending on how long you own it, but you’re probably going to pay ordinary income, so your full tax rate on that income, whereas if you do the same exact project on your primary residence, as Ashley said, as long as you’ve lived there for two out of the last five years, that’s tax free money that you can go and you don’t even need a 10 31.

Dave:
You could take it and do whatever you want with that money. So that is an incredibly good option for people. And I also like this even more because this is sort of going with the trends. I feel like it’s sort of taking what the market’s giving you, because a lot of municipalities right now because of the housing shortage in the US are making this type of work a lot easier. It is becoming easier almost across the whole country to build adu, whether attached or detached ADUs, they’re expanding permits, expanding density, and municipalities want you to do this, whereas 10 years ago you would get fought, I think in a lot of cities, if you are saying like, I’m going to turn my basement into another unit, not anymore. People are looking for creative ways to add units, and so this is sort of going with the times and doing something that is being encouraged in most communities.

Ashley:
And I mean, you’d have to look at the regulations in your area, but I like the flexibility too, where you could have a long-term tenant or you could have a short-term rental and then you could block off the days. Have friends and family come and stay when they’re visiting, stay in the unit, and then open the listings back up when they leave. So I like that flexibility of it too, that you can actually have a little bit of use out of that property too.

Dave:
Totally. This is a great way to do it, and I love that you even got us a quote from your parents, how much it cost. I was literally

Ashley:
In the middle of a conversation with my mom and I just said, oh, by the way, what’s this?

Dave:
We should have gotten your mom on the show. That would’ve been great. Just out of curiosity, is their intention to rent it out for some extra

Ashley:
Income? No, it was for my grandma.

Dave:
Oh, okay. Got

Ashley:
It.

Dave:
Yeah, makes sense. But then even if you do that for practical purposes, it does increase the value of the house eventually when they go to sell it.

Ashley:
Yep.

Dave:
All right. Well, I have some options for you. I came up with just two different scenarios that are really available to people who might not own their primary residence. I think Ashley’s idea is great, but obviously you have to own something to be able to do that. So I wanted to just first talk about whether it’s feasible to just straight up buy a rental property with 50 grand and I ran some numbers and here’s how it came out. If you had $50,000, like I said, I’m going to estimate five grand will go to closing costs, and then I think you need to have $5,000 in cash reserves. Is that about what you would allocate Ashley?

Ashley:
Well, I would do six months reserves as a rookie, six months reserves for your mortgage, your insurance, and your property taxes.

Dave:
Yes,

Ashley:
For those three expenses. So whatever that amount ends up being for six months, that would be, but probably around 5,000.

Dave:
Yeah, that’s a better answer. Yeah, so five, six. So I just took 10 K off the top, which is always difficult. I think when people have saved up an amount of money and they’re like, I’m going to go buy real estate with 50 K. Unfortunately, there are these other things that you have to do. So that would give me $40,000. Now I was assuming you weren’t house hacking, and that means that you’re going to put probably 25% down because if you’re an investor and you’re not living in the property, usually that’s what banks require is a 25% down payment, which leaves you with $160,000 as your purchase price. So that is still absolutely possible, but the list of places that you’re going to be able to buy a solid property goes down a lot, but this is a good option for people if you’re willing to be a long distance investor and you’re looking to one of, let’s say there’s probably a couple dozen markets in the country where this is possible.

Dave:
Actually a couple in your neck of the woods, Ashley Syracuse for example, super popular place to invest now there’s a micron factory going in there. I looked around and I found a property in Syracuse that looked pretty nice. I was pretty impressed by it. Three bed, two bath, 1500 square feet probably needs a little bit of work, but that was 1 35 for example, with a projected rent of 1500. So it meets the 1% rule. I think there’s other places to do it like in Huntsville, Alabama, Pittsburgh, Pennsylvania, Oklahoma City. So if you have 50 grand, you absolutely can just straight up buy a rental property and that’s probably a pretty good idea. What do you make of that approach,

Ashley:
Ashley? Yeah, one a hundred percent. I think one little twist I would do on that is actually go to do a flip first, but purchase a property that could be converted into a rental if the flip doesn’t sell. So you’re going to buy this property knowing that you could either flip it or you could rent it out. So if the market changes, your flip doesn’t sell, you have that security knowing that you can cashflow off of turning that property into a rental. So that also means that you have the ability to get financing. So maybe you’re getting hard money or you’re actually doing a conventional loan to buy that flip, but you’re going to have to bake into your numbers that you’re paying closing costs, and if you do go and refinance, that’s closing costs twice. But if that’s the only way to get the deal done and you will make money off of it, when you run your numbers you refinance, then it’s still a good deal. Just like people get caught up, I’m not paying a hard money lender, 12% a bank would give me 7%. Well, if you can only get the 12% and you still make money, that’s more money than not making any money at all. Yes,

Dave:
Exactly.

Ashley:
So that’s what I would do is I would take that money and I would talk to hard money lenders. We just had a guest on the show that he was first time went and got a hard money lender. No problem. They funded part of his purchase price and I think it was all of his rehab.

Dave:
Oh, nice.

Ashley:
So there’s definitely lenders out there who are looking for a private money lender, and then I would purchase a flip and then I would have a safety plan in place to refinance that property and turn it into a rental if the flip did not sell. But if the flip sells, then that gives you your $50,000 back plus hopefully a little more capital from the profit, and you keep building that to dump into buying rentals then.

Dave:
Okay, so I think this is a good plan, but what price point do you look at with a flip? So if you had 50 grand, are you then looking for a property that’s like 80 or something and then you’re going to put 20 grand into it, something like that?

Ashley:
No, because you can get a hard money lender to lend you, let’s say conservatively you’re putting 30% down of the purchase price. You’re getting the rehab covered private money lender too, which you have to work your magic to find private money lenders. That’s not as easy, but I would look into doing a light cosmetic flip unless you have rehab experience, not going in and doing a full gut rehab, but doing a light cosmetic flip, you’re going to have to work hard to find that deal buying that property under market value already. So you’ll have to door knock, you’ll have to cold call, you’ll have to get populous things from agents and network that way, but I just did one, and it’s definitely possible to find those deals to actually make a flip happen.

Dave:
We have to pause for one final break, but we’ll soon be back for more with Ashley. Okay, we’re back. Here’s the rest of my conversation with Ashley Care. So so far we have improving your own property. We have buying a rental property or doing a flip at a similar price point to the rental property, which is in the low mid 100 to $150,000 range properties all possible. But my actual recommendation was not this. I think that that’s a good option for people, but I would imagine there’s only a handful of markets where this price point is possible, but my number one recommendation for how I would spend 50 grand, again, not house hacking, get to that. Again, it sounds like what you and I did, I would just try and partner with someone. I would try and find a 50 50 partnership where you would have a combined hundred grand to invest.

Dave:
To me, that opens up a lot more markets. First of all, A just gets you in a different class of property that I think is a little bit more stable. There are some markets that have nice single family homes for 160,000, but when you think about the reality of it, even if you’re getting a good cash on cash return, you’re making maybe a hundred, 200 bucks a month, it’s not really going to make this huge difference for most people. If you have a hundred grand, even with a partner, I think that gives you, let’s say once you take off the reserves and the closing costs and all that 90 grand to invest, that means you could buy a property worth 360. That’s a totally different ball game to me. I could tell you dozens of markets where you can probably buy a cash flowing duplex right off the MLS for $360,000 or less. I’ve actually done this twice this year. I’ve bought cashflowing duplexes for less than $360,000. So I think that’s a really good option is just trying to find someone who you could 50 50 partner with and then just buy a regular old duplex. That’s probably the most boring advice ever, but I do it. I think it works. Do you think there’s a reason why people avoid partnerships in those types of scenarios?

Ashley:
I just think maybe they had a bad experience or they’ve watched someone else have a bad experience, but I think it’s great having a partner. For me, it gave me a sense of security because I knew if things are going bad, I had someone to work it out with and I actually liked that and I thrived off of that. I did better knowing that I had somebody by my side to do this deal with me. So I thought that was a great advantage actually having a partner in the beginning.

Dave:
And it also works for any amount of money. It doesn’t need to be 50 grand. If you have 40 grand, you can partner 25 grand, you can partner, and I know it doesn’t means you’re going to have to navigate some interpersonal things. That’s honestly a very valuable skill to learn as a real estate investor because you’re going to partner all the time. I think a lot of newbies are like, I just want to own everything. And where in reality most investors partner all the time. I don’t know. I’m in a lot of partnerships even though I could theoretically just buy houses myself. I think that’s just how the business goes and it teaches you a lot and it just gives you access to better quality assets and

Ashley:
Operators too. People who already have experience like

Dave:
The knowledge of someone else. So I think that’s a great thing that people often overlook.

Ashley:
And you can also go to biggerpockets.com/partnerships to read the book Real estate partnerships that Tony and I wrote because there are some things that you should include in your partnership, and this book kind of helps you navigate that as to how to set the partnership up, how to not have as much risk when taking on a partner and things like that. So it could be beneficial.

Dave:
What do you look for primarily in a partnership? Can you give us a quick rundown? If you are in this scenario where you had 50 K, you’re looking for someone else to help you, maybe let’s just say create something close to a 50 50 partnership, what are some of the things you would recommend the audience prioritize

Ashley:
First, what are your strengths? So what are you really good at because you don’t need someone else that’s good at the same thing,

Dave:
Nothing.

Ashley:
So then what are your weaknesses? Everything. So what do you need somebody for? So are you looking to get into flipping but you have no idea how to flip? Then maybe that’s where you’re looking for somebody that has experience and not somebody else who is brand new just like you and doesn’t have a clue how to do it either. So strengths and weaknesses, but also I think really one of the biggest is dating the person and getting to know them. So whether that’s building some kind of relationship before you actually get into the deal, and that’s what I did. I knew all of my partners before we actually got into a deal, and then we also did one deal at a time. So it wasn’t like, Hey Evan, let’s buy real estate from today until we die. Every deal that we buy is the two of us. We’re partners forever

Dave:
Till death do us part.

Ashley:
So even now, if I get a deal, I look at, okay, what do I need? What am I missing to get this deal done? And then I’ll look at my partners that I use and I’ll say, okay, you know what? Evan would be a good partner for this deal. I’m going to approach Evan. These are my terms of how the deal would work. If he’s interested, we go forward. If not, then I go and I ask somebody else. But I think really not locking yourself in and creating a company and building your brand and your logos, just do one deal. And then Tony does a great job of this is in his joint venture agreements. When he partners with someone, he puts a five year exit plan in place.

Dave:
Oh, that’s a good idea.

Ashley:
So your partners for five years, and in year five, if one person wants to sell, then you sell the property. And of course if you want to keep it, you can buy the other person out if you can do that at the time. But that way it kind of puts an end so it doesn’t go on forever and you don’t have to sell at least that has that timeline. Then if you want to keep it, they set another benchmark for, okay, we’re going to evaluate this again and X amount of years. So gives you an out if you want to be

Dave:
Out. I love that. When I started with my partnership, I did, I’d say 99 out of a hundred things very poorly. But the one thing I did well was actually outline what would happen if we wanted to break the partnership because it was with some friends and family and it was four of us, and I just valued those relationships more than I valued the real estate. I wanted to make sure that there was an amicable way to split up and it happened, but two of the partners wanted out. The other two, we bought them out

Ashley:
And

Dave:
It worked out great,

Ashley:
But

Dave:
It was only because we said what we were going to do well ahead of time,

Ashley:
And

Dave:
They were ready to say, Hey, we want to get bought out. They already knew the terms of that and they were like, we’re going to do this thing. We all did. It worked out. Everyone was very happy with it. But I think it underscores the idea that this is not a marriage, it’s not a commitment for life. These are things that are business relationships, and if you can handle them professionally, there’s no reason you shouldn’t be using partnerships in real estate. Well, I think we’ve actually set a BiggerPockets record here, Ashley. We’re having a conversation about how to invest a certain amount of money, and we haven’t talked about house hacking in over 30 minutes. This is the longest anyone has ever,

Ashley:
Especially with a starting out episode or what to do. Exactly. Yeah, basically.

Dave:
But I think we have, I mean, it is a really good way to spend

Ashley:
50

Dave:
Grand.

Ashley:
So

Dave:
We have to, well, so I’ll just intro it. I think house hacking, to be honest, if I were earlier in my career and lived in a good market with 50 grand, I would probably put 10% down on a duplex that’s under 400 grand because if you put 10% down, even with the reserves, even with the closing costs, that means you can afford something up to $400,000, not San Francisco or Denver or Austin, but in a lot of markets in the south, in the Midwest, in the Northeast, you can find a good high quality property in a good market for under 400 grand. Live in it, learn the business, lower your living expenses. It’s just an easy way to do it. So I think for the people who are willing to be a landlord and live on site and do the house hacking thing, it is just such a good plan

Ashley:
And just the domino effect of you only have to live there a year.

Ashley:
If you live there two years, then you get the tax free income if you sell it within the next five years, which is amazing. But you can also, after the first year or the second year of when you move out and turn it into a rental, your 30 year fixed rate mortgage stays on that property, that’s not changing. Then you go and you move in to the next property, and then you move into the next property. And I’ve even seen investors that have taken the extra step of, they get their first primary, their house hacking it, and then they completely move out. They rent out the other unit, but before they move out and buy their next property, they’re getting a home equity line of credit on that first house, still their primary. Then they go and they buy another property.

Dave:
Ooh, that’s a good advanced move.

Ashley:
So now they have the line of credit from that house. They just bought their next primary, and then they just keep doing the domino effect, and then you have that line of credit from the rental to actually go and use for rehabs or things like that too.

Dave:
Awesome. Great. Well,

Dave:
I’m glad we talked about house hack and we have to just throw it in there. It is a good option. But before we got to that, we had a couple really great ways to invest $50,000. You can add a new unit or add some income generating piece to an existing property. As Ashley had said, you can go out and buy a long-term rental for around 150 grand, and I know that’s only available in a couple markets, but is it a perfectly viable option for people who want to do long distance investing? You could flip a cheap house like Ashley suggested, you could partner with someone to buy a duplex or you can house hack. These are all ways that you can start investing in real estate for $50,000 or really even less thousand dollars or around there. So I know that that and out a number that’s somewhat arbitrary, but hopefully, especially the conversation Ashley and I at the beginning talking about the variables and things that you need to be thinking about will help you figure out if you’ve saved up some money, how you should be investing it in today’s market. Ashley, any other last thoughts on this before we get out of here?

Ashley:
The last thing I’d say is if you are having trouble finding a major city or market that is within your budget or price point, look out into little rural towns. Go outside of those major metropolitan areas and start looking in the more rural areas. That’s where I started investing and even places that have had really no significant appreciation or anything that, first of all, you have no competition, really way less competition of investors there, and just over time they will have, you’ll have mortgage paid on them, you’ll have a little bit of appreciation, but you can also find good cashflow in those areas too. And sometimes there’s not a lot of apartments available, so you don’t really have to worry about vacancy because there’s so much demand. And my favorite favorite in those small rural towns are senior citizens who have sold their house. They have a nice pension they’re living off of and they don’t want to leave their small little town and they want to rent one of my cute little houses to live in, and they always pay their rent and they always take care of everything.

Dave:
Well, that sounds so nice. I agree. I admit I had aversion to rural or smaller town investing when I first got started, but there are so many good ways to make money off of it, and there’s a lot of benefits to it. Actually. Just like a couple of weeks ago on September 16th, we released an episode on this podcast, it’s called Why Your Small Town is probably the Best Base to Buy Rentals just with a guest called, named Josh Bley. If you haven’t listened to that, he does a great job explaining a lot of what Ashley was just talking about, some of the unknown benefits about small towns where people really have a lot of pride in the community, word of mouth, where if you are known as a good landlord, for example, that people talk about it and people want to live in your properties, it’s very easy to establish a good reputation in your community. There’s less competition, so there’s all sorts of great things to do there. All right. Well, if you don’t know where to find Ashley, you should, because she is the host of the BiggerPockets Rookie Channel, also very active on Instagram and BiggerPockets, so we’ll make sure to link to all of that in the show notes below. Ashley, thanks so much for coming on and talking about this with me.

Ashley:
Yes, thanks so much for having me, and I can’t wait to see you guys again.

Dave:
Thank you guys so much for listening for BiggerPockets. I’m Dave Meyer and we’ll see you for another episode in just a few days.