If i only make 30K a year, how can i get money to invest in a 4-plex that costs 100-200K?

Question

Thank you all for your knowledge. I'm a young man that wins around 30K a year and want to start investing in real estate. I would have to wait 6-10 years to get enough to buy a 4-plex or 6-plex. Is there an easier way to get money to buy these investments? Thank you.

Answer 1

Man... where are you going to find a fourplex for 100-200k? Madagascar? Somalia? Sudan? Just kidding, but that's pretty "down market".

Here's some tips:

1) You can get an investment for around 4x-6x your salary from a bank. Think around 120k-180k.
2) You can generally get something that is 80% levered (where you put 20% down and even more levered if you have good credit/reserves). Sure, you can get 100% financing - but you don't want to stretch yourself to the breaking point. Tighter credit policies also make it difficult to get more financing. Don't do exotic financing like negative amortization or interest-only as you can lose your shirt easily. Go 30 or 15 year fixed.
3) Don't go so cheap on the four-plex (speaking from experience as I owned a fourplex). It is better to deal with a single unit that costs the same. Your tenants are a) going to take MUCH better care of your place because they are generally more respectful of property, b) you'll have less people living in your place doing wear/tear/accidents and c) you will have less headaches managing fewer people.
People do REALLY stupid things with your stuff, especially when the deposit is only a few hundred bucks instead of $10,000... my person experience, tenants flood the bathrooms, put the washing machine outside, shoot out all the lights with a bb-gun, dig up the decorative tree in the front yard, go four-wheeling on your lawn, iron on the carpet, knock down a fence, pay late, skip rent, dump trash outside, dump their kiddie pool water next to the building, bash in closet doors. Each small thing will cost you 1-12 months in rent lost money at the low end. My single unit place in California that cost 3x as much as my four-plex had much fewer tenants, less wear and tear, no headaches, was easier to sell and netted more money (downside was lower average occupancy).
5) Start with a single-unit fixer upper in a working class neighborhood. Don't invest too much money in fixtures that don't have a positive return. Put your "sweat capital" into things that make it habitable (e.g. painting, fix the plumbing, make sure the doors/windows/roof all look good). I'm not saying you sould be a cold-hearted slum lord, but don't waste money on things with negative NPV.
6) Unfortunately, it takes money to make money. Get a good job. Take side classes/certificates/degrees to make sure you can make more money in the future. It took 10 years for me to make enough money, but once I did, making money was much easier when you have money. Learn about investing. Knowledge is very powerful - which you can then use to make your money work for you. Read, read, read. Go to the library. Borrow books from friends.
7) Don't be afraid to take some risks. You are going to screw up. You are also going to do things very well. But you need to take risks to get ahead. When things go wrong... and they will go wrong... take self-responsibility (i.e. don't blame someone else) and learn a lesson for the next time.
8) Cut way back on your spending. It's going to suck, but you can turn your sacrifices into cash, which you can then use to fuel your investments. Don't play the "keeping up with the Joneses". You don't need the latest gadget, a new car, new clothes, take-out dinner, the nice cut of steak, the fabbo trip.
9) If you REALLY feel like you need to invest now, get friends to invest with you. However, make absolutely sure you have a contract that is iron-clad. Designate a chairman, voting system and equity rules because friends/family and money don't mix. Some will flake and not work their share. Some will want to do it their way and only their way. Some will want to back out if things go badly. I will never work with family/friends.

Answer 2

At age 17 you are likely going to need to parental help just to open account depending upon the state that you live in and contract laws. That is a small issue though. Your risk tolerance should be 5 (from your list) for money that you are putting away for longer than 10 years. Buy "A" shares in a well diversifed portfolio of mutual funds. Don't shy away from a substantial portion of it in International Funds. I like Latin America and China. Put $5,000 (the max) into a Roth IRA first. Traditional IRA second. any cash that you might need in less than 7 years, you might want in something with a risk of 3 or 4 (your list) and quite possibly into "C" shares. As to the company / funds selected. A good track record of 10 years, if possible, is more important than trying to invest based upon internal expenses of funds. In many cases higher internal expenses become worth the money because the management actually goes out and does its own research. If you do not have any employees, then ask your advisor about setting up a "owner Only 401k". It goes by different names at different mutual fund companies. Your contribution level can be much higher than Roth or Traditional IRA. If your cash flow is that good and you want to take a portion of it to learn about the stock market with single price securities. Be sure that you understand that this money could quite possibly go to zero. After you get a good balance growing in these mutual funds, consider a bit more diversification into Real Estate. Best of luck and congrats on the business

Answer 3

First of all, how is your credit. How much do you have saved now. I can find you a partner who will put up the money or credit if the deal is good enough but you have to bring something to the table as well. There is 100 ways to do this thing! I will not take up your time now however, you know where to find me for more insight. Bottom line, get a money partner and use your credit. I know a couple of possible parties.

Answer 4

If you invest $15,000.00 per year at 20% you will make about $3,000.00 more each year and that would reduce your time by several years.

Keep in mind the second year you now have $18,000.00 and the interest will be $3,600.00 instead of $3,000 and every year you will make more and more money.

You could also get a second job on the weekends and save 100% of that salary.

Answer 5

um a loan...