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I want to begin investing in residential real estate. I have $20k, where should I start?

20k is plenty. You might NEED to spend about $2k of it. The other 18k is optional and should be held tightly in case of emergencies (true emergencies). You only need money to buy real estate if you do not have the skill to use money. The money you should always focus on is “other people’s money”. Don’t scoff, yet. You do not need money. Money allows deals to happen faster, and you can brute force a buy with money, but you do not NEED money to become extremely wealthy in real estate. Re-read that please.

Here is how I would suggest you start your path as an investor, by learning stuff just like what I’m about to share.


I would look into setting up a self employment plan and self directed IRA. Self-Directed IRA – Quest IRA has SDIRAs (you want a Roth) that you can setup for $100. This allows you to invest your money into houses, flip them, and not pay the capital gains (discuss with a GOOD CPA and Real Estate Attorney). If you don’t do this, you’ll make 40k then give 15k or more to the government so you can buy people cell phones, and cheese which they will sell to buy beer (sic). I would advise you go to Affordable Legal Services, Free Legal Documents, Advice & Ask a Lawyer ($400 or so to setup an LLC) or a similar service and setup an S Corp or LLC or even a Land Trust (Setup a Real Estate Land Trust Illinois, Florida & California – Real Estate For Profit$995 course) so you can protect your assets and hide them from would be legal theives. You can learn about things (eventually) like having multiple LLCs in different states and putting a lien on your property from another LLC you control so the first property is so far under water in debt (to your LLC) that nobody will ever bother suing you. But you don’t need to go there now, just start thinking like an investor now. You can spend $100 or so on books from amazon about saving money on taxes. Read 3 or 4 books then interview CPAs until you find one that will help you with what you are about to do, the right way. My CPA charges about $1500 a year.


You will need to discuss with your CPA what your tax structure should look like. Mine is multiple LLCs and Trusts for each property that I buy and hold. After a few years, when I feel like it, I sell or refinance. I use the properties for tax write offs because of my IT consulting business. Your situation maybe completely different. You need to talk to a competent CPA that knows how small businesses and bank loans work. If you show no profit, you can’t get loans. You have to balance the income vs the loan and credit you are applying for. You can avoid so many taxes by simply doing things the right way. Even if you mess up though, don’t get paralyzed by trying to do it perfectly. Just do it and then adjust as you go.


First, Learn about “Section 8” and decide if it’s for you. Contact your local city government and ask about their section 8 program. It has advantages and disadvantages. Section is typically lower class (not always), and more headache, but you are guaranteed to get the money and are helping people with housing. You will never run out of tenants if you qualify your properties for section 8. I personally do not do section 8 because I do not like the headache or dealing with the people, but there are people I don’t want to deal with outside of section 8 so it’s a personal preference. At least learn about section 8.


I live near Dallas, TX so numbers I suggest are for my market. Your market will be different. Decide on what types of houses you want to go into. I suggest that your first few are flips in the 60k to 120k range. And then you focus on houses in the 120k to 180k range possibly to keep. Always try to get 3/2/2 with no pool that will resale easily. Stay away from warzone stuff (crack neighborhoods/ghetto) at first at least. Lots of money to be made, but it’s hard if you don’t know the game they’ll play when you try to rent to them. Just flip those kind at first for the extra seed money. One reason is that banks only like to lend on properties worth more than 60k (where I am from). Above 180k you lose some of the median income clients that can afford to buy/rent your properties because of the way bank loans work. The higher you go in price on the buy and hold the fewer people can possibly purchase your homes. So, this is why I recommend these ranges (for the Dallas, TX area anyway). Each location has different prices and ranges but these two tiers are 60-120k and 120-180k that I use.

With that said, you MUST know how to value a property. I use programs like Real Estate Investing Tools & Local REALTOR MLS Comps and Propelio – Real Estate MLS Tools for Investors or simply ask a competent realtor to pull comps. You can spend about $80 a month or so on the services listed to get values any time you want.


Here are some other generally strategies – numbered for easy of reading, not because of a particular order. You want to find people that are interested in buying deals and selling deals, and here is how you can do it:

1. Go to Find your people – Meetup and find REI/Real Estate Investor meetings. Meet people, introduce yourself as an investor looking for deals. Follow up with them once a month, go to a meeting at least once a month. Networking is a large part of being an investor. Start building a list of people that you can email using mailchimp or aweber etc. You might spend $20 – $50 a month for an email program that manages your contacts.

2. Take about $200 and buy all of the real estate guru courses you can on Ebay. Learn everything you can, non stop. Make this a new habit. Spend $20 a month on books about investing, audio cds, etc. Education is King in REI. Knowledge allows you to put together deals in a way that’s a win/win. Buy up the old, “not wanted/too hard” courses that were originally $1000 for $20. Buy them all that you can find.

3. Find a few realtors that will do what you tell them and ask them for weekly showings of all expired listings or aged listings (more than 60 or 90 days) that are 3 bed 2 bath rehabs. Look at them and make lots of offers at about 70% to 80% of their comparative value. Eventually you’ll get a deal. Don’t forget to factor in repairs. If your realtor says “it doesn’t work like that” fire them (I give them 1 chance to work but as soon as I see they are after a quick commission vs a relationship of many homes, I just stop contacting them). You might have to talk to 30 to find 1 that will actually help you find a deal vs ones that just want easy sales on high dollar properties. Find Real Estate, Homes for Sale, Apartments & Houses for Rent has a list of realtors in your area.

4. Look on HUD Homes for Sale for great deals that you can buy for 80% and get 100% financing/repair funding. Check once a week and get your realtor to show you houses you selected and put in offers. Never pay more than 82% of their value. If you live in the HUD home, you can bid 2 weeks before other investors. HUD pays closing, and pays 97% of the repairs if it’s a 203k loan. Learn this, use it. Use a realtor that has done several HUD deals in the past 12 months, even though ALL realtors CAN do HUD deals. Look for experience here in your choice and trust their advice. If they are doing multiple HUD deals, they understand that you are an investor and will have good input for you.

5. Place ads saying you buy houses any condition, cash in every dandy dime/quick quarter/craigslist etc in your area. Talk to people and see what they have, work a deal with them. (some will owner finance deals). This MIGHT run you $50 a month. Do it from now on, never stop as long as you want more deals. Setup a phone service to handle/screen the calls. I like Voice, Video, Team Messaging, Contact Centers | RingCentral but you can use any similar service. They are all about $20-$50 a month.

6. Call tired landlords in the paper and see if they want to sell, do it on a daily basis if you want deals. Look at eviction notice filings and call those landlords too (public record info). See if they want to sell, again daily basis if you want the deals.

7. Contact Bail Bondsman and see if they have houses they took as collateral that they want to dump. Make this a weekly habit. Walk in and leave them your information.

8. Place bandit signs at intersections saying you buy houses cash, call your Google Voice number (not your cell directly). This is so you can put a free voice answering on it or route it to a larger voip company if you later need multiple lines.

9. Get an investor carrot website for $99 a month and add a few articles once per week about solving real estate problems along with a contact form that tells them you can fix it and you buy houses cash. Post links to the articles on your social network. Pay someone to write articles if you aren’t going to. Your articles should show how selling a house to you is a good idea for them, solve their problems. Focus on leads, not free content. The website, by itself will do nothing. You have to market it by getting inbound, relevant links from youtube, facebook and other real estate related websites and directories.

10. Spend $50 and get some magnetic signs for your car saying you buy houses cash, use your Google Voice number or a VOIP number like from Phone System, VoIP, Cloud PBX, 800 Numbers, that you can leave short sales pitches, etc.

11. Buy some business cards for $20 that list your website, say you’re an investor and that you buy houses any condition for cash. On the back of mine I specify that I’m looking for 3/2/2 in the area I want the houses in. Any problems are ok. I specifically list things like foundation, bad roof, burn outs, etc so they know I am looking for non-pristine houses. I leave cards with a tip, and with every person I interact with. I tell them I give them a finders fee if they find me a house that is not “prime”, meaning that the owner needs to sell but they can’t for some reason.

12. Ask your city code inspectors how to get a list of vacant properties. Send the vacant property owner on tax record 70% of the appraised value or of the tax records as a real, filled out offer in the mail (whichever is lower). They have a house they can’t/won’t maintain and the city is fining them, you are their savior. There is no end to this list. Put a budget of $200 to $500 a month on postcards using a service or by hand to direct mail. Learn about direct mail methods with a few books. It’s an art. Track your pieces so you know what’s effective; adjust and always try to beat your last send out with a higher send out rate.

13. Go to estate sales estate sales and talk to people, follow up with them. They often have a home in need of repairs that was left to the relatives and they have a headache fighting over the inheritance. They need 10k for a new roof but none of the kids has 10k to fix it, so it can’t sell. Talk to probate attorneys (probate court has a list of attorneys) and let them know you can help their clients, give them your card, buy them lunch, follow up. Signup on Find Upcoming Estate Sales Using EstateSales.NET and offer at every estate sale to buy the house.

14. Ask for disconnect records from the city. If water is disconnected then it’s likely vacant (see vacant strategy above).

15. Go to sherriff sale auctions (foreclosures section in paper) and see who the bidders are. Tell them you get properties sometimes and if they are interested in a deal you’ll assign them the contract. Build up this list of investors with cash money, just sell them the good deal you found – no fix up. they do all the hard work and pay for all the repairs then make a bunch of profit. You could sell the contract for 5k to 10k though. There are other auctions in your area just google “home auction” and signup on all of them so you know when an auction is taking place.

Now you have a bunch of cheap/free/awesome ways to find great deals on properties and ways to sell them fast to investors too.


Eventually you may find a deal that needs 5k or 10k down and 10k repairs but will net you 40k in profits after fixing it up. Do that a few times, OR sell that deal to someone you met at the real estate meetings. You don’t have to do the flip and repairs yourself. Just sell the contract to another investor and wash your hands, 5k richer. No money required.


There is a skill to getting people to loan you money. Banks, credit cards, private investors all have different strategies. Small credit unions will fund up to 80% of your deal including repairs. Credit cards can give you 0% loans of 10k. Private investors may give you 5–7% loans for 1–5 years with no points. Learn these theses. You can learn about private lending from this mentor: Private Lending Made Easy – Home. I have purchased his course and it was pretty good.


IF you don’t want to sell it, leave your 20k in it rent it out and then get a loan on 80% of it’s new value 12 months down the road. Usually you can pull all of your money out of it and still have a small mortgage that the renters will easily cover. Use the loan to fund the next deal. If you sell it, make sure you understand the tax ramifications of flipping and how to keep the money you earned instead of throwing it away.


Learn every day, read articles, listen to audios, learn the markets, drive your neighborhoods… market market market. Set a goal for how many houses/deals you want to do and what deadline you want to do them in. Don’t give up until you have met your goals. The actual skill of real estate investing is not near as hard as the spirit of being an entrepreneur and doing deals back to back. You need the habits of marketing to keep the machine rolling, or else you might get 1 or 3 houses in your lifetime instead of 10-30 houses per year.


Try to never purchase for more than your 82% of the actual value (see cash flow for the exception). This means don’t even look at the pristine deals on a recently remodeled top dollar etc. You want distressed properties that normal people won’t touch. You’ll have closing costs, taxes, repairs, appraisals, down payments, contractors, legal fees, title costs etc. ALL of that must not add up to more than 82% of the actual value of the property. With that said, you can often get into controlling a property for $100 or less vs spending your 20k. Be patient and make many offers that keep all of your costs below the 82% mark. Use leverage as much as you can to keep hold of that 20k for as long as possible. The problem will happen when you spend 92k on a house worth 100k. That’s 92% and if you need to dump the property you will lose 10k. Many people that are afraid of investing think of over-leveraged loans. If you don’t buy over leveraged, you’ll be much safer. Just focus on that and make offers! Appreciation isn’t guaranteed, don’t count on it. Do NOT buy because of your hot realtor tip that properties are going up in xyz area. Don’t do it! Cash flow is King. Appreciate is icing on the cake, not the cake.


The app “cash flow game” is a great fun thing to play with (Cost $2.99 on google play) they have a free online version too, but I like the app better: Play CASHFLOW® Classic to Get Out of the Rat Race Like the game, you need to make sure that after taxes, insurance, repairs, vacancies, marketing, fees, mortgage, etc you make some cash flow every month. That’s what the game is all about. So if you happened buy the 100k house at 108k (yes 8k more than it’s worth) but only had to pay the owner $300 a month for 30 years, it would cash flow for about $500 a month and it’s still a good deal. Cash flow is the secret sauce to this recipe, and if you’re in it for the long haul start looking at deals this way. Make your cash flow safe and you never have to sell, ever. The longer you hold on to property, the more you make, even more than getting 5%, 10% or 20% off of the initial purchase (but that’s important too!)

If you are sticking to the working class homes that are 3/2/2 without a pool and easy to rent/sell, you never have to worry about “I couldn’t find a renter”. The people that lose their shirts in a crash are the ones doing the 500k flips that nobody buys while they hold onto a 6k a month note…. ouch. They forgot about cash flow and just assumed people will always want 500k homes! People always want affordable homes in the 150k range, stay there for safety and you really can’t go wrong (no warzones either!)

Anyway … this is the path I’m taking and have taken. It’s worked great so far for me.