Can You Buy a Rental Property With Only $5,000? (Rookie Reply)

0:00Ashley Kehr:You're ready to start investing, but the question is not always what deal should I buy? Sometimes it is how do I make an offer when I only have a little cash? Can I invest in the U.S. from another country? Or am I too late if retirement is coming up?

0:15Tony Robinson:Today's questions come straight from the bigger pockets starting out for him, and they all come back to the same Ricky skill. Slow down the decision, get the right information, and make a plan that fits your real life.

0:32Ashley Kehr:This is the Real Estate Rookie Podcast. I'm Ashley Kerr.

0:35Tony Robinson:And I'm Tony J. Robinson. And with that, let's get into our first question for today's episode. So this question comes from Casey. And Casey says, I'm in the middle of this deal. He said he still has some money left on the mortgage. His price is$219 ,000. It's a multifamily. And I only have 5K in capital, but he wants to get rid of it. He said his last statement to me was just make me an offer and we'll go from there. It generates$3 ,050 a month in rent. What should I do? I'm excited and nervous. I wrote him this. Thanks. I appreciate that. And I'm definitely interested. Before I put an offer together, I just want to make sure that I structure it in a way that makes sense for both of us instead of throwing out numbers that may not make sense.

1:18Tony Robinson:Would you mind sharing a few things with me? Approximately what is the current mortgage balance? What is the monthly payment, including taxes and insurance if you know the interest rate. Once I have that information, I'll put together an offer for you to consider. Casey finishes by saying, please help. So again, first, Casey, congrats to you for jumping in and talking to sellers and trying to make some things happen. I think I'll surface maybe my biggest concern before any of this is that you're looking to buy a property for a couple hundred thousand dollars, multifamily, and you've only got 5K.

1:53Tony Robinson:I don't know if that 5K is like your entire life savings or if that's just the 5K that you have allocated towards real estate. If the 5K is all that you have, I think my first advice is don't do this deal. And I say that because what happens if on day number two, there's a storm and you get, you know, you're like Ashley's biggest fear, your roof blows away. What happens if the HVAC system goes out? What happens if the main sewer line going out to the city sewer cracks and breaks? There's a lot of different things that can happen. And I worry about buying a multifamily property with only having 5K to your name that you might end up putting yourself in a position where you end up losing that property relatively quickly.

2:46Tony Robinson:um so i think that's my first statement and if that is your only 5k since you are negotiating on the deal maybe bring in a partner who's got a little bit more money in reserves and you can show them the deal and say hey look this is a great deal but i only got 5k and i don't want to lose this so can you come in with me to help me bring maybe some of the capital the seller might want and to also just kind of help us fund some reserves in the beginning so we can move things in the right direction so i think that would be my very first statement casey is just like let's evaluate your financial situation to see if this actually makes sense for you.

3:19Ashley Kehr:Yeah. So it says the rent is$3 ,000 per month. Let's say for our example, your expenses are $2 ,000 per month. That leaves a thousand for variable expenses and your cashflow. Okay. So conservatively 2000, in which honestly your expenses are probably more. I think it would be a great deal if you're cash flowing$1 ,000 a month. But even if it was at$2 ,000 per month, which it possibly could be higher than that, your monthly expenses, we like to save three to six months for reserves. So if you're doing the bare minimum of three months, that's just$6 ,000 that you need. So you don't even have the bare minimum for reserves.

4:04I started in real estate investing,

4:06Ashley Kehr:bought my first property with only$5 ,000 in my savings account. And I did it the exact same way Tony recommended is you find a partner. I found a partner that had about, I don't know,$80 ,000 in cash. And we used$70 ,000 of that to purchase the property in cash. And then we still had his $10 ,000 in reserves and we had my$5 ,000 in reserves. And you know what happened right after closing, we found out the electric panel needed to be updating, updated in order to add the split unit that we were already putting in. So we had budgeted for that split unit to be put in, but not to do all this electrical work and the panel upgrade.

4:50Ashley Kehr:So guess where my$5 ,000 went that I had in reserves? It was literally gone within the first month because we had to do these repairs and these updates that weren't expected, but we still had my partner's money and additional reserves. So I think that it's really important to be above. Even if you can get into a deal for zero dollars, you get seller financing, you do some kind of creative structure, whatever it may be, you still should have those reserves in place. And I think it's worth, in this scenario, it's worth waiting a couple more months until you can save up a little bit more to have that cushion financially because nothing will ruin your love for real estate investing or your excitement than having it bankrupt you or drown you, having to take out credit card debt to stay afloat.

5:43Ashley Kehr:So I think having those reserves in place is a really good idea. Okay, coming up, we have a BiggerPockets listener from Sweden who wants to invest in the U.S. So we're going to talk about what it takes to invest from another country in the U.S. We'll be right back.

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8:24Ashley Kehr:So we've talked about creative finance and when the deal is right in front of you. Now let's talk about a rookie who wants to invest in the U.S. from another country. Our second question comes from William. Hi, I am 27 years old from Sweden and I'm a big fan of Bigger Pockets. I've been researching and planning my first investment in real estate in the U.S. I would love to get in touch with people that have done this themselves out of country or out of the state to look for inspiration, but also for knowledge sharing and guidance. Okay, Tony and I do not have experience or a vast amount of knowledge living in another country and investing in the United States.

9:02Ashley Kehr:I'm going to give this disclaimer, but we can guide you into how to find that information and find the people that you need to network and connect with to actually make that happen. The first thing I am going to say is to contact a real estate attorney that handles international real estate sales. That is going to be your first step. Pay the consultation fee to be able to have them to give you an idea of what it's going to take, what's going to happen. So when someone decides they want to do a syndication, you contact a syndication attorney and they go through, they do a consultation with you and go through exactly everything you're going to have to do, everything they will do on your behalf and give you this kind of like outline of it.

9:50Ashley Kehr:And so you're going to want to get something similar from a real estate attorney that actually does this. So that's the first step is finding a real estate attorney. Start with Google, ask chat GPT, but then your next step is going to be connecting with people in Sweden that have already invested in the U S. So from your country, I would start getting into Facebook groups. I would start posting in forums. If there's any kind of local real estate meetup, I would say how many people will actually invest in the US could be very, very slim compared to investing in your own market, but going there.

10:32Ashley Kehr:Then I would attend BP Con and come to the conference and connect and meet with everyone so that you can get yourself help identifying a market that you actually want to invest in in the U.S. Because once you figure out how to invest, then you need to figure out what market or city you're actually going to invest in as your next step.

10:54Tony Robinson:Yeah, I think another big piece, too, is sort of I totally agree, Ashley, on like the networking piece. But I think another element is figuring out the financing as well. There are a lot of loan products that as U.S. citizens, we have access to that folks who are not citizens investing here don't have access to. So I think just getting clarity on what is the actual loan product look like, because that'll really, I think also help dictate how you execute your strategy. Because if you're looking at a 30 % down payment versus a 5 % down payment, that's a very, very big difference in terms of the types of deals you can go execute on.

11:31Tony Robinson:So I think understanding first your purchasing power here inside of the US, talking with the lender would be probably one of the first steps that I'd focus on.

11:42Ashley Kehr:Or just figure out what your purchasing power is in cash. So if you have a primary residence that you can maybe put a mortgage against to pull out more cash, if line of credits are available, get a line of credit, use that as cash or just cash that you have available as your purchasing power too.

12:01Tony Robinson:Yeah, we see that a lot. So like in the neighborhood that I live in, there's been a lot of Chinese investors who have purchased homes. they pay for them in cash and they buy in like all these new subdivisions um you know they they rent them out for a couple years and then they sell them for like double the price you know uh a few short years later so if you do have enough cash actually that's a great strategy actually just like buying in cash in high appreciation markets maybe even um and and kind of flipping them a few years later i think the last piece um that i'd also add is i'm big on like remote investing, right?

12:38Tony Robinson:Like, you know, the first rental I ever bought was like thousands of miles away from where I live. But doing it in a different country, I feel like I would need to like get some eyes on the market before I actually pulled the trigger. So I think once you've spoken with like the attorney, once you've spoken with the lender and you've kind of got your short list of markets, I would just take a trip, you know, road trip around the different cities that you're thinking about them, really get some eyes, meet people, shake hands. Because I even think like working with a property manager, I think it's slightly different if you're just like a name on an email thread versus someone that they've shaken hands with.

13:15Tony Robinson:The handyman, the cleaners, if it's a short-term rental, like whoever you're working with, if they can actually shake your hands, see you, meet you, I feel like it adds some depth to the relationship that's hard to grasp if you're just doing it all over email or virtual. So once you have your city selected, I take a road trip out or take a flight and then road trip to the United States.

13:33Ashley Kehr:And I guess another person to add on as a team member to consult with as a tax advisor as to what's the tax implication of investing and owning real estate in the U.S. and how is that rental income taxed to you? So even just I have done some work for a company out of the country and even when I invoice them Like there's taxes taking out before I even get the money. I think, what is it? VAT, I think it's called VAT. So I would be curious as to, you know, what the tax implications would be too, because you could analyze the deal, but not, you know, calculate in some of the taxes that you will accumulate and have to pay for.

14:21Ashley Kehr:And that will end up coming out of your deal's profit.

14:23Tony Robinson:All right, guys, we're going to take a quick break. But when we're back, a listener who's 60 has savings and some home equity and wants to know whether real estate investing still makes sense before retirement. We'll be right back after this. A few weeks ago, I took a trip down to Pensacola, Florida with my dad and my kids. We spent our days at the beach in the pool. We cooked dinner together one night, and I got to experience the simple joy of just watching my dad suck up time with his grandkids. We played a round of mini golf that ended up being the best part of the whole trip. And it was one of those visits where you just slow down with the people you love and realize how much these ordinary days together actually mean.

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15:33Tony Robinson:Find a co-host at Airbnb.com slash host. Do you ever notice how every passive investment somehow turns into a very active lifestyle? Active spreadsheets, active phone calls, active stress. Here's a better question. What if you could buy brand new construction homes, 10 % below market value, in the best markets across the country, without making real estate your second job? That's exactly what Rent to Retirement does. They're a full-service, turnkey investment company handling everything for you. In some cases, investors get 50 % to 75 % of their down payment back at closing, plus interest rates as low as 3.75%.

16:09Tony Robinson:They've partnered with BiggerPockets for over a decade, helping thousands invest smarter. If you want to do the same, visit biggerpockets.com slash retirement to learn more. Quick note before we dive back in. This episode is brought to you by Cash App. I've been using Cash App for years to send and receive money. Sometimes I need to pay someone who doesn't take credit cards, or if I want to split a check, or just to pay back a friend for a shared cost. Cash App also helps me online shop safely. More investors are thinking about where Bitcoin fits into a broader portfolio. Not as a short-term trade, but as long-term exposure to an asset that behaves differently from traditional markets.

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19:19Tony Robinson:You can finally step away mentally without feeling like something's going to fall apart. Now, my rentals practically run in the background, and yours could too. deposit qualifying rental income into Baselain for a chance to win$10 ,000. All right, guys, welcome back. Our last question comes from Morris. And this is a question a lot of people have, but don't always ask out loud. What if I did not start investing in my 20s, 30s, or 40s? All right, so Morris says, I'm 60 and I will retire in 10 years on a salary of$120 ,000. My wife makes 30K a year and we'll retire 25 years from now. Only debt is 250K mortgage on a 500K house.

20:00Tony Robinson:We have 150K in savings. Just read Dave's article on equity versus cash flow for retirement. What would a plan look like for me? Is it too late? Thank you. All right, great question. I think the first thing, just like answer the question is that no, it's not too late. Investing at any age, I don't think is too late because it's an asset. that's going to continue to give you benefits that will continue on to your family members. And it's hard to ever say that buying real estate is a bad thing. Now, I do think that the strategy at 60 is probably slightly different than what the strategy would be for someone who's, you know, like just graduating from college, right?

20:43Tony Robinson:Or even in their 30s, right? I think when I talk to a lot of folks now who are millennials, slightly younger, slightly older, a lot of times they can buy things where it's like, hey, I'm buying for appreciation. I like my day job. I'm going to work my day job for another 30 years. And I just want to have like five paid off rentals by the time I retire. So they're not as worried today about the cash flow that the units produce. And they're more so focused on buying a good solid asset that's going to appreciate over time. I think investing at 60, assuming that you're doing this for some additional income in retirement, I think investing at 60 when you're 10 years away from retirement, could you potentially still buy for some appreciation play?

21:27Tony Robinson:Yes. But I think the strategy starts to shift a little bit more so toward stable income. And it's almost like the stock market, right? And Ash, you can probably speak this better than I can. But a lot of folks, when they're younger, their stock portfolio might be a little bit more aggressive. and as they get older, their portfolio becomes a little less aggressive. And as they get closer to retirement age, it becomes like the least aggressive possible. Now they're buying things like bonds, whatever it may be. So I think for real estate investing, we can take that same concept and apply it here.