Listener Question! - How To Get Started Investing With Only $20k

Speaker 1: [0:02] Welcome to the Collecting Keys Real Estate Investing Podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [0:25] What's going on, guys? On this episode of the Friday Focus, I actually wanted to dive into a question that I got from someone recently who is a listener. And I felt like this is super relevant to a lot of people who listen to our show and kind of start to engage with us, you know, if they are, I guess, coming from a position where they're kind of unfamiliar with real estate, and especially if they're just starting to get they're just trying to get started. So they reached out and they said that they had just sold their previous house, moved into a new house, and they had about $20,000 extra that they wanted to use to start flipping houses. And they basically said, like, I have this $20. How do I go about getting started with this? Right? It's kind of unclear, especially they recognize that isn't an incredibly huge amount of money, but, you know, they want to increase the velocity of their money. And I will say that first off, the fact that they are even thinking this way is extremely positive, you know, and they're looking at ways to take this opportunity to have this extra money and grow it. That's probably one of the best things you can do. Whereas I know there would be a lot of people who get that money, they would go and they'd buy a new car. You know, they would go and blow it on, I don't know, other toys or miscellaneous things. But by having this extra cash that you can go and potentially grow, I mean, that's plenty of money to be able to potentially change the financial future of yourself and your family. So first thing I'll say is if, you know, you just wanna flip houses, starting with only $20,000 is going to be pretty challenging just because that isn't a ton of liquidity to actually be able to purchase a property, to renovate it, and then carry it for the period of time for that to happen. I mean, honestly, most lenders like, depending on the price point of your market, if you're in like a super low price point market, somewhere in the Midwest where houses are like $2,030,000 dollars.

Mike DeHaan: [2:16] I mean, you can maybe figure out something weird there, but margins of those deals are also gonna be pretty small, so you might wanna play with that. But in most markets, a lender's not even going to really lend to you. Like, a hard money lender is not gonna lend to you with this kind of liquidity. I mean, typically, they're gonna want 10% down. They're gonna wanna see more than enough liquidity to be able to carry the project and do the renovation, you know, while also making sure that you have enough money to live your life because they know that if you start to get strapped for cash in your day to day life, the first thing you're gonna let go is this investment property, which means that the hard money lenders gonna have to foreclose and do this whole thing. So they're trying to prevent that. They're gonna wanna see you with more liquidity in just this $20. So I'd also say that since you, you know, you have this $20 to start and you're kind of asking this question, I'm also gonna assume you don't have a ton of knowledge or experience. And, you know, the other thing of just, like, jumping in with this little money, let's say that you find some way to get into it. You find one of these lenders that will give you a 100% financing without doing a lot of due diligence on you.

Mike DeHaan: [3:19] By the way, if you do find a lender lender that does that, that is a red flag because they are probably looking for you to fail so they can take the house from you at a discount. There are lenders that are out there like that. Trust me, we buy houses from people who use lenders like that on a regular basis. So the point being, I'm gonna assume that you're kind of new to the game, and that $20,000 can be eaten up pretty quickly by any sort of miscalculation with, a renovation or, you know, miscalculating the ARV or anything like that. So, you know, you definitely wanna be a little bit more conservative. So I'm saying, if you're adamant that you really wanna flip and, like, that's absolutely what you wanna do, then with this $20, you're gonna be stuffed dude on your own. So the best thing you can do is go find a partner or a mentor, someone with more money and more experience. And, you know, they can basically help coach you through the deal, partner with you on the deal, and they will get a percent of the profits. Right? So when you're doing that, you're obviously gonna have to bring some hustle or like maybe bring the deal. You're have to bring something to the table, but if you can find someone to cover that money experience, you should be pretty good. Because ultimately, what it takes to do a deal, there's kind of like a triangle. Right? You need some money. You need some experience.

Mike DeHaan: [4:30] You need some hustle. When you get to a position where you have kinda like money and experience, you can hire the hustle. Right? You can find the hustle. From the position that you're in right now with this fresh $20,000 and you're wanting to get started, you don't really have the true money or experience needed to do this. So if you can bring that hustle to someone that has the money money and experience, and maybe even you contribute a little bit of your money to show that you're serious, then you're gonna be able to, you know, complete that trifecta and get a deal done with a more experienced partner than yourself. So if you're really adamant about flipping, that's what I would suggest you do. To find a partner like that, you know, you can connect with people online. Things like BiggerPockets are a good resource, Facebook groups. Going to meetups is a great way to go. That's actually where I found my first partners back when I was in a really similar position to this, and I started flipping houses back in 2019. I connected with someone in BiggerPockets, then met them at a meetup that was local, and we did exactly what I described where they brought the money. I brought the hustle. We flipped a couple properties together, and we split split the profits. Right?

Mike DeHaan: [5:34] So that's kind of how you go about doing that. So like, all around with that, flipping is gonna be a little bit challenging to get started. But if you are adamant that you wanna grow this money and you want real estate to be the way that you do it, honestly, what I would kinda recommend you do is look into potentially trying to start wholesaling, and you use that money to instead of going and actually buying a property, you use it to start learning about how to build a marketing system, and you spend the bulk of your system on marketing. Right? Because I mean, realistically, if you spent that $20,000 on marketing and you have a system, you can two x or three x that money in about the same amount of time it'll take to do a house flip, if not a little bit faster. And in doing so, you're actually going to be able to build skills that you're gonna be able to use to find more properties in the future, which will be infinitely more valuable than just doing a single flip. So, you know, there's kind of a couple of different ways that you can do that. I mean, obviously, self promotion here. We have our instant investor program, which you hear us talk about on every podcast. So, you know, that's our group coaching program where we can bring people in and teach them exactly how we built our business and our funnel.

Mike DeHaan: [6:47] You come in, the cost is surprisingly affordable. If you're 20 k, you'd be surprised at how far you can go with that. So definitely go to instantinvestorprogram.com and reach out if you wanted to learn that way. If you didn't wanna join a course, you've just truly wanna do it yourself, there are YouTube videos that can teach you the principles. There are other podcasts out there. I mean, even listening to some of the episodes of our podcast, you can get a lot of the gist of what we do. But sometimes having that community and that accountability of a coach can help escalate that a little bit. But either way, if you go and you, you know, watch some videos, network with people, start learning how to build systems in marketing, you're gonna be able to grow that money significantly faster. And I think in this time, the market was less risk than if you're trying to flip a property yourself and trying to figure out how to actually, you know, go through that whole process, which at this just with this phase of the market where things starting to slow down a little bit is getting a little bit more questionable, especially for newbies. So I guess going full circle with it, you have your $20, you wanna start flipping properties, jumping into a flip, would not necessarily recommend unless you can find a good partner to help you out.

Mike DeHaan: [7:56] If you really wanted to go solo and you really wanted to, like, potentially pursue this as a business, I would look into learning how to market and wholesale for deals. Back when I started several years ago, we actually spent about $20,000 to find our first deal between me and Dan. And we had went through a whole bunch of hurdles with the instant investor program, helped make that a little bit easier. But so we spent that first $20,000, took us four months to get our first deal, made 7,500 back. Our second deal came right after that. We made 13,000 at that point. We were breakeven. And then three months after that, we actually had our first 6 figure month. And from there, we were off to the races. Right? And that was all off of the momentum of the skills that we used our initial $20,000 to develop and build. Right? So, you know, that's if it was me doing it again, that's what I recommend is that you go that route instead of jumping in into a renovation. So do it that what you will. Overall, despite what people say, real estate is a pay to play business, and you want to have more money than necessary when jumping into any part of this. And if you are sort of like on the fringe like you are right now, you just wanna make sure that you do have some reserves for whichever direction you go. So, obviously, with the marketing, you know, you can sort of have a few chance to bat. With $20, you're gonna be jumping into a singular flip. And then if it doesn't go well, you're gonna be stuck. So yeah.

Mike DeHaan: [9:14] Anyways, do with that what you will. Hopefully, that was helpful and you guys enjoyed the show. If could please go and subscribe to our podcast and leave us a five star review, wherever you listen to your podcast. Also, if you have somebody else that is looking to get into flipping a property, has a little bit of extra money, is looking for some guidance or might find this useful, please share it with them. The easiest way for us to grow this podcast is if you share it with your friends. So absolutely do that. If you wanna follow me on Instagram, I'm at Mike underscore invest. Dan, my cohost at investor man Dan. And besides that, one last time, if you want to learn from us in how exactly we built our business from being a situation where we had $20 into, you know, we made 7 figures overall last year. Go to instantinvestorprogram.com, schedule a call, and we will see if you are a right fit for our group coaching program. Thanks so much, everybody. Talk to you next week.

Speaker 1: [10:04] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.