How Much Money Do I Need To Start Investing?

Founding partner and attorney Toby Mathis goes over what you need to know before investing in your first property and how to do so safely. 

Updated September 26, 2021

Step 1- Have cash on the side. 

When you’re getting your first rental property make sure you’ve got cash on the side because every investment brings with it the unexpected. We finally earn some money, put it away, and we’re ready to throw our hats into the financial freedom ring but, there’s more. A lot of us are taught to jump headfirst into our local markets, thinking we’ve got to immediately secure a rental property. 

What they don’t teach you- don’t go where you eat. Our neighborhoods are not always the best places to be buying real estate; with numbers usually way too high. Let’s look at the booming city of Las Vegas. If I live in an area where the average price is $330,000- a really high average, maybe I can get a rental property for $200,000? Around here we use the rule of 1%, so that’d put us at making roughly $2,000 a month from the new rental. Not bad, right? 

Well, on paper it’s smooth sailing. What’s often written in invisible ink and isn’t shown are the insurance costs, property management, repairs, vacancy rates, air conditioner repairs, CapEx- a mandatory roof replacement every so often, and of course the overall property maintenance. Budgeting for those things alone, you can go ahead and subtract 50% from that monthly rate. Now you’re sitting at $1,000 a month and that’s assuming it went well. 

I’m not saying not to invest in real estate, I’m saying not to start with it. If you’re a first- time investor with a tight budget, start with the liquids over the solids. I teach a course called Infinity Investing, where new investors are taught to recoup their investments from stocks and securities. Isn’t the stock market riskier? Not necessarily. We’re not buying the typical stock market stuff, where you throw money in, watch the news, and hope it swings up only to pull out. We treat our stocks like our real estate. So we don’t need to worry about those big market swings. The goal then becomes building up to at least $50,000- which we’d then wire over into our real estate portfolio. 

Ultimately, you know your finances best. My goal here is just to pass along some information so that you can make a well- informed decision. 

Take this scenario, for example. That big shiny house with a $200,000 sticker price, it’s going to repay you about 6% a year. If we can talk person to person here, that’s a measly $12,000 a year you’ll make, in exchange for very high risk. I can get 6% on some of the stocks we have from dividends alone. 

So, what’s the real estate sweet spot? 

Well if there was a lucky number, it’d be closer to the $100,000 range, where we don’t have those wild swings. You want to save up for your first property, and buy with cash. This is the best bet for this investment actually making you money. You’d pull that extra cash from the stocks, or savings, and purchase a rental property between $70-120k. Yes. Properties at that price do in fact exist, I promise. You’ll find them outside of the big cities with increasing populations. I know, I buy them every single week. 

I won’t tell you what the right move for you is, but I will tell you what successful people do, after all, I see their taxes. According to the experts, the average successful investor shares this in common, that first property- it’s on the inexpensive side and the maintenance? Delegated. You want these pieces streamlined and taken care of by professionals, this way you know exactly what you’re walking into before you walk into it. 

So if you want to learn more, by all means, click on the link and certainly we’ll assist you in any way we can. And again, how should I get in the real estate market? I’ll just leave it at this… carefully.

Bonus Video