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Ask Philip: How to Invest Your First $10K and More

We get by with a little help from our friends, so that’s why we’re back with another Ask Philip! In this segment, he shares his two cents on how to fund your startup, invest $10K and find the best reads on real estate strategy. 

Q. I want to start a business. Where is the first place I should turn for money? Should I get a loan or find investors?

A. I get bombarded with this question, honestly, in my DMs because people think that in order to start a business, you need a favor, you need an assistant, money from somebody. But it’s simply not the case. Even if you’re somebody that wants to start a startup and you’re out there actively raising money, I always recommend this: Find a way to, number one, validate your business hypothesis. What does that mean? That means, is there somebody out there that wants to pay me for my business? You can quickly do that without going into creating LLC logos, websites and just burning through money before knowing whether anybody is interested in what it is that you have to offer. So figure out a way to get somebody to pay you money for what you do. Scale that. Now, once you get to the point where [you] have to expand, then you can go ask for investments. Because then, your investors are investing in a system and not an idea that’s unproven. So that’s what I would say: Find a way to get started. And once you do that, you’ll be far more equipped to go out and run a business and raise somebody’s money. [If] somebody gives you a handout, you’re just going to blow it. Trust me when I say that. 

Q. If we have our first $10K cash savings, where should we put it?

A. That’s a really good question. I actually created a video about that topic specifically where I said “how you can.” (Since I’m not a licensed financial advisor, I can’t say “well, you should…”) I can see where I would or where you can. And what I’d recommend if you have $10,000 (and, of course, it depends on your investment strategy, your age and things like that) but generally speaking, I would take that $10,000 and slice it in half. Put $5K into illiquid instruments, meaning real estate, where your money will increase in value, but you can’t just take it out and spend it. This is very, very good because we have some money habits that stem from childhood, where when we get money, we go out and blow it … So you want to see your money going up where you cannot touch it. The other $5K, I would just put it into the stock market. I would say the S&P 500 index funds, you could put half into that. Or you could, under normal circumstances, put half into municipal bonds, where you get a 6% to 8% yield tax-free. But right now because of many reasons, and the uncertainty that’s happening, I would stay away from bonds for the time being. Just go into the S&P 500 because as we know, the stock market is at record highs (which really suggests some other things such as inflation, but let’s not get into that now.) 

Q. Hi, Phil. Any book that you can suggest to learn the best real estate strategy? 

A. I’m trying to remain totally humble and grounded here. But I actually wrote a book about that, and I think it’s –– these are not my words, by the way. This is from Amazon –– one of the best real estate books ever. And the reason why is because I literally started with nothing, with less than a homeless person, simply because I wasn’t in the system … Save up some money because, with an FHA-backed mortgage, you can buy a property with only 3.5% down, meaning with $3,500, you can own a $100,000 asset. That’s how I started, and that was in 2016. As of 2020, we have 1,200 apartments in our portfolio. And that’s not because I’m anything special. I don’t know what a square foot is. It’s just the simplicity of the business model. And if you focus on shelter, that’s a business model that will never ever go out of style. So I would say start there. I write about it in my book … There’s a number of them out there, but I would say Rich Dad, Poor Dad, Top 10 Distinctions Between Winners and Whiners and Real Estate Wealth Hacking, which is my book. I could honestly recommend that. If you disagree, I’ll take you to lunch. 

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