What to do with 100k

Member since 2019 · 10 posts · 4 votes

I'm a newbie and looking for advice. My wife has recently received 100k from her employer. We are considering purchasing our second income property. My wife likes the idea of paying cash for a property in the mid-west and not having a loan. Our agent brought up a good idea that I like but my wife is hesitant about. Instead of spending all 100k on 1 door, buy 5 doors with 20k down on each. Thoughts?

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Reed Rickenbach

Real Estate Broker · Memphis, TN · Member since 2020 · 202 posts · 203 votes

Quote from @Puett Willcox:

Thanks for the advice William. Our goal is long term buy and holds. We are going to be empty nesters in a few years and would like to quit or jobs and move to South America and using the revenue to supplement some of our income. I'm retired military so I have a pension that can provide nicely in cheaper areas of the world.

If this is the end goal within a few years, and you don't plan on actively investing for 5+ years to build out a team/structure, you may be better off as a passive investor from the start. Although total returns are higher in real estate, cash on cash returns are very similar to publicly traded REITs or dividend ETFs.

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Eric Tullius
Real Estate Agent · Philadelphia, PA · Member since 2022 · 58 posts · 40 votes
3y
Hey Puett, what market are you looking to invest in? I feel like that may be a good idea depending on values available.
0 Reply
Puett Willcox
OP
Member since 2019 · 10 posts · 4 votes
3y
Looking in Indiana. Which option did you like? 1- buy 1 door and pay cash and have NO loan. or 2- carry loans on 5 doors?
0 Reply
William Sing
Real Estate Agent · Portland, OR · Member since 2020 · 278 posts · 136 votes
3y
I think this depends on what your ultimate goals are. I think that another option might be just to put a portion of it down for a property in the area you are wanting that is only 1 door but then spend half the year figuring out your team and getting everything settled. Then buy a quadplex or something else so you can get the economy of scale. Also depends on how much free time you and your wife have and the connections you have. Investing out of state takes more systems and you can't just go see the property whenever, unfortunately. If you haven't invested in out of state, make sure to go a bit slower so you don't lose your shirt if things go sideways.
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Puett Willcox
OP
Member since 2019 · 10 posts · 4 votes
3y
Thanks for the advice William. Our goal is long term buy and holds. We are going to be empty nesters in a few years and would like to quit or jobs and move to South America and using the revenue to supplement some of our income. I'm retired military so I have a pension that can provide nicely in cheaper areas of the world.
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Ash Hegde
Lender · Fort Lauderdale, FL (Lending in FL CT GA MI PA) · Member since 2022 · 470 posts · 349 votes
3y
Agree with William in having some caution and doing some evaluation of your free time, connections, and team. If that's all good, this sounds like a good opportunity to BRRRR if you are up for it. That is the only way I would buy with all cash - if I could get it back later. Otherwise, spreading it out to multiple properties will generally work out better for you in the long run.
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Puett Willcox
OP
Member since 2019 · 10 posts · 4 votes
3y
Quote from @Ash Hegde:

Agree with William in having some caution and doing some evaluation of your free time, connections, and team. If that's all good, this sounds like a good opportunity to BRRRR if you are up for it. That is the only way I would buy with all cash - if I could get it back later. Otherwise, spreading it out to multiple properties will generally work out better for you in the long run.
What level of concern do you have with the prices dropping while doing the rehab and before the refi? This was a good question my wife had and I didn't have a good answer.
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Ash Hegde
Lender · Fort Lauderdale, FL (Lending in FL CT GA MI PA) · Member since 2022 · 470 posts · 349 votes
3y
That's a good question and likely one for the agent who knows the area you are looking to invest in. Some markets stay fairly stable and some are volatile.
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Lisa Wright
Real Estate Agent · Metro Detroit · Member since 2022 · 66 posts · 28 votes
3y
Instead of chasing after 5 separate houses, why not a quadplex with $100,000. I would do this in a heartbeat.
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Puett Willcox
OP
Member since 2019 · 10 posts · 4 votes
3y
Quote from @Lisa Wright:

Instead of chasing after 5 separate houses, why not a quadplex with $100,000. I would do this in a heartbeat.
Hmmm, do you see a lot quads around that price?
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Dominic Pizzi
Lender · Freehold, NJ · Member since 2022 · 235 posts · 85 votes
3y
Puett, I think the all cash option is not a bad one, however spending money on 3/4 properties with some wiggle room would be best case scenario as opposed to just one. With a loan you would need more liquidity to close and fund so it may be possible that you get 2/3 doors with that 100k, and if you look in a good market I have seen people cash flow airbnb/vrbo for tens of thousands. Long term holds are always good but short term rentals are a serious move right now for people trying to make great cash flow.
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Leo R.
Investor · Member since 2021 · 591 posts · 695 votes
3y
@Puett Willcox if you're getting 5 doors with 20k down per door, what type of properties are they, and what grade are they? (20k down usually means 100k purchase price, and I don't think there are many markets where you can get much for 100k...even in the midwest)
...but, I'd love to be proven wrong!
1 Reply
Mitchell Roadruck
Lender · Northwest Indiana · Member since 2021 · 55 posts · 26 votes
3y
Hey @Puett Willcox, I am an agent/investor in Northwest Indiana. Id be happy to jump on a call sometime this week with you and your wife if you'd like.
0 Reply
Billy Daniel
Rental Property Investor · Russellville, AR · Member since 2014 · 684 posts · 509 votes
3y
My personal preference is to spread it out to as many doors as possible. With $100k, you could purchase a $500k multifamily property. Maybe two $250k properties? Vacancy becomes less of an issue the more cash flowing doors you have. With one property, a tenant moving out takes your cash flow to $0. It's unlikely you would have a month like that with multiple doors (as long as you plan properly). Multifamilies in that price range are fairly easy to find in Arkansas!
0 Reply
Ricardo Hidalgo
Real Estate Agent · Member since 2019 · 569 posts · 257 votes
3y
Quote from @Puett Willcox:

I'm a newbie and looking for advice. My wife has recently received 100k from her employer. We are considering purchasing our second income property. My wife likes the idea of paying cash for a property in the mid-west and not having a loan. Our agent brought up a good idea that I like but my wife is hesitant about. Instead of spending all 100k on 1 door, buy 5 doors with 20k down on each. Thoughts?

I would consider leveraging your money into multiple properties but I wouldn't be fixated on the number of homes. One home could cost 75k for down payment and renovation while anther could require only 25k depending on the deal. Cash is always safe but as long as you cash flow positive with a strong reserve you should be able to limit risk if financing.
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
Read a few books on real estate investing to learn the power of leverage. I like the Unofficial Guide to Real Estate Investing. Here's a very basic explanation to get your juices flowing:

Assume a house costs $200,000 and rents for $1,500. The market appreciates 3% per year.

Buy one house for cash. In five years, you'll have Pay cash for one house and rent it for $1,500. After five years you'll have earned $90,000 in rent income and gained $34,000 in appreciation.

Buy four houses with $50,000 down on each. Mortgage payment is $1,000 on each house, so you're essentially earning $500 per house or $2,000 a month. After five years you'll have earned $120,000 in rent income and gained $136,000 in appreciation. You've earned $132,000 more by splitting your money and leveraging it.
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John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
3y
@Puett Willcox
I’d put 20% down on as many C to C+ class properties.
0 Reply
Eric Greenberg
Investor · Philadelphia, PA · Member since 2019 · 618 posts · 430 votes
3y
I think there is some good advice here but you said your wife and you are looking to move to South America in the next few years. That would have me hesitant to buy 4 different SFHs unless you already have a really really strong team already. Do you plan to keep these rentals once you move? Any thoughts of buying into a fund instead to be more passive?
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Sebastian Hernandez
Contractor · Morris County, NJ · Member since 2020 · 186 posts · 91 votes
3y
I would try to buy more than 1 property if possible, as long as they cash-flow should be a sloid move.
0 Reply
Reed Rickenbach
Real Estate Broker · Memphis, TN · Member since 2020 · 202 posts · 203 votes
3y
Quote from @Puett Willcox:

Thanks for the advice William. Our goal is long term buy and holds. We are going to be empty nesters in a few years and would like to quit or jobs and move to South America and using the revenue to supplement some of our income. I'm retired military so I have a pension that can provide nicely in cheaper areas of the world.

If this is the end goal within a few years, and you don't plan on actively investing for 5+ years to build out a team/structure, you may be better off as a passive investor from the start. Although total returns are higher in real estate, cash on cash returns are very similar to publicly traded REITs or dividend ETFs.
2 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Puett Willcox:

I'm a newbie and looking for advice. My wife has recently received 100k from her employer. We are considering purchasing our second income property. My wife likes the idea of paying cash for a property in the mid-west and not having a loan. Our agent brought up a good idea that I like but my wife is hesitant about. Instead of spending all 100k on 1 door, buy 5 doors with 20k down on each. Thoughts?

In high interest rate market like today the better reward/risk is credit investment aka you become the banks
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Adam Wigdorski
Rental Property Investor · NY · Member since 2017 · 132 posts · 90 votes
3y
@Puett Willcox
Put it in a Delaware statutory trust. When the manager sells take those proceeds and 1031 into another trust or into a bigger multifamily.
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Andrew HoganPro Member
Rental Property Investor · Indianapolis, IN · Member since 2016 · 559 posts · 463 votes
3y
@Puett Willcox Syndications let you spread that across hundreds or even 1,000+ doors with an experienced team!
All the best
0 Reply
Joe S.Pro Member
Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
3y
Quote from @Billy Daniel:

My personal preference is to spread it out to as many doors as possible. With $100k, you could purchase a $500k multifamily property. Maybe two $250k properties? Vacancy becomes less of an issue the more cash flowing doors you have. With one property, a tenant moving out takes your cash flow to $0. It's unlikely you would have a month like that with multiple doors (as long as you plan properly). Multifamilies in that price range are fairly easy to find in Arkansas!

What part of Arkansas are you referring to?
0 Reply
Cody Neumann
Rental Property Investor · Surprise, AZ · Member since 2020 · 405 posts · 179 votes
3y
@Puett Willcox educate yourself more before making a final decision without getting caught in analysis paralysis.
Yes it would be better to leverage the banks money by getting 5 properties, but do you have the time and experience to manage all those properties?
What are your goals in real estate? If you pay cash for a property at 100k, your return on equity would be low if you plan to continue growing.
It depends on what your long term goals and short term goals are.
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Lisa Wright
Real Estate Agent · Metro Detroit · Member since 2022 · 66 posts · 28 votes
3y
We have a load of multi by me. I think you just have to watch and wait.
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