I have a cryptocurrency investment that has matured nicely. I am thinking about an exit strategy. I have a full time job and don't really want to self manage so any real estate would need to be fully managed and I'd basically just be collecting an annuity, if you will.
I'm 38 years old making roughly 250k per year. I'm thinking about one thing. Retirement (seriously). But I can't seem to make the numbers make sense.
option 1 - 500k into a mutual fund earning 8% generates about 40k a year. Not bad but not retirement level money
option 2 - single rental, no mortgage maybe makes $3000 per month or roughly the same as option 1.
option 3 - OPM. 30k each down payment on 15 doors (section 8 maybe?). Even at $200 per door I still make the same $3000 a month. I feel like I should be able to make more though. I would also have 15 assets. This feels like I could retire quickly if I did some basic things right. Ultimately id like to make 10k per month but I could live on less. Can someone help with real world numbers for how I should invest this money and leverage it to maximize my return?
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
3y
Develop some sort of subject matter expertise or investment thesis first. Go buy 1 property and test that thesis to see if it is a good idea. Try, fail, and adjust until you really know what you are doing. Keep your job and don't deploy all that capital at once.
You don't have enough money to make 10k per month - especially if you don't want to self manage. You need a 25% cash on cash return to get that. That is very, very unlikely - especially if you are hiring a property manager.
Throw the money in an after tax brokerage account or a short term bond/bond fund or CD yielding 5-ish% as your dry powder. Put 30-50k down on your first property, figure out if you like owning and/or managing property, and keep the rest of the money working for you while you give real estate a shot.
Real estate is a fickle beast. You want to take her on a few dates before you decide to go all in and marry her.
I have a cryptocurrency investment that has matured nicely. I am thinking about an exit strategy. I have a full time job and don't really want to self manage so any real estate would need to be fully managed and I'd basically just be collecting an annuity, if you will.
I'm 38 years old making roughly 250k per year. I'm thinking about one thing. Retirement (seriously). But I can't seem to make the numbers make sense.
option 1 - 500k into a mutual fund earning 8% generates about 40k a year. Not bad but not retirement level money
option 2 - single rental, no mortgage maybe makes $3000 per month or roughly the same as option 1.
option 3 - OPM. 30k each down payment on 15 doors (section 8 maybe?). Even at $200 per door I still make the same $3000 a month. I feel like I should be able to make more though. I would also have 15 assets. This feels like I could retire quickly if I did some basic things right. Ultimately id like to make 10k per month but I could live on less. Can someone help with real world numbers for how I should invest this money and leverage it to maximize my return?
None of your scenarios are accounting for inflation, and you really can’t count on 8% per year on the market… 2022 is a perfect example of that… down 20% or something! the industry suggestion is to count on 4% withdrawal rate for your money to survive (and sone even call that number slightly optimistic) … so welcome to withdrawals of $20,000/ year on the stock market on that option.
The OPM route is definitely the best option of the 3. But trying to do that given the current interest rate / RE market conditions wound be difficult at best. You would get sone really good tax benefits, along with future appreciation on your assets. Multiple properties is definitely better than one cash property (you’ll figure that out when you run your numbers and factor in rent appreciation and property appreciation.
My personal suggestion is to continue to work in the short term until you are confident of your financial position. We have 37 rental units and within 5 years have 75% of those free and clear with how the market ran up the past 2-3 years. But we accomplished with rates in the 4-5% range, properties at 1/2 the price they are today, and an initial $/door profit of over $300/door. Since then we have pushed that number beyond double that per door by selling a few highly appreciated units and doing a few flips along the way. You can’t predict how either the stock or real estate market will treat you. We were lucky with timing for sure! I don’t see a way you truly retire in the short term with the resources you are suggesting given the current market conditions… but you have a good start.
Keep in mind that if you want to truly have some experience with everything fully properly manage, you will lose 10% of your gross income to your property management expense. So if you had a unit that was cash flowing at $200 per month that would then be down to $100 per month with property management. So self managing in the short term is at least 33% more profitable.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
3y
500 k in rental real estate today is not going to give you retirement money unless you work it hard and roll it up with appreciation then 1031 into bigger assets on a 10 to 20 year plan.
keep in mind do you have any pension from your high paying job.. and at that rate of income SSI is going to be max if you keep making money and pay into it.. so you want to add that in.
I know at your age its hard to think about 62 or 66 YO for ssi but for high wage earners its not nothing ..
Personally i would stick to what your doing and just let everything roll and accumulate as you keep making your 20k a month maybe look at things when your 50..
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
3y
Develop some sort of subject matter expertise or investment thesis first. Go buy 1 property and test that thesis to see if it is a good idea. Try, fail, and adjust until you really know what you are doing. Keep your job and don't deploy all that capital at once.
You don't have enough money to make 10k per month - especially if you don't want to self manage. You need a 25% cash on cash return to get that. That is very, very unlikely - especially if you are hiring a property manager.
Throw the money in an after tax brokerage account or a short term bond/bond fund or CD yielding 5-ish% as your dry powder. Put 30-50k down on your first property, figure out if you like owning and/or managing property, and keep the rest of the money working for you while you give real estate a shot.
Real estate is a fickle beast. You want to take her on a few dates before you decide to go all in and marry her.
I would say a modification of option 1, not a mutual fund but syndications.
My suggestion would be investing in other people's projects or more commonly syndications. Most syndications offer a yearly cashflow expectation of around 10-12% and then a backend equity growth of 50% to sometimes double over 5 years.
The reason I am saying this is because if you were to invest today you can collect some of that cashflow (and do whatever you want with it) but then in 5 years your investment base also increase, thus leading to more cashflow if you invest it into another syndication.
I would say a modification of option 1, not a mutual fund but syndications.
My suggestion would be investing in other people's projects or more commonly syndications. Most syndications offer a yearly cashflow expectation of around 10-12% and then a backend equity growth of 50% to sometimes double over 5 years.
The reason I am saying this is because if you were to invest today you can collect some of that cashflow (and do whatever you want with it) but then in 5 years your investment base also increase, thus leading to more cashflow if you invest it into another syndication.
This is a really interesting idea. How does this compare to owning real estate outright though? On a basic level, it seems like I could get similar returns doing this as I could owning my own properties and I don't have to do near as much manual work. From an ROI perspective, isn't this better than owning?
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
3y
Hi @Arthur Means, I pass right by Troy every so often. I live in Tampa now, but grew up just North of you about 35 miles outside of Springfield. I'm still a Cardinals fan. Perhaps you can do what we did and have a "hybrid retirement". You don't have to work, but you do what you enjoy for a while. Perhaps do a flip or two and hold a property. Do a flip to two and hold another. I'm not ready to stop at 54...I wouldn't have been able to do it at 38 for sure. The only issue with OPM right now is the interest rates relative to where they were. Many investors we work with are having to put a bit more down in order to get the property to positively cash flow. $250K is a lot, but it likely won't carry you for a long time. Perhaps you can partner and develop a couple of projects, build the nestegg a bit more, and, as you do, pick up cash-flowing assets along the way. At some points, you'll have enough cash flow to tell the world where they can stick it. You're in a great spot, but I wouldn't completely take your foot off the gas just yet...and Go Cards!
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
3y
Retirement is a long-term plan.
I would spread that $500,000 over a couple of different investments. I would then see how much of the $250,000 on an annual basis that you can put into future investments. Is it $10,000, $20,000 or $50,000?
I would also try to get an idea of how much you need to retire.
I have a cryptocurrency investment that has matured nicely. I am thinking about an exit strategy. I have a full time job and don't really want to self manage so any real estate would need to be fully managed and I'd basically just be collecting an annuity, if you will.
I'm 38 years old making roughly 250k per year. I'm thinking about one thing. Retirement (seriously). But I can't seem to make the numbers make sense.
option 1 - 500k into a mutual fund earning 8% generates about 40k a year. Not bad but not retirement level money
option 2 - single rental, no mortgage maybe makes $3000 per month or roughly the same as option 1.
option 3 - OPM. 30k each down payment on 15 doors (section 8 maybe?). Even at $200 per door I still make the same $3000 a month. I feel like I should be able to make more though. I would also have 15 assets. This feels like I could retire quickly if I did some basic things right. Ultimately id like to make 10k per month but I could live on less. Can someone help with real world numbers for how I should invest this money and leverage it to maximize my return?
Diversify. Put $100k in 5 different investments and asset classes while continuing to work and save money. When you have $1M-$1.5M then you can get to the $10,000 per month mark you were looking to achieve. Options #2 and #3 you are creating another job for yourself, thats not what you want.
I would say a modification of option 1, not a mutual fund but syndications.
My suggestion would be investing in other people's projects or more commonly syndications. Most syndications offer a yearly cashflow expectation of around 10-12% and then a backend equity growth of 50% to sometimes double over 5 years.
The reason I am saying this is because if you were to invest today you can collect some of that cashflow (and do whatever you want with it) but then in 5 years your investment base also increase, thus leading to more cashflow if you invest it into another syndication.
It's an interesting idea, but given that the OP has no experience with real estate investing, how is he going to be able to do any diligence and vet syndication deals. That's not my idea of a first time investment.
If he can mitigate that risk, then sure, works great.
Rental Property Investor · San Francisco · Member since 2017 · 39 posts · 8 votes
3y
Unfortunately it might be hard to rely on $500k to fund your retirement, but since you make a high income, is it possible for you to cut back on the hours a bit and perhaps work on something on the side (a potential business idea) that might give you the financial freedom to retire when you want to? What industry are you in that brings in $250k? I would look at the $500k as a financial war chest to protect your efforts to generate even more income in a way your 9-5 doesn't allow.
I have a cryptocurrency investment that has matured nicely. I am thinking about an exit strategy. I have a full time job and don't really want to self manage so any real estate would need to be fully managed and I'd basically just be collecting an annuity, if you will.
I'm 38 years old making roughly 250k per year. I'm thinking about one thing. Retirement (seriously). But I can't seem to make the numbers make sense.
option 1 - 500k into a mutual fund earning 8% generates about 40k a year. Not bad but not retirement level money
option 2 - single rental, no mortgage maybe makes $3000 per month or roughly the same as option 1.
option 3 - OPM. 30k each down payment on 15 doors (section 8 maybe?). Even at $200 per door I still make the same $3000 a month. I feel like I should be able to make more though. I would also have 15 assets. This feels like I could retire quickly if I did some basic things right. Ultimately id like to make 10k per month but I could live on less. Can someone help with real world numbers for how I should invest this money and leverage it to maximize my return?
Crypto and stock bullrun could present a good reward for 2025 and 2026. Instead of liquidating everything why don' you diversify your money into 3 different assets classes with 50-65% of it being in real estate that produces income. I would try to get into flipping for desired profit or make sure you can short term or long term rent them if you decide to hold until market bounces back. I am not selling anything in stock crypto and business related assets until economy picks back up since valuations can go crazy during those times.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
3y
We're are certainly biased here, myself included, but I would take the $500k and invest passively in several syndications, then with your income level, I would save $100k+ each year and passively invest that into more real estate syndications. I may also spread some of that out to oil and gas. These types of investments typically double every 5-7 years. So, your $500k turns into, $1mm in 5 years, then $2mm in 10, then $4mm in 15, then $8mm in 20, etc. Your $100k/year, then turns into $200k in 5 years, then $400k in 10, etc. You can see how your wealth builds relatively quickly. Of course, nothing is guaranteed in these investments, but real estate has historically provided much less risk with higher returns compared to stocks.
We're are certainly biased here, myself included, but I would take the $500k and invest passively in several syndications, then with your income level, I would save $100k+ each year and passively invest that into more real estate syndications. I may also spread some of that out to oil and gas. These types of investments typically double every 5-7 years. So, your $500k turns into, $1mm in 5 years, then $2mm in 10, then $4mm in 15, then $8mm in 20, etc. Your $100k/year, then turns into $200k in 5 years, then $400k in 10, etc. You can see how your wealth builds relatively quickly. Of course, nothing is guaranteed in these investments, but real estate has historically provided much less risk with higher returns compared to stocks.
you have to calculate your tax's on syndication exit correct ? is there a way for the LP to 1031 into the next deal so they can keep all that rolled up profit ?
Real Estate Agent · Denver CO · Member since 2019 · 209 posts · 332 votes
3y
Not a direct answer to your question but something to think about...Heard this the other day from a mentor.
You know what you're running from (your job), but what are you running towards? Meaning what do you plan on doing in retirement? To make the most out of it you'll likely need something that excites you, contributes to your community, family, etc...I never thought about this until I heard it the other day. It's really caused me to slow down.
And if your answer is to find happiness in retirement that's justfiable but realize the quicker you find happiness the quicker you can feel "retired" even if you still show up to work everyday.
We're are certainly biased here, myself included, but I would take the $500k and invest passively in several syndications, then with your income level, I would save $100k+ each year and passively invest that into more real estate syndications. I may also spread some of that out to oil and gas. These types of investments typically double every 5-7 years. So, your $500k turns into, $1mm in 5 years, then $2mm in 10, then $4mm in 15, then $8mm in 20, etc. Your $100k/year, then turns into $200k in 5 years, then $400k in 10, etc. You can see how your wealth builds relatively quickly. Of course, nothing is guaranteed in these investments, but real estate has historically provided much less risk with higher returns compared to stocks.
you have to calculate your tax's on syndication exit correct ? is there a way for the LP to 1031 into the next deal so they can keep all that rolled up profit ?
Cash out your current cryptocurrency investment, set aside appropriate amount for taxes. Re-invest by DCA accordingly into BTC, wait for BlockRock's upcoming ETF approval, go big. Ride the 2024-2025 halving wave, cash out again, set aside appropriate amount for taxes. Then take profits and invest in multiple rental properties or apartment syndications. Relax, enjoy life and buy me a drink. :)
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
3y
You have encountered the biggest barrier to retirement..MATH. Generating 120K per year out of $500K is a return of 24%. You would need that year in and year out and that doesn't even account for inflation. Not to mention taxes. Consistent 24% returns are rainbow colored unicorns. Leveraged RE will not help you because your actual interest rate (7%) is higher than your expected yield (about 6% or less). Thus leverage is negative. Truth is you need 20X your desired annual income as a minimum to retire. No matter where you actually put your money. $120K requires about $2.4M. The good news is that with an income of $240K at age 38 you can get there pretty fast. Just save consistently (maybe not in crypto) and conservatively in either index funds or rentals and you will get there. Boring I know, but it actually works.
In your mutual fund scenario, you count appreciation, but you failed to include appreciation and tax benefits in the real estate scenario, which is a big miss.
When you take $30k and leverage it for a $300k property, you now gain a ~4% appreciation on $300k….every year
I would say a modification of option 1, not a mutual fund but syndications.
My suggestion would be investing in other people's projects or more commonly syndications. Most syndications offer a yearly cashflow expectation of around 10-12% and then a backend equity growth of 50% to sometimes double over 5 years.
The reason I am saying this is because if you were to invest today you can collect some of that cashflow (and do whatever you want with it) but then in 5 years your investment base also increase, thus leading to more cashflow if you invest it into another syndication.
This is a really interesting idea. How does this compare to owning real estate outright though? On a basic level, it seems like I could get similar returns doing this as I could owning my own properties and I don't have to do near as much manual work. From an ROI perspective, isn't this better than owning?
The two advantages this type of investing brings is 1)the passivity of it, and 2) the power of scale. The passive part means you don't have to handle any tenants or do much besides vet the deal to invest in. Also with the power of scale, you can come together with 10 other investors and buy a much bigger asset, which produces outsized returns over what 1 investor can individually afford.
In my experience, the ROI on my individual deals have been on average with the stock market, probably a few points better. But for the ones I have syndicated, they tend to be 15%+, which is much better.
I would say a modification of option 1, not a mutual fund but syndications.
My suggestion would be investing in other people's projects or more commonly syndications. Most syndications offer a yearly cashflow expectation of around 10-12% and then a backend equity growth of 50% to sometimes double over 5 years.
The reason I am saying this is because if you were to invest today you can collect some of that cashflow (and do whatever you want with it) but then in 5 years your investment base also increase, thus leading to more cashflow if you invest it into another syndication.
This is a really interesting idea. How does this compare to owning real estate outright though? On a basic level, it seems like I could get similar returns doing this as I could owning my own properties and I don't have to do near as much manual work. From an ROI perspective, isn't this better than owning?
The two advantages this type of investing brings is 1)the passivity of it, and 2) the power of scale. The passive part means you don't have to handle any tenants or do much besides vet the deal to invest in. Also with the power of scale, you can come together with 10 other investors and buy a much bigger asset, which produces outsized returns over what 1 investor can individually afford.
In my experience, the ROI on my individual deals have been on average with the stock market, probably a few points better. But for the ones I have syndicated, they tend to be 15%+, which is much better.
We're are certainly biased here, myself included, but I would take the $500k and invest passively in several syndications, then with your income level, I would save $100k+ each year and passively invest that into more real estate syndications. I may also spread some of that out to oil and gas. These types of investments typically double every 5-7 years. So, your $500k turns into, $1mm in 5 years, then $2mm in 10, then $4mm in 15, then $8mm in 20, etc. Your $100k/year, then turns into $200k in 5 years, then $400k in 10, etc. You can see how your wealth builds relatively quickly. Of course, nothing is guaranteed in these investments, but real estate has historically provided much less risk with higher returns compared to stocks.
you have to calculate your tax's on syndication exit correct ? is there a way for the LP to 1031 into the next deal so they can keep all that rolled up profit ?
Yes you do get taxed for 99% of all syndications. You can 1031 but one major issue is you have to keep the same ownership % which is not always the easiest thing to do. One would need an extremely good 1031 specialist to help with this process.
Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
3y
I'd strongly advise against option #3. Based on your statement of wanting to be passive, investing in Section 8 is the opposite of passive. It requires being extremely hands on, otherwise you will go in the negative real quick.
My advice would be to park 50% of the capital into something safe like a mutual fund and that invest the other 50% strategically into several passive opportunities. Another option to look at is investing in syndication deals as an LP. This is a true form of passive investing while gaining all the benefits of having real estate in your portfolio.
Denver, CO · Member since 2021 · 59 posts · 100 votes
3y
This is a simple way to look at it. Think of wealth in real estate in two categories.
Equity and Income (no surprise there).
What you have to come to terms with is that in most cases, you have to optimize for one at the expense of the other at any given time. This is especially true when interest rates are not in the 3's.
The name of the game will always be income eventually. Otherwise how can you stop trading your time for money? But the art is in planning when you want to optimize for income.
The best "returns" on your investment in real estate will likely come from appreciation using some leverage. For example, if you put 20% down, and the property appreciates by 5%, then you've achieved a 25% return on your investment ($100k down on a $500k property that appreciates to $525k turns your $100k investment into $125k of equity), and we haven't yet counted income or debt reduction. That's just the appreciation.
One might look at that and conclude that leverage is better than having properties free and clear.
But this is not the case. It's a question of timing.
Optimizing for appreciation (with leverage) will almost always create the best "return", but it doesn't usually create the best cash flow in the present. And you can't easily take monthly retirement income from equity, so you have to plan to optimize for income at the time you want the income.
When I'm 80, I don't plan to be aggressively building my RE portfolio. I'm guessing I'll want to be enjoying the income (maybe sooner). But I'm planning for income from quality debt-free real estate to be maybe 5% (this is a doable cap rate in desirable markets).
This is not the best "return" I can get, but when I optimize for income, the best return is not my focus.
So, in my humble opinion, the trick is to focus on overall return (best achieved by focusing on getting more equity using leverage) with an eye on when you want to focus on income. Grow the portfolio with whatever level of leverage I'm comfortable with, so that when I implement my mortgage reduction strategy to shift over to income, I'm doing so on a larger portfolio than I otherwise could have by trying to focus on income too early.
It's very common for people to want to invest in real estate with leverage and enjoy fantastic income right away. This is a generally a myth. But if you invest $500k into real estate with leverage, you could very easily turn that into a very healthy income later.
