Suggestions if you were in my shoes

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Suggestions if you were in my shoes

Dan Rushiti
Member since 2023 · 1 post · 3 votes

Hello all,

I am looking for some advice on what you seasoned investors would do if you were in my shoes. I am 30 years old, and have some money ready to invest. I own 3 restaurant businesses that are doing well for me. To this point, everything has been poured into building and expanding my business. I have enough in savings, a 401k, an IRA, and a traditional brokerage account. I have $400k that I would like to invest in real estate.

6 months ago, I purchased a duplex in Milwaukee and it has gone as well as I'd hoped. I have a property manager that I'm happy with, rents are paid on time, and I'm happy with the ROI. I have a goal of someday purchasing or developing a small shopping center that I can open another restaurant in, but I think that's further down the line.

My more specific question is, if you were in my shoes, would you continue to purchase small properties like the duplex in Milwaukee for a conservative return but with little effort required, or would you be thinking bigger (and if so how). I am not interested in short term rentals and am not in a place to learn how to operate a whole new business.

Thanks in advance,

Dan

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Alecia LovelessPro Member
Member since 2019 · 3k+ posts · 2k+ votes
2y

@Dan Rushiti I’d continue investing in the same market where you already have a good relationship with the current property manager. From others’ reports this relationship can be hard to find and if you have a good one that can be golden.

I’d recommend buying something in the 2-4 unit range so you don’t get all your eggs in one basket. If you wanted to you could potentially put a bit more than 20% as a down payment but I wouldn’t go crazy because it sounds like you could let the second property stabilize and then buy a third and get it going and then do a fourth if you wanted to.

I’m not sure what the price point is in your market but I’d build up your portfolio that way, buying a property, getting it situated and running strongly and then buying another.

Then down the road if you decide you want to go bigger like a 10-30 unit property or a strip mall for a new restaurant you can potentially use a 1031 exchange and some future cash reserves for that.

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  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    2y

    If you have the golden goose touch for restaurants, and you are tapped out time wise or energy wise on opening another one, have you considered partnering with someone who is equally successful in the restaurant business and continuing on with those investments versus coming into real estate.

    Realize I am not offering you investment advice on this, I'm only asking the question, have you considered this as an option for yourself. Because you seem to have the Midas touch with these restaurants.

    2Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    This kind of will go with what you're interested in and what you're good at. You've done well at restaurants, so there's that. You have just 1 successful purchase in Milwaukee, I wouldn't consider that a track record to speak on. I wouldn't bet on traditional RE investing, at scale, to be as passive as this one. Take that for what it's worth.

    With that said, I would invest based on where you are interested and can see yourself learning. If your goal is to really own a small bit of CRE, and a restaurant inside of it. Get caught up in the CRE world, it's very different and definitely doable but you'll need more capital.

    1Reply
  • Account Closed
    New to Real Estate · CA · Member since 2023 · 33 posts · 27 votes
    2y

    it would be a good idea to build a solid base of rentals like duplexes and etc before getting into bigger projects, it would not hurt your pocket since you are already satisfied with the returns and you don't spread yourself too thin with many different things.

    1Reply
  • Steve KenneyPro Member
    Investor · Auburn, ME · Member since 2015 · 72 posts · 45 votes
    2y

    Finding a good property management company can be hard, so if you are working with one now that is doing a good job, I would continue investing in that market and working with them. If I were in your shoes I'd continue adding cashflowing properties to my portfolio while having a property management company manage them so you can focus on your restaurant business. 

    On your next deal you could consider buying a larger building with more units (IE 4-8), as those typically cashflow much better than a single family or duplex. 

    0Reply
  • Jake BarrBusiness Member
    Real Estate Agent · Milwaukee, WI · Member since 2023 · 17 posts · 9 votes
    2y

    Hey Dan,

    Love your story and enjoy hearing that you are finding success not only with your restaurants but also with your first investment property. Based on where you are currently at, if I were in your shoes I would continue investing in smaller scale duplexes. I would do this as a strategy to continue with this strategy for two reasons. The first reason would be that investing/ diversifying your already expansive investment portfolio further into real estate is a great path to take in my opinion. Real estate appreciation and cash flow is one of the best ways to build wealth. Secondly, if you have plans to buy/ build something larger in the future, you could 1031 exchange these properties into a larger commercial one. This would help you avoid paying taxes, giving you additional cash to put into needed renovations or simply allowing your purchase price to be higher. 

    2Reply
  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    2y

    @Dan Rushiti I’d continue investing in the same market where you already have a good relationship with the current property manager. From others’ reports this relationship can be hard to find and if you have a good one that can be golden.

    I’d recommend buying something in the 2-4 unit range so you don’t get all your eggs in one basket. If you wanted to you could potentially put a bit more than 20% as a down payment but I wouldn’t go crazy because it sounds like you could let the second property stabilize and then buy a third and get it going and then do a fourth if you wanted to.

    I’m not sure what the price point is in your market but I’d build up your portfolio that way, buying a property, getting it situated and running strongly and then buying another.

    Then down the road if you decide you want to go bigger like a 10-30 unit property or a strip mall for a new restaurant you can potentially use a 1031 exchange and some future cash reserves for that.

    3Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    2y

    Many people look to REI for cash flow and to fund their life. But cash flow is not where it's really at with REI cash flow is meant to keep the lights on and continually improve your assets. Interesting things happen when you combine a business (primary focus is cash flow), with investing in RE (primary focus is equity growth). Instead of trying to do two things with one vehicle, you use two seperate vehicles that are very specialized and let them synergize. Ask me how I know.

    The type of RE you choose is a matter of taste, they all have their advantages and disadvantages, but there is no one type that beats everything else. My issue with CRE and a shopping mall is that I would not want any property to be more than 10% of my portfolio, in fact closer to 1% is better. If you are early in your RE career and you invest 50% in one commercial deal that is 80% leveraged and you have a tenant turn over, you'll be in sweating to find a new one and thats not a good spot. My suggesting is go wide, before you go deep.

    I was not a fan when I had to move to Milwaukee 15 years ago, but I am now: the city has been re-inventing itself over the last decade and is not anymore the slow rust belt city it has been in the 80s, however that is still the countries perception and will take a while - I talk about this on my YouTube channel a lot. Property prices are still pretty low compared to the US average, but you want to think about what the city will look like in 10 years and position yourself in the right neighborhoods.    

    3Reply
  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    2y

    one thing I would investigate VERY carefully is the potential to buy the building(s) your restaurant(s) are in. Worked with several friends who transformed their businesses due to the advantages presented by owning their operating space, often in ways they hadn't focused on. SBA loans can be really useful here too.

    3Reply
  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 956 votes
    2y
    Quote from @Jonathan R McLaughlin:

    one thing I would investigate VERY carefully is the potential to buy the building(s) your restaurant(s) are in. Worked with several friends who transformed their businesses due to the advantages presented by owning their operating space, often in ways they hadn't focused on. SBA loans can be really useful here too.

    @Dan Rushiti, I second this.  Whether it be just for your business, or small strip centers your restaurants occupy, this would be my target strategy if I were in your shoes.

    2Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    2y

    @Dan Rushiti I would continue on your RE path. The first one went well so far and you have a good PM. They won't all be great but follow that model that you have created.

    I like RE because of it's safety and longevity. You restaurants could take a dive at any time (think Covid), but people will always need a place to live. And you are providing the community a great service as well.

    2Reply
  • Nick HarringtonBusiness Member
    Real Estate Agent · Milwaukee, WI · Member since 2019 · 31 posts · 28 votes
    2y

    Hey Dan - 

    I think it all comes down to what your short and long term goals are.  I know not the answer you are looking for, but this is where any real estate conversation normally starts. If you don't know what those short and long term goals are for yourself financially, it's hard to reverse engineer to what type or how real estate investing fits into those goals, and I would start by clearly writing out what those goals are for you. Is it leaving the restaurant biz? Is it retiring early? Or is it simply just building your net worth? 


    Taking a quick look at the financial picture you provided - a couple things come to mind: 

    - Your financial picture is solid
    - You have a lot (enough in savings as you put it) for retirement already
    - Your restaurants probably pay your living expenses and then some 

    Are you looking to step away from the restaurants and build something passively? Are you wanting to stay engaged in the restaurants but diversify your portfolio? 

    Without having a full picture, it's tough to say what that "best" next step is for you. However, from what you've said, if another property is that next best step for you, I would lean towards a property that is in an A or B neighborhood in Milwaukee to take advantage of the appreciation that Milwaukee has seen, as these are the neighborhoods that tend to appreciate at a faster rate than others in the area. 

    If we just look at Shorewood for instance (an A neighborhood in Milwaukee), the average sale price in January of 2021 was $381k. Today, the average sale price is $463k. While your cash flow in this neighborhood will be marginal, your return in 3 years from equity (if the trend continues) would be around $80k.

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    2Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    2y
    Quote from @Jonathan R McLaughlin:

    one thing I would investigate VERY carefully is the potential to buy the building(s) your restaurant(s) are in. Worked with several friends who transformed their businesses due to the advantages presented by owning their operating space, often in ways they hadn't focused on. SBA loans can be really useful here too.


     Yea, me too have same idea.

    Anyone can buy house in Milwaukee, but not everyone can build sustainable restaurant business. This is very hard work that you do here and a great achievement. Dont think real estate is passive, it's very far from it.

    1Reply
  • Jason Allen
    Attorney · Columbus, OH · Member since 2023 · 193 posts · 145 votes
    2y
    Quote from @Dan Rushiti:

    Hello all,

    I am looking for some advice on what you seasoned investors would do if you were in my shoes. I am 30 years old, and have some money ready to invest. I own 3 restaurant businesses that are doing well for me. To this point, everything has been poured into building and expanding my business. I have enough in savings, a 401k, an IRA, and a traditional brokerage account. I have $400k that I would like to invest in real estate.

    6 months ago, I purchased a duplex in Milwaukee and it has gone as well as I'd hoped. I have a property manager that I'm happy with, rents are paid on time, and I'm happy with the ROI. I have a goal of someday purchasing or developing a small shopping center that I can open another restaurant in, but I think that's further down the line.

    My more specific question is, if you were in my shoes, would you continue to purchase small properties like the duplex in Milwaukee for a conservative return but with little effort required, or would you be thinking bigger (and if so how). I am not interested in short term rentals and am not in a place to learn how to operate a whole new business.

    Thanks in advance,

    Dan


     Hi Dan,

    Have you considered investing out of state? Here in Columbus, Ohio we have a significant amount of investment opportunities that would cash flow off the bat. We specialize in bringing out of state investors great deals that have cash flow, equity, and the opportunity to increase both by utilizing the BRRR strategy. As far as your duplex vs commercial question, small steps in the right direction is often the best way to get the ball moving in the right direction to give you the necessary experience in order to execute a bigger (commercial) deals.

    0Reply
  • Brock Mogensen
    Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
    2y

    I'd say it depends on what your long term goal is in real estate.

    If you are okay with being more actively involved, building a portfolio of multifamily in Milwaukee with the assistance of the property manager can be a good idea. That being said, you will still need to be actively involved in finding deals and overseeing the property manager.

    If you are looking to build something more passive to focus on your current business, investing in syndications or funds as a limited partner can be an option as well.

    1Reply
  • Angela Martinez
    Turlock, CA · Member since 2021 · 24 posts · 15 votes
    2y

    Congratulations on your achievements! If I were in your position, I'd prioritize pursuing my passion while managing a modest portfolio of rental properties in a way that doesn't overly demand my time but still contributes to portfolio growth.

    2Reply
  • Alyson Gordon
    Real Estate Broker · Raleigh, NC · Member since 2023 · 79 posts · 57 votes
    2y

    As some others have said, it really depends on your goals! There are endless opportunities in real estate so if you consider what kind of life you want to life, and how close you are to reaching your financial goals that will inform the best type of investment to make next. 

    1Reply
  • G. Brian DavisPro Member
    Investor · Hatboro, PA · Member since 2016 · 2k+ posts · 848 votes
    2y

    The restaurant industry is notoriously difficult, so congrats on creating success there. But it also means you should consider diversifying. 

    Building a portfolio of rental properties requires both time and skill. It's a side hustle of its own, which is difficult when you own and are trying to grow a separate business. I personally no longer buy properties directly, but invest small amounts ($5-10K) in fractional real estate syndications. If you're not familiar with these passive real estate investments, they're basically group investments where you own a small piece of a large property. 

    The biggest downside for the average investor is the high minimum investments ($50-100K). But if you go in on these with other investors (either friends/family or an investment club like ours), you can invest small amounts. That makes it a lot easier to diversify and ease your way in, rather than having to start with large investments immediately. 

    Best of luck with the restaurants and real estate investments both!

    1Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    2y

    @Dan Rushiti I say, ask yourself what unique advantageous do you possess, and how can you leverage those to create passive income/wealth. 

    Succeeding in food service industry is difficult at best, but than succeeding in multi-location food service industry, now were getting into a multiplier event of rarity in success, that sure as heck sounds like a unique area of advantage. 

    So have you thought of mixing the 2? Ray K. did it, and McD's went from bankrupt to billion-$ as a direct result. Why not take a page out of that play-book? 

    You know restaurant's dang well, so, make em your target tenant's. Lot's of potential for creativity there. Could offer "incubator lease" were you combine mentorship and infrastructure, Offer a whole $ amount that is on a tiered payment structure to afford cheaper month's at critical launch phase and it ramp's up in payment as there business revenues too should be ramping up. 

    But striking out into a completely different industry entirely, why? When opportunity lives in the industry you clearly know very well. You have a competitive advantage, use it. 

    2Reply
  • Michael J.
    Real Estate Agent · Greenville, SC · Member since 2021 · 210 posts · 142 votes
    2y

    Hey there,

    First off, kudos to you for smashing it with those restaurants and getting your financial game strong. You're doing better than most, and that's something to be proud of. Now let's dive into the real estate game, which is clearly your next battlefield.

    If I were in your boots, I'd weigh out a couple of things. First, think about your risk tolerance. Bigger properties mean bigger risks but also potentially higher returns. It's like deciding between betting on a sure-fire small win or going for the jackpot. If you're not looking to learn a whole new business or get into short-term rentals, consider scaling up slowly. Maybe look for a fourplex or a small apartment building next. It's a step up, but not a leap into the unknown.

    Remember, real estate is about location, location, location. Keep an eye out for emerging areas or places where you've got a strong gut feeling about growth. Networking with other investors or joining a real estate investment group can give you insights you might not have considered.

    In the end, it's about making moves that align with your goals and comfort zone. Nobody knows your situation better than you. So trust your gut, stay informed, and keep hustling. You've got this!

    Best of luck!

    1Reply
  • Julien J.
    Investor · CO · Member since 2016 · 757 posts · 1k+ votes
    2y

    @Dan Rushiti

    Well done with your success. 

    2 thoughts:

    - At 30 years old, I would focus on building out your equity base rather then cash flow. When ready to retire, convert the equity into cash flowing assets.

    - Tax angle: consult your CPA to figure out how to take Real Estate tax loses against the rest of your affairs. Consider the Cost Segregation strategy.

    3Reply
  • Mark H. Porter
    Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
    2y

    At a 70% LTV in the commercial market you're sitting in $1.33M in buying power. Think of this from a risk perspective. I'm sure I'm not stating anything new here.

    If none of your restaurants have drive up windows, I would diversify to that side of the business first.  After all, that is your bailiwick. Another pandemic could knock your dreams in the ground.

    That being said, having that kind of buying power is a gift.  You have choices that people starting out in this business don’t often have.  You can go down the path of multiple, 4-unit, residential investment properties (max number of units for residential loan terms), or start in multi-tenant net lease small shopping plazas and have tenants pay all expenses including taxes and insurances (my current choice).

    I don’t know your locale well enough to state the demographics that support one choice over another, but congratulations on your success.


    0Reply
  • Timothy Howdeshell
    Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes
    2y
    Quote from @Dan Rushiti:

    Hello all,

    I am looking for some advice on what you seasoned investors would do if you were in my shoes. I am 30 years old, and have some money ready to invest. I own 3 restaurant businesses that are doing well for me. To this point, everything has been poured into building and expanding my business. I have enough in savings, a 401k, an IRA, and a traditional brokerage account. I have $400k that I would like to invest in real estate.

    6 months ago, I purchased a duplex in Milwaukee and it has gone as well as I'd hoped. I have a property manager that I'm happy with, rents are paid on time, and I'm happy with the ROI. I have a goal of someday purchasing or developing a small shopping center that I can open another restaurant in, but I think that's further down the line.

    My more specific question is, if you were in my shoes, would you continue to purchase small properties like the duplex in Milwaukee for a conservative return but with little effort required, or would you be thinking bigger (and if so how). I am not interested in short term rentals and am not in a place to learn how to operate a whole new business.

    Thanks in advance,

    Dan


     Congrats on your early success Dan!

    My thoughts are if it isn't broke don't fix it. I'm not sure how long it took you to gain that amount of money, but if it was fairly quick I was in less than a few years. Then I would focus on the Golden goose and not. I'm trying to scale a giant real estate portfolio.

    That's just me though and some people have more Grand desires. Only you can decide what the end goal is. 

    real estate is a relationship business so if you have a great property manager I would continue to explore the area you're already having success in. I do want to caution you though that it is not all smooth sailing as it has been for this property. Being an active owner or manager, Even a manager of managers, comes with some stress and hassle.

    If you don't need the cash flow right now buy a property in a neighborhood that you think will appreciate. Keep your LTV low. And if you just can't wait to scale partner with a syndicator or other active investor to run that side of the business.

    Best of luck!

    0Reply
  • Taz Zettergren
    Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
    2y

    @Dan Rushiti welcome to the forums, congrats on the first post and all your success! We are the same age but I'm in a completely different business/market than you and don't have that kind of cash handy unfortunately but have a similar goal as far as larger ventures. What I'm doing is building out the single family portfolio first before getting into land development (I'm an avid outdoorsman so I'm talking about hunting land, surprisingly there's a large market for this but not only will I be able to enjoy the hunting it's very profitable as well) . Single families are a very safe investment that provide a great return, rents and prices will continue going up overtime while a resident services your debt. They are relatively easy to sell if you're around the median price and owning a quality asset. 

    It seems like you're doing very well for yourself as far as cash flow goes so I'd advise focusing on areas that are appreciating quicker overtime. If Milwaukee fits the bill I'd definitely continue building out the portfolio yourself. I don't know much about Milwaukee, for me I live in Memphis, it doesn't have the most appreciation but the higher priced homes do so I focus there as well as Texas. DFW is one of the fastest growing metroplex's in the US so I've parked some money there. I don't have the time nor do I want to spend the effort building a team so I partnered with a turnkey provider who handles the entire process for me.

    Best of luck with the investments! Let us know which route you go and don't hesitate to reach out if any questions arise

    2Reply
  • Leslie Pappas
    Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes
    2y

    @Dan Rushiti congrats on your success with your restaurants and real estate. I'd suggest chatting with your property manager for advice to evaluate which offerings are suitable and promising in your local area. A very good source of local analysis, rereport.com.

    I can tell you what people here have done in my area to set themselves up for retirement:

    1. Buy or inherit and hold for a long time, then cash out and redeploy equity into potentially higher cash flowing properties or other investments.

    2. Buy or inherit and hold all their lives while working the properties for income.

    I've seen teachers, firemen, software engineers and all sorts of people utilize both strategies successfully. One way or another, however, the investors must work to pay down loans, increase rents and decrease expenses wherever possible. One way or another, they are building their net worth. So my advice- build your equity. 

    How to play it? You can do it yourself through developing a team (more control but more time intensive); you can seek out good turnkey providers (less control but less time intensive); or work w/experts as a passive investor through syndication (little to no control and least time intensive). I help my clients with the latter when they want to transition away from the hassles of managing properties and tenants and redeploy their equity into a 200 or 300 unit apartment investment in a strong market . 

    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    Agreed, STR's are another business and likely another headache at this point.
    Seems like you are doing well with the businesses that you currently have.

    I would focus on 'investing'.
    Either buy some long-term rentals and find a good property management company to manage them for you
    or
    Find some good sponsors to invest with.

    Best of luck.

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