Over $1,000,000 in equity and no idea how to use it!!!
Miami, FL · Member since 2017 · 7 posts · 8 votes
Over $1,000,000 in equity and no idea how to use it!!!
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2yQuote from @Jonathan Soto:
As the post states. I'm looking at ways to put my equity to work and invest in real estate. If you had the same equity, what would be your plan of action? Would a fix and flip be the best way to go or is it better to invest in rental income properties. Thanks in advance.
I would do nothing with it right now as the cost to borrow it is too expensive and real estate returns have been compressed. I would wait till rates eventually go down and there are real opportunities in real estate and take advantage of it then
7e investments53 Reviews
13 Replies
- Property Manager · Miami · Member since 2024 · 36 posts · 19 votes2y
Hey Jonathan,
First off, just wanted to congratulate you on achieving over 1M in equity, that's huge! I'd say the Bigger Pockets forums are one of the best places to explore how to put your money to work in RE.
When considering how to use your equity, both fix and flips and rental income properties have their advantages. If you have a knack for renovations and good understandings of the markets you'd enjoy flipping. On the other hand, rental income properties can provide steady, long-term income streams with room for appreciation.
In your shoes, I'd start by evaluating my goals as an investor. Understanding your risk tolerance, time commitment desires, and investment horizons is critical. At my company we specialize in rental property management and we also would be happy to be a resource for tailored advice to ensure your future investments align with your financial goals.Feel free to reach out if you'd like to discuss further or if you were to need property management solutions in the future. You've made an impressive achievement so far and we'd be excited to be a part of your next steps in the journey. Whether it's the next step or ten steps from now.
- Investor · Member since 2024 · 52 posts · 47 votes2y
Quote from @Jonathan Soto:
As the post states. I'm looking at ways to put my equity to work and invest in real estate. If you had the same equity, what would be your plan of action? Would a fix and flip be the best way to go or is it better to invest in rental income properties. Thanks in advance.
What are your goals? Do you want to buy yourself a job (fix and flip) or do you want something that is a "little" more hands off, and just want a return on your money? Being a landlord isn't all rosy. I had a small fleet of rentals at one time, and it was a lot of work. They all need maintenance. And tenants can be sketchy. Had one this month tell us she isn't paying rent until she gets an eviction notice. So, had to drive an hour to the house to deliver an eviction notice. Still no rent.
I'm not trying to scare you off from real estate. Just get real clear with what you want out of real estate before you jump into a million dollar mistake. And then absorb as much education as you can.
Good luck! - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
Quote from @Jonathan Soto:
As the post states. I'm looking at ways to put my equity to work and invest in real estate. If you had the same equity, what would be your plan of action? Would a fix and flip be the best way to go or is it better to invest in rental income properties. Thanks in advance.
I would do nothing with it right now as the cost to borrow it is too expensive and real estate returns have been compressed. I would wait till rates eventually go down and there are real opportunities in real estate and take advantage of it then
7e investments53 Reviews - 2yAlecia LovelessPro MemberMember since 2019 · 3k+ posts · 2k+ votes
@Jonathan Soto I usually agree with Chris Severny but do not on this occasion. If you do lots of research there are still good deals to be found. You just have to do lots of homework. I’m still finding good deals. While they do not cash flow as much as they once did I’m still getting enough for my reserves and solid cash flow each month. My tenants are still paying down my mortgages.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes2y
You could borrow against the equity, but you must be careful to not over-leverage. If one property fails, they could all fail.
Borrow $500,000 at 7.5% and you need to make a 20% return on investment to make it a good deal (20% - 7.5% = 12.5% return). That's hard to come by in today's market.
I'm not a fan of borrowing money to borrow money. I advise you to focus on increasing earnings, reducing expenses, saving up, and investing from a position of strength.
The DIY Landlord Book4.7247 Reviews Quote from @Jonathan Soto:
As the post states. I'm looking at ways to put my equity to work and invest in real estate. If you had the same equity, what would be your plan of action? Would a fix and flip be the best way to go or is it better to invest in rental income properties. Thanks in advance.
1 mill, you can get about 20 props SF, duplex, Avg SF about 110- 11k with 1300- 1500 in rent, Duplex 120-125kish, with 1800- 2k in rent. I have seen others get them with seller financing, about 45kish down per property. Im closing in the next couple days on two more SF and a duplex. both SF all in 75k each rent will be about 1500, value about 115- 120k, Duplex all in 90k with 1800 rent. Great numbers. Best part I do all this from the beach in FL about 1.5 hours north of you :)
- 2yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
@Jonathan Soto Fix & Flip is another job that just generates income.
Buy & Hold (rentals) should generate income over time AND build long-term wealth - if done correctly.
So, what are your short-term & long-term goals?
How can you balance them?
Your risk tolerance?
Logical Property Management4.9460 Reviews - 2yDaniel HymanBusiness MemberCPA · Milwaukee, WI · Member since 2016 · 2k+ posts · 1k+ votes
I would explore all of these options:
1. Invest in Real Estate Education: Before making any major investment decisions, it's crucial to understand the ins and outs of the real estate market. Consider using some of your funds to enroll in courses, attend workshops, or hire a mentor. This knowledge will be invaluable in making informed decisions and avoiding costly mistakes down the line.
2. Analyze Your Risk Tolerance and Goals: Are you looking for quick profits, long-term passive income, or a combination of both? Your risk tolerance and investment goals will largely dictate which strategy is best for you.
3. Build Your Network: Connect with real estate agents, contractors, property managers, and other investors in your area. Networking can open doors to opportunities you might not have found on your own.
4. Develop a Financial Plan: Determine how much of your equity you're comfortable investing and create a budget for your real estate ventures. For rentals, remember to factor in costs like renovations, property taxes, insurance, and potential vacancies.
My Online Accountant572 Reviews - Real Estate Agent · Central Ohio · Member since 2024 · 10 posts · 6 votes2y
Quote from @Jonathan Soto:
As the post states. I'm looking at ways to put my equity to work and invest in real estate. If you had the same equity, what would be your plan of action? Would a fix and flip be the best way to go or is it better to invest in rental income properties. Thanks in advance.
The answer to that question depends on your personal wants, needs, and goals for you and your loved ones. You should not take the advice of anyone [including money managing professionals] until you have answers to those questions!
Quote from @Bob S.:
Quote from @Jonathan Soto:
As the post states. I'm looking at ways to put my equity to work and invest in real estate. If you had the same equity, what would be your plan of action? Would a fix and flip be the best way to go or is it better to invest in rental income properties. Thanks in advance.
1 mill, you can get about 20 props SF, duplex, Avg SF about 110- 11k with 1300- 1500 in rent, Duplex 120-125kish, with 1800- 2k in rent. I have seen others get them with seller financing, about 45kish down per property. Im closing in the next couple days on two more SF and a duplex. both SF all in 75k each rent will be about 1500, value about 115- 120k, Duplex all in 90k with 1800 rent. Great numbers. Best part I do all this from the beach in FL about 1.5 hours north of you :)
Those legit? 90k for a duplex rents 1800? 1970 trash w 10k maintenance or nice properties? Seems unreal. I’m gonna pm you. Would love to chat. I’m in sf other coast:)
Quote from @Aaron N.:
Quote from @Bob S.:
Quote from @Jonathan Soto:
As the post states. I'm looking at ways to put my equity to work and invest in real estate. If you had the same equity, what would be your plan of action? Would a fix and flip be the best way to go or is it better to invest in rental income properties. Thanks in advance.
1 mill, you can get about 20 props SF, duplex, Avg SF about 110- 11k with 1300- 1500 in rent, Duplex 120-125kish, with 1800- 2k in rent. I have seen others get them with seller financing, about 45kish down per property. Im closing in the next couple days on two more SF and a duplex. both SF all in 75k each rent will be about 1500, value about 115- 120k, Duplex all in 90k with 1800 rent. Great numbers. Best part I do all this from the beach in FL about 1.5 hours north of you :)
Those legit? 90k for a duplex rents 1800? 1970 trash w 10k maintenance or nice properties? Seems unreal. I’m gonna pm you. Would love to chat. I’m in sf other coast:)
LOL, 1970. It seems you are not familiar with the mid-west market, more like 1920s, its irrelevant. All 500 of my deals (more then 2k of my colleagues) and many many of the props I own are all from PRE 1940.Heck my 7 unit I think was built in 1910, I get about 20% NET on that. .The 81 unit I believe that was about 1935. Little to no maintenance as they are renovated properly. Also, IMO props were built better back then. BTW so if you paid 90k and had a 10k repair are you going to really complain when you're getting 14% + net :) What are you going to get in FL, 3-4% IF your lucky.
We used to buy them for all in 30k, 40k,
I know where you are, I did a TON of biz in the Cape, back in the day.
- 2yGino BarbaroPro MemberRental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
That's a great problem to have. You can start as a passive investor, and look at alternative active strategies. With the liquidity you have, I would consider investing in rental properties.
I would consider what you objective is. Is it to leave your current occupation and transition into real estate, or is it to create equity and cash flow with your liquidity.
I would love to hear what you decide. The Psychology of Money by Morgan Housel may provide you with some answers
Ciao
Gino
Congratulations on building over $1,000,000 in equity! That’s an impressive milestone and offers a lot of potential for expanding your real estate investments. Here’s what I might do based off your situation:
Steps to Put Your Equity to Work:
- Evaluate Your Investment Goals:
- First, clarify your investment goals. Are you looking for quick profits, long-term wealth building, passive income, or a combination of these? Your goals will guide your strategy.
- Leverage Your Equity:
- Consider using a Home Equity Line of Credit (HELOC) or a cash-out refinance to access your equity. These options allow you to tap into your equity while keeping your current property. Ensure you understand the terms and interest rates to avoid over-leveraging.
- Diversification:
- Diversifying your investments can help spread risk. You might want to consider a mix of fix-and-flips, rental properties, and possibly other types of investments like commercial real estate or REITs.
Fix and Flips:
Pros:
- Potential for high returns in a short period.
- Can increase your capital quickly if done correctly.
- Good for active investors who enjoy project management and renovations.
Cons:
- Higher risk due to market fluctuations and unexpected renovation costs.
- Requires significant time and effort.
- High competition in some markets can squeeze profits.
Rental Income Properties:
Pros:
- Provides steady, passive income.
- Potential for long-term appreciation.
- Tax benefits, including depreciation and mortgage interest deductions.
- Builds equity over time as tenants pay down the mortgage.
Cons:
- Requires property management (either by yourself or a property manager).
- Potential for tenant issues and vacancies.
- Initial returns may be lower compared to flipping, but more stable.
Considerations for Both Strategies:
- Market Research:
- Thoroughly research your target markets. Look for areas with strong job growth, population growth, and rental demand.
- Network and Education:
- Leverage your network and continue to educate yourself. Attend local real estate investment meetups, join online forums, and seek advice from experienced investors.
- Financial Analysis:
- Use real estate investment calculators to analyze potential deals. Ensure the numbers make sense and align with your financial goals.
My Suggested Plan of Action:
- Access Your Equity:
- Start by accessing your equity through a HELOC or cash-out refinance. Be mindful of the costs and interest rates.
- Diversify Your Investments:
- Allocate a portion of your equity to different types of investments. For example:
- Fix and Flips: Use a portion for fix-and-flip projects to generate quick capital.
- Rental Properties: Invest in rental properties for steady passive income and long-term appreciation. Consider both single-family homes and multi-family properties.
- Build a Team:
- Surround yourself with a reliable team, including a real estate agent, contractor, property manager, and financial advisor. Their expertise will be invaluable in making informed decisions.
- Monitor and Adjust:
- Continuously monitor the performance of your investments. Be prepared to adjust your strategy based on market conditions and your financial goals.
Final Thoughts:
With over $1,000,000 in equity, you have a fantastic opportunity to build a diverse and profitable real estate portfolio. By leveraging your equity wisely, diversifying your investments, and surrounding yourself with a strong team, you can maximize your returns and achieve your financial goals.
Good luck, and keep us updated on your progress!
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