100K TO INVEST - WHAT SHOULD I DO WITH IT!!??

12 Replies

Would love to get some feedback / brain storming on the best way to break into the RE INVESTMENT game. 

About Me:

I work in CRE Brokerage in Los Angeles, and representing tenants in the office leasing market is my focus. The market is hot and I have done well, saving 100K in a two year time span.

I rent a OK apartment in a great area, at a great price per the rental market, and its in a rent controlled building, but as you all know, renting sucks because I am still dumping 18K a year into rent w/ zero tax benefit, equity build up etc. 

I'd love to buy a house or condo, but the market in LA is crazy expensive.

So I think its best to start investing. 

Goals:

I want to own a fat portfolio of income properties in my life. 

Problem:

That being said, i can't decide which asset class to invest in.

Should i look for college rentals, vacation/ air bnb's?

Duplex's, triplex's, quads or more?

Should i go at it alone? or in a partnership?

Should I attempt a few fixer deals and grow my savings before looking for buy n holds?

Anyway, what would you do with a 100K?

@John P. My market is totally different than California. If I had $100k, i'd probably go build a few more single-family homes. Or maybe a small commercial property with some apartments above. I just finished building it home and finished a basement apartment. It's been great. When I move out, I'm not selling. I will just rent the upstairs and cash flow about $900. I'd probably look for an area that allows for accessory apartments or try to do some kind of duplex. Sounds like you've got a great nest egg to start with. It might be beneficial to look outside of your area due to the high costs.

John,

What resonates w/you?  For starters, you want to build a passive income producing portfolio so you are looking at buy n holds.  To do that quicker w/less cost per unit I'd look at multi-family (MF) or multi-unit (MU) niches where I can get scale / optimize / value add / re-position / re-brand.  

Do you want to be active or passive in managing your investments?   If passive, look at syndication and crowd funding for MF or MU opportunities.  Some require accredited status and some don't so determine your status to determine what opportunities are available to you.  The beauty of this approach is you leverage experts in their niche and can diversify by niche type and geography into those markets where you can find some better yields, cash on cash returns and total returns.  

Some other REI niche areas receiving attention continue to be storage units, student housing, mobile home parks, just about anything where you can scale (think multi units). Do your research and look for niches that have a good history of returns and good future prospects like the ones above.

If you want to be more active, you can look at more turnkey small unit plexes and partnerships where you can bootstrap your way w/some partners into the MF game w/BRRR type strategies. Look into MF groups in your area as well to see if there are some overlooked opportunities closer to home.

My favorite strategy personally is I do both. For my IRA $ I like passive investments w/syndications and crowdfunding that are in areas where I'm not an expert but like the niche. Hence, I'm active and put active money into large MF syndication (as a general partner) since that is what I do and feel that I'm good at, but find sponsors in areas I'm not an expert but they are such as storage units, student housing, assisted living, etc...and invest passively w/them.

Hello & welcome @John P. I would say that it really depends on what strategy you decide to focus on. In my market with 100k I would diversify into multi-family, maybe even a few SFR & get on a plan for where I want to be in 3-5 years. I'd probably also work with partners so you'd be able to diversify & spread the money into multiple opportunities. I agree with David that finding your niches & developing partners that can expand on your own knowledge will only serve you well in the future.

I would buy a 2-4 plex that needs work and has potential for raising rents and live in one of the units. Live there for a few years and then repeat the process.

I recommend you take 50k and use it to leverage multifamily. Keep 50k in reserve until you're comfortable to purchase another property.

Key is LEVERAGE

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@John P. Well as others have said, it depends so much on any number of factors.  In addition to what others have asked above, I say consider how much you want to diversify with the initial funds you have to work with? whether you want to stay local or consider out of state investing for your buy holds? how active or passive you want to be?  Whether you want something turnkey or needs work? Whether you want to invest short, medium or long term?

I can tell you that I have put money into several different types of investment all out of state - including private lending, buy and hold turnkey SFR, funding flips, and a rather unique crowdfunding platform that involves co-owning portfolios of 10 SFR. The latter is my current favorite for its ease, transparency and mitigated risk while still owning property and realizing double digit returns.

I am focused on passive investing (although there are very different levels of that), and you may have very different focus. All best on your REI journey.

I would be a little cautious going into a public forum and saying the equivalent of, "I have 100k where can I invest it."  While there are many who will help, be cautious of self serving answers.  That said....

Your post seemed a little bit like you're unsure how you want to allocate your money.  On one hand, you complain about paying rent and not getting the tax benefits, etc.  So it sounds like you are lamenting, not being a property owner.  Then you talk about wanting to invest it.  Part of the answer will depend on which is more important to you.  Which problem do you wish to solve first?  Do you want to live in a house(a lifestyle choice) or do you want to be an investor(a financial choice).  Remember, living in a home is not really an investment.  And there are times when renting is cheaper than owning even considering all the benefits of taxes, etc.  It depends on your market.  Neither is wrong, but you need to figure out first what is your goal.

Assuming that it is to invest, then you need to decide how you wish to invest it.  Real estate is huge.  You can buy for capital appreciation(which is a gamble), buy for cash flow, buy a REIT and play real estate like the stock market.  You can buy and flip houses for short term capital gains.  You can invest in mortgages(notes) which doesn't make you a property owner, but a bank.  You can buy tax liens.  There are other ways.  The answer to the question is also dependent on how much "hands on" do you want to be.  The answer is also dependent on how much risk you're willing to tolerate.  If you find a low cost of living area, your $100K could be down payment on 5 or more properties.  In a higher cost of living area, it might not be enough for one.  Assuming a low CoL area, would you be more comfortable buying one house for cash and having 100% equity and a high cash flow or having only 30% equity and paying a mortgage.  If you were fortunate to get 5 properties with 5 mortgages, how comfortable would you be when 2 units go vacant for a month or two?

Personally, I go the cash flow route.  My goal is to replace the income from my job so that I can quit.  I do buy and hold in low CoL areas.  I'll buy in cash and then try to cash out refinance to get maybe 50% of my money back and do it again when i'm ready.  My personal risk tolerance is to have at least 1 rental and my personal home paid in full.  I can make more by taking out loans against it and having more cash for more deals, but I like to sleep knowing that if everyone stops paying and I lose my job, MY personal residence isn't at jeopardy.  When I'm ready to buy another property i'll cash out refi the existing paid off one and then buy the next one and have it be the one that's free and clear.

Figure out the answers to what you're trying to accomplish and how much risk you're willing to take and then choose one of the strategies that fit that model.  Then do as much research on BP and other places on that strategy and go for it.  By the way, congratulations having the $100k.  That puts you a lot further ahead than the many people who come on here wanting to buy everything they can while having no money.

Good luck,

Brian

Absolutely in partnership with a person or company you trust personally and professionally. I am not saying that you couldn't do better on your own, but it is risky. I know numbers of people who did and wish they hadn't. We offer them and I am sure so do other people who responded to you. If you can get even get something around 8% and learn from someone, be grateful. When you see opportunities for 12-15% ask why this source is offering such a deal when there are a plethora of people who would be thrilled to earn more than the 3% they are getting in the stock market. 

There is a lot to be said about commercial multi-families where you can have a lot of units under one roof which consolidates management, creates economies of scale for maintenance and capex projects, and also gives you an easier time of managing/visiting your investment. And since you already have a background in CRE, you could leverage your network and knowledge much quicker to find a better deal in that space than re-learning a whole new investing dynamic. Whatever you do, good luck to you!

Thanks everyone for the excellent feedback. 

What is everyone's opinion on college rentals / vacation air bnb's??

I would do a 2-4 plex in a cash flow market , like lot of them in the Midwest. I can get a 4-plex here for about 100k

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