What to do with a sizeable inheritance?

What to do with a sizeable inheritance?

Lender · Tuscaloosa, AL · Member since 2017 · 15 posts · 11 votes

Hello BP Family,

My name is Parker Grissom and I new to BP. First, just a little back ground on me before we dive in. My brother and I lost our Mom to cancer in October of 2014. Our Mom was an amazing person. We could not have asked for a better person to raise us, mentor us, and love us. She taught us to work hard and never give up. She is the reason I am here now on BP. My brother and I seek advice on how to start our real estate investing career. We wish to continue to grow the wealth she left behind to us. To give back to the generations to come just like she did for us.

My brother and I are both in our mid 20's and work full time. We both have decent jobs with good benefits and all that jazz. But, we recognize that there is more to life than punching the clock, sitting in a cubicle, and counting down the years to retirement. We want sieze our future now rather than waiting for it 30 years from now. We understand that real estate investing is that vehicle that can get us there. We want expand the finacial wealth our Mom left us and real estate investing is how we want to do it.

Finding Bigger Pockets has fueled our desire to start investing ASAP. We are currently researching all we can to gain knowledge and insight to avoid common mistakes. We are listening to every BP podcast we can. I am currently reading "The Million Dollar Real Estate Investor" by Gary Keller. I have reached out to a local REI group and will meet with them next month. We seek advice from you all on how to continue to gain knowledge.

Our Mom blessed us with an opportunity that most people don't have. She had a successful career and always saved more than she spent. We understand the fortunate position we are in and we wish to take full advantage of it. Our trust fund is currently invested in growth stock mutual funds through a managing firm and we have been very happy with the results. However, we wish to move into the real estate rental game.

The current stragety we have chosen is to buy and hold multifamily and single family properties and rent them out. We wish to focus more on multi unit because from I have researched, they have more upside potential. The capital we have starting out would allow us to acquire them easily. With our inheritance, putting down payments on many properties would not be an issue. Eventually, we wish to acquire enough properties with enough cash flow to quit our jobs and invest full time.

My question to you all is:

What would you do if you were in our shoes?

What mistakes should we look out for?

What books would you reccomend?

Should we consider a different stragety because of the furtunate position we are in?

Any and ALL advice is welcome.

Thank you in advance,

Parker Grissom

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Chris LopezPro Member
Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
9y

@Parker Grissom I have a financial planning background. Often, people are their own worst enemies when they come into large sums of money. Read the horror stories of many lottery winners. Most go from broker -> rich -> bankrupt.

Once you control the money, consider sticking all of it in a savings or similar account for 6 months and don't touch it. Let your emotions get used to having that much in the bank. Spend the time exploring and learning.

When you're ready to do your first deal, do one deal. Don't go crazy spending all of it. Buy one deal and wait 6 months. Spend that time to learn what you like about the deal, don't like, etc. You'll learn a lot more doing it than reading any books.

Then go from there. Time is on your side. Don't try to hit a grand slam this year. Consistent base hits over the next few years can set you up for the rest of your life.

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29 Replies

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  • Real Estate Agent · Los Angeles · Member since 2017 · 107 posts · 33 votes
    9y

    1) Don't listen to the first person who knocks at your door. 

    2) Financial advisor

    3) "Pay for it with assets" -Kiyosaki

  • Chris LopezPro Member
    Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
    9y

    @Parker Grissom I have a financial planning background. Often, people are their own worst enemies when they come into large sums of money. Read the horror stories of many lottery winners. Most go from broker -> rich -> bankrupt.

    Once you control the money, consider sticking all of it in a savings or similar account for 6 months and don't touch it. Let your emotions get used to having that much in the bank. Spend the time exploring and learning.

    When you're ready to do your first deal, do one deal. Don't go crazy spending all of it. Buy one deal and wait 6 months. Spend that time to learn what you like about the deal, don't like, etc. You'll learn a lot more doing it than reading any books.

    Then go from there. Time is on your side. Don't try to hit a grand slam this year. Consistent base hits over the next few years can set you up for the rest of your life.

  • Lender · Tuscaloosa, AL · Member since 2017 · 15 posts · 11 votes
    9y
    Chris Lopez Thank you for valued insight. I have found myself a little wound up recently thinking, "now now now!". Your post really hit home and calmed me down a little. This is a long methodical journey. It is a process and success will come with calculated risk backed by knowledge and insight. On another note, I'll be flying into Denver tomorrow (8/30) for a couple days! Let me know if you're free to grab coffee or something. Would love to meet maybe get more advice! -Parker
  • Chris LopezPro Member
    Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
    9y

    @Parker Grissom bad timing! I just flew out of Denver this morning. Do you travel back and forth regularly?

  • Lender · Tuscaloosa, AL · Member since 2017 · 15 posts · 11 votes
    9y
    Chris Lopez Bad timing indeed, ha! Unfortunately I don't. Heading there in vacation this time.
  • Realtor · Denver, CO · Member since 2016 · 499 posts · 129 votes
    9y

    Hi Parker, welcome to BP. I like the multifamily aspect. Especially when you can get them cheap and rent them for a lot. In Colorado, while denver is higher priced, so are the rents. In Colorado springs, the cost is low but you still have good rent and with the military base nearby renters are easy to find. I hope you enjoy your visit to Colorado and if there is anything I can do for you while you are here, feel free to reach out.

  • Rental Property Investor · Brooklyn, NY · Member since 2014 · 722 posts · 1k+ votes
    9y

    @Parker Grissom

    Sit tight.  This bull market is coming to an end soon.  Wait for the correction before getting in.  Spend the time between now and then learning as much as you can and networking with good people who can help you.

    "Now!" is almost never the right time to do a deal.  And there is always another deal out there.  Learn before you leap.

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    I like your attitude towards this blessing @Parker Grissom.  In your wonderful mom's memory you would like to create generational wealth and do good.  Bravo!

    I would stay in my backyard with assets I can see and touch.  I would be patient and try things a little at a time like @Jonathan Twombly suggests. 

    Nothing is on fire.  Don't sink all into one thing.  Only do things you understand AND have a say in. Watch for sharks in these waters.  Good luck and keep us posted!

  • Colorado Springs, CO · Member since 2016 · 59 posts · 33 votes
    9y

    @Parker Grissom: Do as you feel comfortable. Sorry for your loss! My grandmother is currently fighting Cancer battle #3, and we suspect she'll be joining your mom soon. Unfortunately, she was/is not as frugal with money as your mother, and the hospital bills didn't help!

    I bought my first home using my VA loan last year in Colorado Springs. Regardless of what the market may/may not do, proper investment research will ensure a financially secure future. I've noticed the strength of the Rental Market in the springs is still very strong, as I also House-Hack my Single Family 4 bedroom home at this time. Just posted a room for rent and the e-mail's have been 1-2 every couple hours with interest!

    If you're a single man and don't mind living with others, house-hacking can have it's benefits. If you prefer your privacy, definitely stick to looking for a multi-family home. With more money in the bank, I'd probably also attempt to locate something with room for improvement that has a few vacant units. Usually show's the current owner's didn't find value in the property, and makes updating/increasing rents easier to process. Good Luck! Enjoy the mountains!

  • Real Estate Consultant · Colorado Springs, CO · Member since 2013 · 325 posts · 117 votes
    9y

    @Parker Grissom - thanks for posting. Resist the temptation of focusing on quick cash, wholesale/flipping strategies or at least temper it by simultaneously building long term wealth with rentals when it makes sense to do so, the goal being passive income or mailbox money that you can use for retirement, children's college education, etc. 

    To succeed, make sure the potential asset cash flow's TODAY or will do so once the value adds are complete, after projected expenses and debt service. And if investing outside of your own backyard, make sure you understand the long term potential of that market in terms of migration, employment and infrastructure growth and have experienced and qualified boots on the ground to help, including an investor FOCUSED real estate licensee.

    Last but not least, keep in mind the Colorado Springs real estate market ranks 15th out of 50 top U.S. markets. :)

    All the best!

  • Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes
    9y
    Educate yourself before you invest in anything. Start small. Don't invest in anything you don't completely understand. And realize that no one cares about protecting your money like you do. Also beware of financial advisors, especially those trying to sell you loaded or in-house mutual funds or annuities.
  • Crossville, TN · Member since 2017 · 121 posts · 168 votes
    9y

    Since this is a real estate investing board i probably wont get anyone to agree with me but things might be better off as it is. You need to ask yourself if you really can make more in real estate than stocks when you consider the time commitment 

  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    9y

    I'll bite with you @Robert Hudson, There's a lot of high water marks that have everyone questioning whether its Dow 22K or real estate where it has recovered to. The grass isn't always greener.  And evaluation of status quo vs potential is always a first second third and last question.

    But real estate is a great passion goal and tool @Parker Grissom.  The question is when and how.  You don't have to start at the beginning.  Your mom's gift to you has given you the opportunity to skip some of the early boot strapping, teeth rattling, sleep losing all in, risk it all growth efforts.  

    The 1031 Investor5140 Reviews
  • Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y

    I would get started as if you didn't have a lump sum to invest. If you want to go multifamily, then "house hack" a 4-plex with your brother, put 20% down, you two share one unit, fix up hands on yourself, if you do hire some stuff out then act as GC and oversee it, rent out the units, manage the tenants yourselves. Get your hands dirty, learn the business, then apply those lessons to slowly but surely ramp up the business with the remaining funds. As an added benefit, it could be inheritance from your mom that brings you and your brother together even more to start and learn hands on the REI business ... I think she would've been pleased to see such a plan like that come together ...

  • Real Estate Consultant · Colorado Springs, CO · Member since 2013 · 325 posts · 117 votes
    9y

    @Robert Hudson - of course you can if for only one word, leverage. If one invests $50,000 in stocks, bonds, mutual funds...whatever, how much does one control? That's right, $50,000. Put that same $50k into real estate and how much does one control? Up to the loan limits for owner occupant loan products ($721k in HI), $200k as an investor with 25% down. 

    There's also the principal reduction that happens automagically and expense costs that are covered courtesy of carefully selected tenants, not to mention depreciation and other tax advantages. 

  • Bernard ReiszPro Member
    CPA delivering RE Tax Tools: 1031 Exchange, SDIRA, 401(k), Cost Seg · New York City, NY · Member since 2017 · 581 posts · 563 votes
    9y

    @Robert Hudson@Parker Grissom

    For passive investors that invest passively on their own or have others manage investing for them (including RE), publicly traded securities may be the better alternative. But for those that are ready to actively invest and put in a lot more than money - find the deals, force appreciation, etc. - RE presents far greater opportunity for current and long-term dollars in your pockets.

    The cash flow and appreciation available in RE, combined with all the tax benefits - paper losses, 1031s, etc. - generated with the bank's money, translates into far greater potential for most people. Well-diversified stock portfolios can do well and be safer than real estate, but if you want to beat the market in a big way the stock market is far riskier than real estate.   

  • Realtor · Charleston, SC · Member since 2016 · 229 posts · 159 votes
    9y

    @Parker Grissom 

    I didnt read others responses but if I had a large sum of money left to me I would learn the areas that I wanted to invest in pretty well. I would build a network of people who are currently doing what you want to do and learn from them before you buy. I wouldnt spend all the money in one pass either, I would buy a property, get it up and running for a little bit and then analyze how my deal actually came out versus how I planned it to come out. If it worked well, then repeat the process. 

    I would avoid ANY financial advisor who is paid commission based pay. You want someone who is going to have your best interest at hand, not their commissions. Flat rate fee or hourly is best. There are many many wolves out there waiting to take the money you inherited, dont let them. 

    LAstly read, read, read......

  • Realtor · Philadelphia, PA · Member since 2017 · 20 posts · 4 votes
    9y
    Parker, i am in a similar situation. first off i am sincerely empathic for your loss. personally i lost both my parents at the ripe age of 13. being 21 now, i received my inheritance not too long ago (within 2 months) and have been vigorously learning real estate for the past 8 months-ish. i close on my first deal on Sept. 15. Would love to keep in touch throughout each others journey.
  • Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    9y

    First off, my condolences to your family. Losing a mom to cancer, especially at a young age must be tough. 

    I like the idea of sitting on the money for 6 months or longer - not spending a dime, which may be tough, but it will be worth it. In the mean time educate yourself through BP, Podcasts, books, etc. Look at opportunities in commercial, multi-family, flips, syndication's, etc to analyse the deals and get use to the numbers. Then when you are fully ready start to invest. 

    Books I recommend: 

    Think and Grow Rich 

    Tools of Titans

    Mistakes Millionaires Make

    ABC's of Real Estate Investing

    Multi-family Millions

    Art of the Deal

    Commercial Real Estate Investing - Dolf De Roos

    Rich Dad Poor Dad

    I feel like I could use a large inheritance effectively now, but that is after doing hundreds of deals. Looking back honestly at when I was in my mid-late 20's and I would tell myself to get educated and be patient. Good luck in whatever you decide. Feel free to reach out 

  • Rental Property Investor · Hyannis, MA · Member since 2016 · 19 posts · 18 votes
    9y

    Hey Parker, 

    First off , sorry for your loss and Im sure that your Mom would be proud that you want to grow what she has given to you.

    Take your time to figure out an investment plan. If you are inexperienced and in a hurry your odds of winning go way down. 

    I would take some time to learn about and visit some of the markets that have strong rent appreciation and job growth. Owning in a rising market can solve a lot of investment problems. 

    And do not feel you have to invest all you have at once. 

    I prefer to start with putting the time and work into learning a market and searching for great deals then buying an average deal and putting in time and work to try to try to make it a better deal.

    Best of luck,

    Bryan

  • Lender · Tuscaloosa, AL · Member since 2017 · 15 posts · 11 votes
    9y
    Thank you everyone for your kind words. I appreciate everyone's insight and taking time out of your day to provide input. This has been a valuable board and it has allowed me to look objectively at the situation. -Parker
  • Rental Property Investor · Tallahassee, FL · Member since 2014 · 67 posts · 18 votes
    9y

    I agree with many other's thoughts.  Learn, network, and build/buy slowly/cautiously (especially in most r/e markets right now).  Be patient and wait for a good deal - don't buy just to buy...I see a lot of folks doing that and counting too much on appreciation.  Cash is king, and you're in a good position - just be patient, but acquire the knowledge to be ready to pull the trigger when you see a deal.

    In addition to learning about real estate, knowing the basics of personal finance is worth it's weight in gold.   Some may laugh, but the book I read that caused the light bulb to turn on for me when I just graduated college was The Total Money Makeover by Dave Ramsey - it provides a great foundation for building and securing an awesome financial future.  Now, I certainly don't agree with him when it comes to paying for investment properties in all cash,  but the majority of his principals guided me positively in my 20s and continue to do so today. 

    R/E investing is one piece to the puzzle, but if you don't have a solid understanding of personal finance you'll only get so far.  

    Best of luck Parker.  

  • Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    Owning / Operating rental properties is a job,, maybe not 9-5 but a job.

    Invest / Own in your nearby surrounding area to start, you will need to be hands on.

    Take classes in landlord tenant / property management so you understand what the laws are and how you need to comply to operate. download landlord tenant laws for your state you have properties in. 

    Silent partner in a syndicated holding may be an option for you, your a partial owner in a large holding with several other partners.. 

    Talk with a financial planner,, not all eggs in one basket.. 

    Family business although today you and your brother are leaning to go together on something I'd recommend you do it on your own.. 

    SFH are not easy to make any money on.. I would rather have a 4 plex or larger to work with.

    If you don't know how to fix a toilet that leaks learn, because you'll need to understand maintenance issues either how it's done or how to have do it and lack of knowledge is expensive.

    Our parents left us a trust with rental properties, after the fact not all wanted to participate, so I was in control and sold the properties. So with what I had to deal with helping run a rental business for 40 years has me leaning towards syndicated holdings in the future.. for myself... I want complete control of my financial decisions and no family to deal with.

     Good Luck

  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    9y
    Real estate investing has many facets. The biggest mistake you can make is not identifying what part of it you are passionate about and pursuing that. In your situation it wont matter if you make money doing something if you hate it.
  • Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
    9y

    Theres going to be a lot of good replies and you're already asking great questions. My suggestion is read read read. Use google and the BP seach bar vigorously.

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