21 Year Old with $100,000 to Invest in Looking For Guidance

31 Replies

Hello guys, I am young entrepreneur with zero experience in the real estate business. I have been in the eCommerce business for 2 years just stacking and saving all of my profits and I have $100,000 to invest. I just turned 21 years old so I'm looking to just park this money for 10 years and hopefully be very happy with it in 10 years when I'm 31. My first choice was to invest in Cardone Capital with Grant Cardone but by doing more research I discovered that RealCrowd and CrowdStreet have better investment opportunities. My question is that on CardoneCapital.com the Cardone Equity Fund has a preferred return of 6% and I can't seem to find a preferred return on any of the RealCrowd and CrowdStreet offerings however I do see the "Target Annual Cash" I was just wondering if "Preferred Return" and "Target Annual Cash" are the same? Also for those of you experienced investors, if you had to go back to age 21 and you have $100,000 to invest in, what would you invest in? Thank you all for reading this.

If I was 21 Years Old with $100k I would park it, read as much as I could on BP and REI books for a couple months, then BRRRR rentals.

The best advice I can give is to remember that $100k doesn’t mean you can afford to make reckless purchases. ALWAYS run your numbers on each and every property and make investment purchases intelligently.

I’ve never looked into investing into those individual investment programs like Cardone’s so I can’t help you there. Investing is a hobby/fun for me, why pay someone else to have that fun for me?

Was reckless w $ at that age. Would rather ask my 30 year old self.

Welcome Jay....and congrats on saving your first $100K.  That is awesome at your age no doubt. 

Don't have any insight into the investment options you mention.  But I will say looking back to when I was your age, I would have done one of two things. 

First is DCA (dollar cost average) into the stock market using an array of stock-based mutual funds and/or market index funds.  DCA meaning not putting it all in at once, but putting in a set portion each month or quarter.  In your case with $100K, I'd spread the deposits over 2-3 years.  Either that, or having the money in a money market account ready to invest and buying on the dips in the market to maximize long term return.  Lots of options of who to use (Schwab, Fidelity, etc.).  I was in the investment business for my first dozen years or so out of college.

Second option is what we are here for.....real estate.   Finding as many properties as you can to invest in without having to take out secondary debt and reinvesting the income from said properties to not only use as upkeep, but to end up buying more.  Obviously the properties have to be bought right in the right areas, etc., etc.  And I have no experience in your area, but could only comment on where I invest here in TX as to what works and what doesn't.  Perhaps others can guide you more on your local market and what is best. 

Hope this helps and best of luck! 

@Jay Richards - Preferred return and Target annual cash are not the same terms. Every opportunity is slightly different but generally the preferred is what comes out to investors prior to the sponsor sharing in any of the upside as per the terms of the offering, - whereas target annual cash is what the predicted cash flow to investors  will be as per the pro forma calculations. (neither are guaranteed of course)

In order to invest on RC or CS you need to be accredited ( ie: have a net worth of at least $1,000,000, excluding the value of your primary residence, or have income of at least $200,000 each year for the last two years (or $300,000 combined income if married). 

If you are accredited and once you register on those sites - you will be able to preview the details of each offering including the terms regarding profit sharing and predicted cash flows.

Kudos for having done so well in 2 years and for thinking ahead already (a lot of people your age don't). 

I would suggest you keep doing what you are doing as intensively as possible to build up your assets (looks like you are on to a good thing), while not rushing into anything regarding placing your hard earned savings. Take your time to learn the options, take advice form others who have successful investments,  don't put all your eggs in one basket and don't invest what you cant afford to lose. Remember as well that you have just posted on a public forum that you have a nice sum available- I would expect a lot of soliciting coming your way- be very wary- there are all kinds out there.

@Jay Richards Welcome to BP! 

As @Saul L. mentioned, you need to be accredited to invest with Cardone Capital and the others. 

You need a place to live, so if it were me, I would do a house hack. Try to find a nice small multi-family place. Use an FHA loan, so you won't need to use all your capital. Then rent the other units, and get a roommate for the unit you are living in as well. Make your housing costs go to zero. Then this will let you dip your toe into owning a place and managing tenants. Then while you are living free, keep saving money and learn like crazy before you go into your next deal.

Then I would also look at doing a new house hack every 1 1/2 to 2 years. Being 21, if you did this 4-5 times, and only did this, you could be really set by the time you get to 30.

I agree with @Andrew Kerr.  

Another option is to either find a note investor and become their JV partner (pm me for details) or check out Carolina Hard Money. I've had good experiences investing with them several times (13.5%). I have no affiliation with them. Look them up and talk to Wendy Sweet, she'll explain everything for you.

I wish you great success. 

Joe

 Oh, and while you are doing a passive investment, spend that time learning about where you want to focus your investing gong forward. 

If you haven't already done so, go to CamaPlan.com and learn about opening a self directed IRA. Again, no affiliation, just good experiences.

Joe

@Jay Richards First, I'd say it is very smart to have come here to gather opinions to help you make an informed decision.

Now, you mentioned that you want to "park" the money, so I assume you don't want to be active in the real estate investing game yourself as you have done pretty well in the eCommerce space and possibly just want to continue to do that 

Couple of scenarios to answer your question

  1. If I was 21 years old and I love what I was doing but had 100k to invest I would learn foundationally about the asset class (single family, multifamily, or office) I found "interesting" at the time and I would look for someone who I can partner with you to help me steward my money. 
  2. If I was 21 years old and I wasn't sure what I wanted to do with the rest of life but I had 100k to invest, I would start buying multifamily properties, rinse and repeat the process as many as times I could [If I did that 10 years ago, I'm certain that I would be better positioned, financially, as a real estate entrepreneur today] 😎

To conclude, there is no rush to deploy that capital, Jay, as you want to take your time to vet partners and possibly learn a little more yourself. Take your time but, of course, don't take too long. 

Don't forget there is still an option for you to do all this yourself if you are able and willing to. 

Hope that helps, Jay. Goodluck. Thanks! - Ola 

Rather than ask strangers on a forum for advice you should be getting connected with a financial advisor that is recommended by someone you trust, hopefully a trusted individual much much older than yourself.

Find a professional advisor that is not employed by a bank. Don't take random advice from strangers, build a relationship with a advisor you can trust that will take you forward the next 40 years.

@Jay Richards , @Saul L. hit  it right on the head, explaining the difference between a preferred return and targeted annual cash return.  

The preferred return is simply the amount of money that you get, before the sponsor starts taking a fee through what’s called a promote or a split.  That amount may or may not be what they are projecting to return in distributions on a yearly basis. 

 For example, a very conservative multi family value added investment might have a 8%  preferred return,  but only be projecting to return 5% on a yearly basis in income, and only hitting the 8% preferred return when they sell at the end (which is where most of the money is made).

 On the other hand, a mobile home park value added fund might have an 8% preferred return, and expect to return 8% per year during the distribution phase, and much higher after the sale is made at the end. 

 As far as investments you could get into, there are many, many possibilities. However, before getting into them, it’s important to know if you are accredited or not accredited, as that changes the options drastically. 

@Jay Richards I would suggest NOT investing your 100K in anything except your business. That will be the best use of your time, effort and capital. 

In the meantime, start educating yourself on investments in general (not just real estate). As @Kenny Lee and @Thomas S. have advised, connect with a financial planner (fee-only... can't insist this enough) to (A) understand your options, (B) why they are important and (C) how they apply in your case. 

Would highly recommend NOT investing in real estate at your age with the level of success you've had. Grow your business and the rest will take care of itself. 

I would say come up with your goals & which direction your most interested & passionate about! If you want to learn & will put in the time study real estate & start with a house hack or brrr & go from there. In this market I would say try another industry or investment related to your experience or interest. The market is sky high most everywhere & deals are like finding a needle in haystack without experience.

I would consider looking at Blockchain & crypto with your internet background. Also consider moving to a lower cost of area if possible.

My goals are to build a fund of private placements but outside of mobile homes & lease to own partnerships the opportunities are not what they were 5-7 years ago when I was starting my Oklahoma-Texas based fund.

I would leave your money in savings for a few months and be in no hurry to spend or invest it right now. Take that time to learn from other's mistakes and make a plan for your money. The advice of well-meaning and experienced "strangers" can be invaluable. 

Personally, I would save until I could buy a 4-plex with an FHA loan. That allows you live in your own space and gain income from the other 3-units. Then I'd accumulate money as fast as possible to do it again. I wouldn't get into a big BRRRR project, but if you can find something with minimal work needed, jump on it. Also, if you continue to work online, you really should move to a less expensive market to maximize your cash flow. Best of luck!

@Jay Richards - good for you for being disciplined and saving this money, and for thinking ahead. Not many people doing that at your age! I also want to agree with @Thomas S. and say that this is a decision you want to make very carefully and from a very informed position: take your time to connect with other qualified advisers who can help you see your options clearly and then choose the one that makes the most sense for you.

You likely worked hard for this cash, and using it in any but the best ways for you would be a waste...

Good luck! 

The good news in starting young is that you have more leeway for the 'mistakes' and learning that needs to happen until you know what you are doing. That sometimes helps me take a step back from what I am working on and know that 'I have time to make this work'!

As an older person who will be in this boat soon, I can tell you that you probably should see where in real estate you want to invest first. You can look into mortgage notes and be the bank, you can go into wholesaling and spend the money on marketing, you can start to rehab and spend money on contractors. But you need to know what you want to do first. It's like learning to cook, cook what? desserts? dinners? breakfasts? fast food? You have to figure out what you want to do first. I am truly happy for you that you are so successful at such a young age. I hope my boys will be as thoughtful in their ventures as you!

Incredible story man. Do you mind if I PM you to ask you what your venture was about? 

As for real estate, I'd find multifamily or commercial property and use property management to have a hands off approach. Dallas, Houston, Phoenix, and Salt Lake City are all pretty hot markets, but do your own due diligence. 

The FHA multifamily is always a great idea too.

Jay,

I'd probably keep it highly liquid as your business grows.  Sudden, rapid growth can make 100k disappear pretty fast.  As another poster suggested, I would keep reinvesting in your business as it's your area of specialization and getting solid results for you so far.   If you want to invest in real estate passively, you could always partner up with others as an investor.  If you're an accredited investor, you could invest part or all of your 100k in private placements.  There are also REITS (best held in a retirement account bc of the taxable distributions) - I use my Vanguard brokerage to hold REITS.  

Originally posted by @Jay Richards :

Hello guys, I am young entrepreneur with zero experience in the real estate business. I have been in the eCommerce business for 2 years just stacking and saving all of my profits and I have $100,000 to invest. I just turned 21 years old so I'm looking to just park this money for 10 years and hopefully be very happy with it in 10 years when I'm 31. My first choice was to invest in Cardone Capital with Grant Cardone but by doing more research I discovered that RealCrowd and CrowdStreet have better investment opportunities. My question is that on CardoneCapital.com the Cardone Equity Fund has a preferred return of 6% and I can't seem to find a preferred return on any of the RealCrowd and CrowdStreet offerings however I do see the "Target Annual Cash" I was just wondering if "Preferred Return" and "Target Annual Cash" are the same? Also for those of you experienced investors, if you had to go back to age 21 and you have $100,000 to invest in, what would you invest in? Thank you all for reading this.

 Do you have a net worth of >$1MM and have $350K liquid? No? Then you cannot invest with Cardone Capital. He doesn't want to take anyone's last/only $100K. Good luck!

If you are "self-employed", it is worthwhile looking at a SEP IRA or Solo 401(k). The plus part of these accounts is that you may be able to get a large part of that $100,000 into a tax deferred vehicle. The negative part would be that you have some limitation getting the money without penalty until you are 59.5 years old.

A couple of other long term strategy thoughts.  If you qualify for an HSA, it is an incredible tax tool.

At the moment Roth conversion rules would allow you to make a max contribution to a SEP IRA for instance and then convert that whole amount to a Roth.

If you plan on wanting the money before 59.5 years old, perhaps research a 72t strategy to know what your options are.

@Jay Richards , congrats on your success early in life!  Since I imagine you can work wherever you have a laptop, have you considering house hacking a 2-4 unit with only 3.5% down?  This was my first investment, and it turned out to be a great move!

Also, because you're only putting 3.5% down, you still have plenty of cash to spare to invest in the things that you mentioned and that others in this post have mentioned.

One more thing.  Do you want to be a more "active" or a more "passive" investor?  I'm thinking the latter based on your interest in Grant Cardone's deals.  I don't know your goals at all, but I would imagine that perhaps you get a better return on your time by growing your eCommerce business than you would by, say, landlording, so the passive route may very well make more sense for you.

Also, don't get behind with the taxman!!!  I have seen so many young clients who have found success early in life lose a good portion of their hard-earned wealth to the IRS and FTB.

@Jay Richards congrats Jay, you have done well and at a relatively young age. Perhaps we should be listening to you rather than you listening to us? There are lots of ways to make a buck and clearly you have found a good one. Sure, learn about REI and other venues too. Stay in control of your hard earned money if you are onto something good try to repeat or increase that success. Reading your monthly Schwab statement is about as unexciting as it gets-was for me anyway!

@Jay Richards I always wonder when someone posts that they have $100K to invest, how many private messages have you gotten in your inbox? Advertising that kind of cash will make you a magnet for scams and offers of "help". 

There are lots of horrible recommendations in this thread, so my best advice is be careful. You don't need high risk, get rich quick. You need a solid investment that will get you good returns 5, 10, 15 years down the road.

First step is to put the money in a high yield FDIC insured account. Online savings accounts are paying around 1.5%. That is just where you park it while you get educated. It is not a long term investment.

Your best path to wealth is buy and hold real estate using leverage. That $100K will buy around $500K worth of real estate (multi, single or commercial). You will get paid monthly in cash flow, which you can reinvest into more rental property. Tenants will pay down the debt, so you gain equity over time. Great tax benefits and fairly passive.

Don't jump into anything. You have the money, but I can tell you need to spend more time educating yourself.

Great job accumulating so much cash at such a young age. Now just make sure you don't screw it up by making a bad investment! Good luck.

@Jay Richards  

Congrats on your success so far #1

#2 I believe Cardone is doing syndications and in that case, preferred return just means the investors (limited partners) get paid before the sponsors and general partners. He advertises it online so I believe the offering has to be a 506c which means that only accredited investors can invest. You may be an accredited investor for all I know, I'm just pointing that out to you. I do not believe that target annual cash is the same as preferred return.

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