Mostly liquid, but no income.. Where do I start?

Question

So...I planned on starting a business but it isn't working out as planned and thinking of pivoting to real estate. I was laid off Jan 1 and received a nice severance, I cashed in both my 401k and my pension (yeah, I know) and I'm close to 190k liquid, but have no income.. Well unless you count Uber at 1k/week gross but I don't think banks really do!

So.. Where should I start? Should I try being a hard money lender? I'm not sure if that is enough in my local market. (Boston) I don't think I can purchase any real estate without a W2. Any suggestions welcome!

Eric

Scott Krone · Answer

I would suggest with education.  If you use $190k fully deployed all year and 100% success rate perhaps you yield 10% prior to expenses.  Is that enough revenue for your new company.  If not then you need to see how you can create different opportunities with that cash.  Grand Coast Capital (full disclosure I do not work for them) is based out of South Shore.  They are a lender who receives investments for two real estate funds and then deploys them into either single family or commercial.  My understanding is they return to their investors around 10%.  They are very good guys that run the firm and truly believe in education and knowledge as the key to real estate.  I suggest stopping by and discussing with them their strategy as well as what their clients do with the loans.  You can learn how others got into real estate as well as what established investors do with their cash.  Best part it is right in your back yard.

Mark S. · Answer

@Eric K. As someone who may find themselves in a similar position (but with a spouse who can help augment the monthly), I would assume your two best options would be to either flip or take the buy and hold BRRR approach.  The flip would have more risks, but might net you cash faster.  The buy and hold would slowly setup a steady stream of income, but take longer to achieve.  And you would have to carve out a portion of your funds to live off of while either one is working.

I'm also eager to hear what others have to say.

Charlie MacPherson · Answer

@Eric K. You could potentially do a small flip, but it would have to be really small - and you wouldn't have much in the way of cushion if anything went wrong.

I'd suggest looking for a partner on a flip.  Someone who can bring some cash to the deal and has good contractor connections.

Ann Bellamy · Answer

I would use that money (some of it) for downpayment on property.  It is not enough to lend out.  At least not in any meaningful business way.  You could invest it with another hard money lender (not a solicitation, I don't take investors) Or you could lend it to one rehabber for downpayment and working capital on a partnership basis.

Becoming a hard money lender requires knowledge of real estate investing, knowledge of lending laws and regulations, and much more capital than that.  Even lenders with a few million to lend out will soon run out of money, and that is not a good way to keep deal flow going.  It also requires significant marketing.

Whether you decide to become a real estate investor yourself, or to find someone to lend/invest your money with, you will need significant knowledge of investing.  The best way to start is to spend 6 months reading here on BP.  Then you will be ready to find out the multitude of things that you didn't know that you didn't know.

Ann Rosen · Answer

Hi Eric, I work for a national commercial mortgage broker (including lending in MA).  If you email me, I can walk you through investing financing considerations generally.  But, long and short is that you would not need proof of income or a W2 for short term rehab, wholesale, and bridge loans and for some permanent financing products.  Thanks.

Mostly liquid, but no income.. Where do I start?

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