Best way to invest several million+?

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Best way to invest several million+?

Uzi Pablo
Member since 2018 · 17 posts · 4 votes

Hello, I'm very new to Bigger Pockets, but I've had this forum bookmarked forever until I really needed it.

I sold one of my companies some time ago and now have a regular stream of ~1 million per month to invest. So far I'm a very aggressive entrepreneur, but I don't know the first thing about real estate, and that's where I want to divert a lot of my income to supplement my standard investment strategy of stocks, bonds, other companies, etc. I'm thinking maybe 10-30% of that into real estate to start.

To be honest, I know absolutely nothing about real estate. So I have started in the Education section in the beginners guide. I was also considering buying the Bigger Pockets book on real estate investing.


There's so many areas of interest though, that I'm wondering which area(s) one might suggest I focus on first, just so I'm on the right track from the beginning. From there I can study all day long until it starts to click.

My ultimate goal is (fairly) hands off income @ ideally around 10% return. More would be incredible. I'm not sure if that's possible while using a management company to manage properties, so if that's not reasonable I'd love to know what is. I have no problem hustling and doing work, but I'm really trying to find something that doesn't require an immense amount of time per day/week. If that also isn't possible I'd love to know what is a more reasonable goal. In the back of my mind I think "what if I had 10 or 20 properties being managed by a company and I just collect income from them" type of deal. Obviously there's a lot more to it, but that's sort of the direction I was thinking.

I don't know if wholesaling or flipping is a good strategy for me either (still reading about that, haven't gotten there yet). Any insight would be appreciated where to start.


Thanks to you all.

- U

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Brian Garrett
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
7y

Be prepared to get a lot of colleague requests and messages now that you announced you have $1M per month income and know nothing about real estate but want to invest. In the future you should never disclose on a public forum how much cash you have available. You will attract more of the wrong people than the right ones. Be very cautious of those who message you offering their services. With all that being said I’d suggest you keep your money safe and sound in a high yield savings account or something alike while you study various investment strategies and learn which is the one you want to pursue. As you gain more knowledge you’ll start to figure out exactly what direction to go. Welcome to BP and best of luck!

25Reply
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  • Allan Smith
    Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    wow that's a lot of cash and a lot of info! 

    I would say your job now is to put the cash to work. You should avoid any kind of active real estate stuff like flipping,  and possibly focus on buying rentals in cash, getting a PM on it right away, and looking for the next deal. Look for higher end rentals that cost more but also are less work to manage so PM can cut you a bit of a break. 

    The main thing is stay out of the weeds of real estate. Put together a team that runs the business. You should be able to do better than 10% as well I'd say. 

    1Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    7y

    Be prepared to get a lot of colleague requests and messages now that you announced you have $1M per month income and know nothing about real estate but want to invest. In the future you should never disclose on a public forum how much cash you have available. You will attract more of the wrong people than the right ones. Be very cautious of those who message you offering their services. With all that being said I’d suggest you keep your money safe and sound in a high yield savings account or something alike while you study various investment strategies and learn which is the one you want to pursue. As you gain more knowledge you’ll start to figure out exactly what direction to go. Welcome to BP and best of luck!

    25Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    7y

    Talk to your CPA and find a reputable commercial broker. Good luck.

    1Reply
  • Dennis Dahlberg
    Phoenix, AZ · Member since 2017 · 93 posts · 105 votes
    7y

    Dont buy the homes, be the lender.....it took me years to figure this out.

    I use to work very hard flipping homes. 

    Late one, night writing checks for all the hard money lenders, my wife said “what are you doing?” 

    Told her I need to make sure all the lenders get paid, I’ll be in bed soon...

    She said “Looks like your on the wrong side of the business, don’t stay up too late dear.”

    And she was correct.........

    Always listen to your wife......

    19Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    7y

    Without talking to you on the phone it would be hard to go over potential investment options.

    There are different levels of being passive and active with properties and deal sizes with varying asset classes.

    The 10% return you have to quantify if total return or cash on cash return. There is cash on cash return and then total return factoring in mortgage paydown (if you do not buy all cash), tax depreciation, any mortgage interest deduction, rental increases, etc.

    Likely since you have no info on profile this might not even be your real name. I deal with ultra high net worth individuals on a daily basis buying large multifamily and also commercial retail NNN and retail strip centers etc. On here they sometimes contact me and use alternative names on BP. Some just read in the back ground and do not use a profile to post.

    With my potential clients I verify a personal financial statement before getting on a call with them. My time per hour is high and I have to verify they really do have the funds to buy before answering a ton of questions. Talk is cheap and the buyers have to be verified upfront.   

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  • Marylynn B.
    Investor · Frederick, MD · Member since 2012 · 160 posts · 31 votes
    7y

    I SO agree with all the posts!! It is a weighty decision and a great responsibility.  I think you are right in learning as much about real estate as you can.    The more you know, the clearer the direction will become.   I agree to stay out of the weeds.  There is no reason to be working that hard when the money can work for you.  Many possibilities in commercial or lending.  Congratulations on your new venture!!

    0Reply
  • Account Closed
    Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
    7y

    Goodness. Why not just retire? Live comfortably. Give the rest away to family or charity. Volunteer at an old-folks home? Take up fishing or painting? All of the above?

    Seriously. What is the point of creating the largest pile of cash you can if you never intend on using it for anything?

    The lottery got up to like 1.5 billion the other week. As I dreamed about what I would do with my winnings, I came to realize it was more money than I could ever spend and it would actually become a liability to a normal life. The only rational choice for me would be to give it all away (ok, most of it).

    But, I suppose if you want to be as famous as Rockefeller, Morgan or more recently Gates or Buffet, you just keep on keeping on. The thing I love about Buffet is he helped a whole bunch of people get rich right along with him.

    But seriously, be the lender if you want the best returns for the least amount of actual work. There are firms that do that out there for you to invest in. No? Well then, I'll take your money and build a portfolio for you, but the cost will be an interest free loan. I can deliver your 10%.

    1Reply
  • Uzi Pablo
    OP
    Member since 2018 · 17 posts · 4 votes
    7y
    Originally posted by @Allan Smith:

    wow that's a lot of cash and a lot of info! 

    I would say your job now is to put the cash to work. You should avoid any kind of active real estate stuff like flipping,  and possibly focus on buying rentals in cash, getting a PM on it right away, and looking for the next deal. Look for higher end rentals that cost more but also are less work to manage so PM can cut you a bit of a break. 

    The main thing is stay out of the weeds of real estate. Put together a team that runs the business. You should be able to do better than 10% as well I'd say. 

     Can you tell me a bit more about what constitutes "in the weeds"? I see someone else mentioned the same thing.

    0Reply
  • Uzi Pablo
    OP
    Member since 2018 · 17 posts · 4 votes
    7y
    Originally posted by @Brian Garrett:

    Be prepared to get a lot of colleague requests and messages now that you announced you have $1M per month income and know nothing about real estate but want to invest. In the future you should never disclose on a public forum how much cash you have available. You will attract more of the wrong people than the right ones. Be very cautious of those who message you offering their services. With all that being said I’d suggest you keep your money safe and sound in a high yield savings account or something alike while you study various investment strategies and learn which is the one you want to pursue. As you gain more knowledge you’ll start to figure out exactly what direction to go. Welcome to BP and best of luck!

     Thanks Brian for the warning, that's already something I expected/deal with on a near-daily basis (unfortunately). Thanks for the welcome! This looks like an awesome place.

    0Reply
  • Uzi Pablo
    OP
    Member since 2018 · 17 posts · 4 votes
    7y
    Originally posted by @Joel Owens:

    Without talking to you on the phone it would be hard to go over potential investment options.

    There are different levels of being passive and active with properties and deal sizes with varying asset classes.

    The 10% return you have to quantify if total return or cash on cash return. There is cash on cash return and then total return factoring in mortgage paydown (if you do not buy all cash), tax depreciation, any mortgage interest deduction, rental increases, etc.

    Likely since you have no info on profile this might not even be your real name. I deal with ultra high net worth individuals on a daily basis buying large multifamily and also commercial retail NNN and retail strip centers etc. On here they sometimes contact me and use alternative names on BP. Some just read in the back ground and do not use a profile to post.

    With my potential clients I verify a personal financial statement before getting on a call with them. My time per hour is high and I have to verify they really do have the funds to buy before answering a ton of questions. Talk is cheap and the buyers have to be verified upfront.   

    Thanks for the info Joel, I like the sound of some of those things you pointed out. I'll do some reading in those areas, and given your reputation/posts on here may decide to reach out in the future :)

    0Reply
  • Uzi Pablo
    OP
    Member since 2018 · 17 posts · 4 votes
    7y
    Originally posted by @Account Closed:

    Goodness. Why not just retire? Live comfortably. Give the rest away to family or charity. Volunteer at an old-folks home? Take up fishing or painting? All of the above?

    Seriously. What is the point of creating the largest pile of cash you can if you never intend on using it for anything?

    The lottery got up to like 1.5 billion the other week. As I dreamed about what I would do with my winnings, I came to realize it was more money than I could ever spend and it would actually become a liability to a normal life. The only rational choice for me would be to give it all away (ok, most of it).

    But, I suppose if you want to be as famous as Rockefeller, Morgan or more recently Gates or Buffet, you just keep on keeping on. The thing I love about Buffet is he helped a whole bunch of people get rich right along with him.

    But seriously, be the lender if you want the best returns for the least amount of actual work. There are firms that do that out there for you to invest in. No? Well then, I'll take your money and build a portfolio for you, but the cost will be an interest free loan. I can deliver your 10%.

    Everyone always has an opinion on what people should do with their money. Quite literally I do almost every thing you mentioned with the exception of volunteering at old-folks homes. And, I am not retiring because I'm not even half the age of retirement yet. It's not in my DNA to sit around idle (maybe later in life). A life of learning, creation, failure, and texture is what excites me.

    And thanks for the suggestion about lending, I'll research more into it. It seems several people have said that.

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    7y

    Hi Uzi,

    Do some initial research and then get focused on a specific plan of action. There are literally hundreds of ways or more to invest in real estate.

    All can have pluses and minuses. What you do not want to do is study for years and then do nothing because you are on to the next interesting thing that pops up. I am a lifelong learner so while I like to learn new things I also have to stay focused and take action on what my specialty is.

    The PFS I have clients fill out is a basic 1 page Excel form. It is just net worth and liquidity type fill in the line box items. 

    Biggest thing I can say with buyers as clients is some like to remain (secret agents) with their financials. With my reputation with other brokerages and developers to get first looks at properties I stand to lose a lot if a buyer presents as one thing and then does another or is not as qualified as they said.

    Buyers tend to think about just the one deal. Brokers and other investors have forged relationships over years or decades and are not going to put damaging that at risk for a transaction no matter how much money a buyer says they have if it cannot be verified.  

    You could look at investing with sponsors passively or owning yourself directly. Cap rate and return depends on size of property you are buying. Obviously as the higher the purchase price on a property the smaller pool of individual buyers can afford that property. Less competition can mean increased yields to the buyer as the loan amount is larger so lender compete for better rates and cap rates are usually higher so you typically can get a bigger spread between debt rate and cap rate for return.

    I have individual clients worth 9 figures in wealth and a lot of clients with 7 to 8 figures in wealth. The higher the number the fewer I run across in that category.

    If you do work with a broker make sure they are experienced and have a vast network and system to help you successfully find the best property to buy especially at these cash investment levels.

    Hope it helps.

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    0Reply
  • Uzi Pablo
    OP
    Member since 2018 · 17 posts · 4 votes
    7y
    Originally posted by @Joel Owens:

    Cap rate and return depends on size of property you are buying. Obviously as the higher the purchase price on a property the smaller pool of individual buyers can afford that property. Less competition can mean increased yields to the buyer as the loan amount is larger so lender compete for better rates and cap rates are usually higher so you typically can get a bigger spread between debt rate and cap rate for return.

    Awesome, makes sense. Could you provide a (rough) ballpark range or tiers of cap rates/returns for different purchase prices?

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    7y

    Heading out for a bit. Will post ranges later today.

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  • Allan Smith
    Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    @Uzi Pablo "in the weeds" means being more involved in the day to day operations of the business. If you are in the weeds, you are meeting contractors at properties for bids/payment, collecting rent from tenants, and so on. Since you have the cash, you can leverage your time and a team to complete the most effective formula.  Your job is more about relationships, looking at reports to optimize how your investments are performing, etc.

    1Reply
  • Uzi Pablo
    OP
    Member since 2018 · 17 posts · 4 votes
    7y
    Originally posted by @Allan Smith:

    @Uzi Pablo "in the weeds" means being more involved in the day to day operations of the business. If you are in the weeds, you are meeting contractors at properties for bids/payment, collecting rent from tenants, and so on. Since you have the cash, you can leverage your time and a team to complete the most effective formula.  Your job is more about relationships, looking at reports to optimize how your investments are performing, etc.

     Ahhhh Ok, that makes perfect sense in this context. Basically more active rather than passive. Thanks!

    0Reply
  • Mike G.
    Real Estate Agent · Las Vegas, NV · Member since 2016 · 589 posts · 275 votes
    7y

    @Uzi Pablo this may sound abrasive but where you shine in business ( not even knowing what business it is that you sold ) your more than likely lack in other skill sets and that as you know since your a smart guy is what you don’t know that you don’t know will kill you in business.

    You need to beef up your sales and negotiating skills before you even think about investing in real estate.

    Fundamentals are the key to big gains and wins. Don’t over look this.

    That’s my .02

    0Reply
  • Gordon CuffePro Member
    Investor · Roseville, CA · Member since 2009 · 1k+ posts · 584 votes
    7y

    @uzi 

    @Uzi Pablo We should be asking for your advice. Your doing much better than most of the real estate investors across the u.s. You can take the advice of Grant Cardone and only buy apartments that are 16 units or more. You can become the lender and earn 10% without the day to day headaches of flipping, managing rentals, etc.

    I would love to hear about your business's if you ever send direct messages to people here on biggerpockets. In return, I will tell you how I lost money in real estate investing and how I made money.  

    0Reply
  • Uzi Pablo
    OP
    Member since 2018 · 17 posts · 4 votes
    7y
    Originally posted by @Gordon Cuffe:

    @uzi 

    @Uzi Pablo We should be asking for your advice. Your doing much better than most of the real estate investors across the u.s. You can take the advice of Grant Cardone and only buy apartments that are 16 units or more. You can become the lender and earn 10% without the day to day headaches of flipping, managing rentals, etc.

    I would love to hear about your business's if you ever send direct messages to people here on biggerpockets. In return, I will tell you how I lost money in real estate investing and how I made money.  

    Thanks a lot for those tips. 2 questions if you don't mind:

    1. Where does Grand Cordone talk about his strategy? Is that one of his books or something? (I have heard of him but don't know his work).

    2. Where would be a good place to learn about lending? Here on BP? I see a few people have also mentioned that in this thread.

    0Reply
  • Gordon CuffePro Member
    Investor · Roseville, CA · Member since 2009 · 1k+ posts · 584 votes
    7y

    @Uzi Pablo  You can start at https://grantcardone.com/. He is also on youtube, and every other social media outlet you can think of. He talks a lot about sales but also talks about real estate investing and investing in apartments. 

    I think BP has articles about private money lending. You can look up mortgage brokers who lend private money because they are always looking for the investors that provide the funds. They have a fiduciary duty to make sure the property has equity so that if something goes wrong, they can foreclose on the property and get back all the funds plus fees for the investor. 

    When I ask for funds on a house that needs work, the broker runs comps and looks at the contractors bids to make sure there is plenty of equity to protect their investor. 

    2Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    7y

    For STNL (single tenant net lease) where you are 100% passive and do nothing but get a check returns might look like this.

    Newly minted leases or close to newly minted leases for primary terms ( new construction NNN, sale leasebacks, ground leases, etc.)

    Dollar stores ( 2 million range and below)

    Cap rate - 6.25 to 7.25 ( varies by quality of construction, location, etc.) Usually you can buy in with 30% or more down.

    Value add ( not many years left on primary lease term) Usually bought all cash or with very little debt. 7.5 to 10 caps

    Banks - New primary leases most go up in price to about 6 million and maybe 5 to 6 cap rates.

    Value add - Leases fixing to expire could see up to 9 caps. If building is dark but still paying the rent sometimes 12 or 13 cap rates. Again lenders do not like these much so paying cash or low debt for LTV to curb risk in a lenders eyes on the loan.

    Pharmacies - CVS, Walgreens, Rite Aid - Usually flat rent in primary terms with most priced 3 to 8 million and a few up to 15 million. Cap rates usually 5 to 7 cap rates.

    Value add you could see 9 to 10 cap plus.

    Restaurants - national credit like Mcdonald's, Chick Fil A, Starbucks looking at mainly 4 to high 5 caps.

    Credit goes into franchisee or mom and pop users then cap rates rise about 100 to 200 basis points and rental increases are generally higher at 2 to 3% a year versus national at maybe 1% to 2% tops.

    Price

    2,000,000 to about 5,000,000

    Auto Stores ( Advance Auto, Oreilly's, NAPA, Pep Boys, Auto Zone,etc.)

    Newly minted leases 1.5 to 3 million in price. Cap rates - 5.50 to 6.75

    Debt for STNL properties currently ranges from about 5.10 to 5.9 depending on credit and lease terms with LTV. Amortization payment schedules most are 15 to 25 years.

    If you want info on retail centers let me know.

    Most multifamily buildings are about 5 to 6 caps right now (some 4's) for quality even the big ones. If cap rater Is higher generally area is bad etc. and with the type of money you say you have the headache is not worth the risk. If you buy multifamily at a low cap rate then rent growth has to keep happening to blend the cap rate return upwards at a good clip over time. If property taxes rise, insurance rates go up, and rent flat lines or has very little growth then those properties can cost you money versus commercial NNN the rent increases are set and the tenants are paying the costs.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    7y

    Be careful with multifamily right now. Everyone is saying it's the (Golden Goose) and have blinders on. You can easily lose your shirt quickly in multifamily. Lot's of syndicators are pushing it and taking investors money as fast as they can get it and making a quick sponsor fee on the way in. Some multifamily is doing well but there is a sense of confidence in the markets that nothing can go wrong therefore people are paying these crazy prices for the asset. I saw the carnage from the last downturn in 2007 and on.

    A key point you will need to decide is if you want to own 100% directly or invest passively? You might want to do a hybrid approach as well.

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  • Uzi Pablo
    OP
    Member since 2018 · 17 posts · 4 votes
    7y
    Originally posted by @Joel Owens:

    For STNL (single tenant net lease) where you are 100% passive and do nothing but get a check returns might look like this.

    Newly minted leases or close to newly minted leases for primary terms ( new construction NNN, sale leasebacks, ground leases, etc.)

    Dollar stores ( 2 million range and below)

    Cap rate - 6.25 to 7.25 ( varies by quality of construction, location, etc.) Usually you can buy in with 30% or more down.

    Value add ( not many years left on primary lease term) Usually bought all cash or with very little debt. 7.5 to 10 caps

    Banks - New primary leases most go up in price to about 6 million and maybe 5 to 6 cap rates.

    Value add - Leases fixing to expire could see up to 9 caps. If building is dark but still paying the rent sometimes 12 or 13 cap rates. Again lenders do not like these much so paying cash or low debt for LTV to curb risk in a lenders eyes on the loan.

    Pharmacies - CVS, Walgreens, Rite Aid - Usually flat rent in primary terms with most priced 3 to 8 million and a few up to 15 million. Cap rates usually 5 to 7 cap rates.

    Value add you could see 9 to 10 cap plus.

    Restaurants - national credit like Mcdonald's, Chick Fil A, Starbucks looking at mainly 4 to high 5 caps.

    Credit goes into franchisee or mom and pop users then cap rates rise about 100 to 200 basis points and rental increases are generally higher at 2 to 3% a year versus national at maybe 1% to 2% tops.

    Price

    2,000,000 to about 5,000,000

    Auto Stores ( Advance Auto, Oreilly's, NAPA, Pep Boys, Auto Zone,etc.)

    Newly minted leases 1.5 to 3 million in price. Cap rates - 5.50 to 6.75

    Debt for STNL properties currently ranges from about 5.10 to 5.9 depending on credit and lease terms with LTV. Amortization payment schedules most are 15 to 25 years.

    If you want info on retail centers let me know.

    Most multifamily buildings are about 5 to 6 caps right now (some 4's) for quality even the big ones. If cap rater Is higher generally area is bad etc. and with the type of money you say you have the headache is not worth the risk. If you buy multifamily at a low cap rate then rent growth has to keep happening to blend the cap rate return upwards at a good clip over time. If property taxes rise, insurance rates go up, and rent flat lines or has very little growth then those properties can cost you money versus commercial NNN the rent increases are set and the tenants are paying the costs.

     Absolutely fantastic info, thank you so much Joel. Now that I have some ideas floating I have some waypoints to start learning.

    1Reply
  • Stanford Neal Mead
    Flipper/Rehabber · Salt Lake City, UT · Member since 2018 · 31 posts · 12 votes
    7y
    @Dennis Dahlberg is on to something. Lending is a pretty good road to passive income, and you can easily get 10% returns. I’m no expert, but I just funded my first private 6-month bridge loan at 12% interest, 2 points up front. We used real property as collateral, with me on title in first position should the borrower default. All I need to do now is sit back and collect on the note!
    2Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    7y

    If the loan goes bad you still have to deal with a headache of a property.  Make sure and research what state you are funding the note in. The foreclosure process and legal expenses can be substantial  to take the property back. Some state are judicial and some are non-judicial.

    Investing in tax liens and some notes with a book by David Krulac is a good read with case study examples.

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