Noobie inherited 1 Million Dollars

CA · Member since 2019 · 5 posts · 3 votes

Hello! I love this site. Learned so much on it already!

Before I go on, I would like to say that I feel very fortunate, lucky and very grateful for this inheritance. This money was given to me without my doing anything. So I see it as my duty to increase it, rather than waste it.

I am 45, single, no kids and live in California. I rent. I am thinking of investing in long distance properties (duplexes/fourplexes) under 200.000, starting out with a single family home to get my feet wet. I am reading David Greene's and Chris McLaughlin's book.

What would YOU do with that money? What would be your strategy? Any tips? Advice?

Thank you, everybody!

1 Reply

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Joel OwensBusiness Member

Moderator

Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes

You haven't mentioned anything else about your situation such as if you own a company or work somewhere and what is annual income? Current net worth and liquid besides the 1 million inheritance?

There is a huge difference between someone with 1 million as total net worth and they need to live off of the cash flow it produces and someone worth 7 million with 1 million to invest more interested in equity growth because they already make 500k a year and would just likely pay more taxes on the higher cash flow type properties.

I do not agree with the person saying do not tell the broker or agent how much money you have. I believe to have an excellent working relationship there needs to be transparency. It's not a beneficial relationship to a broker/agent for a buyer to take up their time and ask all these things they want them to do but the buyer wants to be a (secret agent) and tell little to nothing about their situation.

On the commercial real estate side I require clients before we even start to send financials so I can see their overall picture. If they do not want to do this then I tell them we are not a fit to work together. I deal with clients that are high net worth to ultra high net worth all the time some nine figures.

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
7y
Start small and figure out what you want to do. Make sure the numbers make sense and do NOT tell your realtor that you have $1 million or that you are paying in cash.
If you have any debt, pay that off. Make sure what you buy makes sense and is a solid investment. For example buying a cheap $50K house may not be as good of a move as paying a bit more for a house that is in a better neighbourhood.
5 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
I would like to be the first, of many, to volunteer to assist you in ~~spending~~ investing that money. The answer as to where and why depends on many factors you haven't stated...yet.
1 Reply
Jerry Padilla
Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
7y
@Account Closed
If you are renting, why not start out with purchasing a primary residence? You can go up to 4 units, with conventional. The tenants will help pay your mortgage. Maybe find one that needs some cosmetic updates, that you can fix up and increase the value of the property and rents after the repairs are made. Just some suggestions.....
4 Reply
Account Closed
Rental Property Investor · San Diego, CA · Member since 2014 · 12 posts · 21 votes
7y
Congrats! This is a very cool opportunity.
Do you like real estate and want to do it for a career? If the answer is no (or even maybe), I would look into investing as a passive Limited Partner investor in a syndication. You'd qualify as an accredited investor with a liquid net worth of $1 million, so you'd have access to many opportunities. Most investment minimums are $25K-$50K, so you could start with one or two and see if you like the process.
This involves vetting syndicators, but if you feel comfortable with the investment team and their strategy, you can leverage years of experience and literally have a passive investment that can grow significantly. I've invested in close to a dozen of these at this point (I also live in California, so buying 1-4 unit properties that cash flow is difficult here) and have seen really strong cash on cash returns and overall returns for deals that have been sold or refinanced. It's truly "mailbox money", but you're also growing your inheritance in the process.
Hopefully this helps - good luck and let me know if you want any recommendations on groups to look into.
8 Reply
Caleb Jordan
Lender · Arlington, TX · Member since 2018 · 465 posts · 184 votes
7y
Originally posted by @Account Closed:

Hello! I love this site. Learned so much on it already!
Before I go on, I would like to say that I feel very fortunate, lucky and very grateful for this inheritance. This money was given to me without my doing anything. So I see it as my duty to increase it, rather than waste it.
I am 45, single, no kids and live in California. I rent. I am thinking of investing in long distance properties (duplexes/fourplexes) under 200.000, starting out with a single family home to get my feet wet. I am reading David Greene's and Chris McLaughlin's book.
What would YOU do with that money? What would be your strategy? Any tips? Advice?
Thank you, everybody!
Start small so you get a feel for it and have a chance to learn and gain experience. Get to know some solid trustworthy investors. There are plenty of people who have experience and knowledge but little capital, you could partner with them on a deal or two to makes some money and learn alot in the process.
0 Reply
Mike G.
Real Estate Agent · Las Vegas, NV · Member since 2016 · 589 posts · 275 votes
7y
@Account Closed very nice that you got that and YES you have the right attitude. RE investing isnt a race its a marathon. So start slow, get some books on negotiating and reading people and beef up your people vetting skills so that way you know when your dealing with someone if they are real or real POS.
Go to local real estate meet ups and get to know some people and dont tell them that you have that money and see who is genuine to partner with and help you learn and grow without expecting much in return other than some sweat equity.
Just go slow and learn there are many ways to skin a cat in this game but you have to choose 1 way and get really good at it and that process takes time, things dont happen over night.
Best of luck to you!!
2 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
7y
You haven't mentioned anything else about your situation such as if you own a company or work somewhere and what is annual income? Current net worth and liquid besides the 1 million inheritance?
There is a huge difference between someone with 1 million as total net worth and they need to live off of the cash flow it produces and someone worth 7 million with 1 million to invest more interested in equity growth because they already make 500k a year and would just likely pay more taxes on the higher cash flow type properties.
I do not agree with the person saying do not tell the broker or agent how much money you have. I believe to have an excellent working relationship there needs to be transparency. It's not a beneficial relationship to a broker/agent for a buyer to take up their time and ask all these things they want them to do but the buyer wants to be a (secret agent) and tell little to nothing about their situation.
On the commercial real estate side I require clients before we even start to send financials so I can see their overall picture. If they do not want to do this then I tell them we are not a fit to work together. I deal with clients that are high net worth to ultra high net worth all the time some nine figures.
Podcast Guest on Show #47
NNN Invest53 Reviews
Website View Page
9 Reply
Eric Schultz
Investor · San Diego, CA · Member since 2016 · 265 posts · 305 votes
7y
Daniela Skrein Congrats to you and recognizing that you have a newfound duty! With some diligent self-education in real estate investing, you should be able to turn that $1M into $100k - $150k+ of passive annual income within 1 - 3 years. You now qualify as an accredited investor, so maybe look into private placement offerings (likely SEC Reg D 506c) with a couple syndicators / operators after due diligence. Let the experts execute while you share in the profits and tax benefits, passively as a limited partner. It is not uncommon for these deals to produce 20% - 30% IRRs.
3 Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
7y
Originally posted by @Account Closed:

You are taking the first step is losing the $$$$$$$$s. Dont read Greenes book and take it seriously.
They say RE is local but i bet anywhere in METRO USA prices are out of hand-so to say.
In other words if Warren was a RE guy he wouldnt be buying right now.
When to invest in REI isn't based on what the overall trend is in prices. You're not investing in a property that is all over the USA...it's in one spot. What the market is in that one spot dictates if/how/when to invest in it.
There are always places to invest in RE...it doesn't matter what the economic climate is. If Warren was a RE guy, he would invest in the market that worked.
2 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
LAST thing I would do in your situation is go far afield and invest that kind of money in a market yo don't know and you have no experience.. and maybe real estate rentals is not what you should be looking at.
you have a chance to be an equity partner.. or move up the food chain past just owning vanilla rentals..
there are note funds that pay 6 to 10% like clock work with very little risk to you..
rentals have risk
but if you are dead set on buying rentals.. just don't buy low value what looks best on paper rentals.. those can kill you
buy at the top of the market. with the best tenants and live with lower returns.
remember market prices for risk.
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8 Reply
Brit F.
Rental Property Investor · DFW · Member since 2017 · 143 posts · 120 votes
7y
@Account Closed, if I was in your situation, I'd find a federally insured banking institution to hold my money with a reasonable interest rate while I learn and strategize how to use it. In parallel, I'd stop renting in CA, move to another state, and buy a home.
Advice: you may want to rethink how you ask this question in the future (in-person or virtually). The way you're doing it invites risk - unless you're doing it strictly for entertainment.
3 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Brit F.:

@Account Closed, if I was in your situation, I'd find a federally insured banking institution to hold my money with a reasonable interest rate while I learn and strategize how to use it. In parallel, I'd stop renting in CA, move to another state, and buy a home.
Advice: you may want to rethink how you ask this question in the future (in-person or virtually). The way you're doing it invites risk - unless you're doing it strictly for entertainment.
well for sure it invites one of my favorite Texas sayings.. those that are all Hat and no Cattle will be pitching their deals..
Even though the thought is to grow the funds.. that's great but number one is capital preservation that's number one then move out from there.. and remote rehab for beginners like the Greene book that is a receipe for utter disaster.. some can pull it off but if you have never rehabbed a home and are trying to do that 2k miles away.. there are going to be a lot of people lose a lot of money following that advice.
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8 Reply
Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
@Account Closed mentioned or something similar.
2 Reply
Aaron Hunt
All Over, USA · Member since 2017 · 689 posts · 756 votes
7y
Originally posted by @Account Closed:

Hello! I love this site. Learned so much on it already!
Before I go on, I would like to say that I feel very fortunate, lucky and very grateful for this inheritance. This money was given to me without my doing anything. So I see it as my duty to increase it, rather than waste it.
I am 45, single, no kids and live in California. I rent. I am thinking of investing in long distance properties (duplexes/fourplexes) under 200.000, starting out with a single family home to get my feet wet. I am reading David Greene's and Chris McLaughlin's book.
What would YOU do with that money? What would be your strategy? Any tips? Advice?
Thank you, everybody!
First, with no kids, determine the end game with making more money?
Charity? Passing along to niece/nephew? Donating to state aka no plan at all?
Second, what’s your 4%? Now work the numbers to see if it even make sense to aggressively invest or if very simple investments/near guaranteed will do.
0 Reply
Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
Be a money lender .. not a landlord
5 Reply
Matt P.
Investor · Columbus, OH · Member since 2015 · 625 posts · 601 votes
7y
@Daniela Skrein First step is not to announce it online lmao.
3 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
7y
@Account Closed I have read so many stories about California investors investing out of state and having nothing but trouble, losing money and selling properties for a loss. There are so many ways you can be taken advantage of and the books you mention just make it sound like all roses. When people hear California investor, they see dollar signs and that alone puts you at risk.
Start off by putting the money into conservative investments. I would talk to multiple banks and see what type of secure investment options they have like high yield savings. You can also look at bonds which are lower risk but higher return. The point is get the money earning something conservative but SAFE. It doesn't need to stay there forever, but it buys you time to get educated.
If you buy anything out of state, fly out to walk through the property yourself. As a new investor, never buy a property with promise of rehab. Only buy something that is rent ready in a good neighborhood. Once you have experience, then move into rehabs if you so chose.
This real estate market is moving towards a peak, so you need to be very careful. Five years ago, you could trip over deals. Not the case now.
0 Reply
Christine Kankowski
Real Estate Broker · Temecula, CA · Member since 2014 · 994 posts · 783 votes
7y
SO many possibilities. If you want something a little closer to home, you could buy several single family homes in Temecula. $400K will get you $2100 in rent. If you get loans and leverage the money, you will be able to buy a few more.
0 Reply
Roger Hefner
Yuma, AZ · Member since 2015 · 140 posts · 137 votes
7y
@Daniela Skrein hold your money for next recession than buy..
2 Reply
Account Closed
OP
CA · Member since 2019 · 5 posts · 3 votes
7y
Thank you all for your feedback, advice and pointing out the red flags. You made me rethink my approach.
@Mike G.
@Michael Noto
@Joe Splitrock
@Tony Gunter
@Roger Hefner
2 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Account Closed:

Thank you all for your feedback, advice and pointing out the red flags. You made me rethink my approach.
@Mike G.
@Michael Noto
@Joe Splitrock
@Tony Gunter
@Roger Hefner
have to love BP I million members 1 million opinions..
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Cory CarlsonBusiness Member
Real Estate Broker · OR · Member since 2018 · 311 posts · 226 votes
7y
Step 1 hire a professional. An investment broker who tailors and advises wealth building strategies will be able to both teach you how to screen properties and move quickly when the right property comes up. Moving money between several pieces of real estate takes experience and careful planning, not a haphazard string of transactions.
First time investors often get "paralysis by analysis". An investment broker will be able to advise/consult/educate you and move things along. The good deals go quick. PLUS on the buy side it won't cost you anything for the broker.
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1 Reply
Account Closed
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
7y
@Account Closed
Invest it slowly and gradually! I see you're already planning to do that.
Go out of state for sure in this phase of the market. Don't settle for 1% deals, and run a conservative pro-forma with accurate expenses and healthy reserves... I would say a good deal is going to have to come out of this pro-forma at a 10-cap. Little deals like 1/2/4 units have a lower gross cash flow than bigger purchases, so 7 caps or 12% cash on cash returns with debt are not going to be adequate enough to cover incidentals in an average property unless you've got really solid tenants and condition at the time of purchase.
Pick a market with the highest rent-to-value ratio possible, but also look for low property taxes & low owner paid utilities. A lot of folks see cheap purchase prices in some midwestern cities with high rents and jump at them, only to find it being completely eaten up by disproportionately high taxes or owner paid utilities (sewer/water/garbage varies quite a bit from city to city).
Also, look for a market with great landlord tenant law & high rental demand/low supply of rental units. You want to mitigate turnover risk as much as possible, which is the biggest problem in high cash flow market because many of them have so many available housing units that you're always competing for a good tenant & they cycle often.
Finally, a good property manager is going to be the catalyst of your success (but only if the above factors are in play as well). Make sure to use referral to identify the best candidates. Everyone's going to tell you what you want to hear if you screen independently.
Lots to consider! It's easy to make the wrong decision in a high market like our current.
3 Reply
Christopher Blanco
Real Estate Consultant · Cleveland, OH · Member since 2016 · 511 posts · 345 votes
7y
Others have said it. Be a lender, but make sure if you are lending to a market you don't know that you have boots on the ground in that market that can help you make decisions. I know deals on paper that aren't really deals in many places.
2 Reply
Tanner Marsey
Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
7y
If I had a million bucks I’d be looking at something way more passive than investing in/managing small multi unit properties. With that kind of cash you can get a decent return with almost 0 headaches.
3 Reply

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