Noobie inherited 1 Million Dollars

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Noobie inherited 1 Million Dollars

Account Closed
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!

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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.    

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

    Eduardo,

    Please contact me directly if you have questions. We like the forum posts to stay on topic.

    I do not work on 1 million multifamily deals. I did over a decade ago. Now the time involved  for the return is not worth my time. You have sellers that half manage and generally 2 sets of books. The loan falls in a grey area where it is too big for 1 to 4 unit financing but too small to attract competitive lenders on commercial loans. Makes a ton of work and many hours for a low chance of success getting closed.

    Conversely I can transact a Starbucks with nation credit and one lease STNL for 2 million price. I still do multifamily but only much larger stuff.

    If you are looking to invest passively on a larger project as an accredited investor then that is a different situation where generally I have 100k minimums per investor.

    Hope it helps.  

    Back to the original poster. If you do not need to generate cash immediately then take some time to learn multiple avenues. Mortgage notes you have to be careful in the state where the notes are held. Some are judicial, non-judicial state, or both depending on the situations. The timeline to recover the property in default could be substantial and legal costs high compared to the value of the property. Anybody who approaches you with a type of way to invest and says there are no downsides you need to run away from the person as fast as possible.

    EVERY real estate investment has pluses and minuses ,varying levels of risk, and time commitments for the expected returns. Often when people contact me about commercial real estate they might be a fit 4 out of 10 times on average. If they do not appear to be a fit then I mention other avenues that might work better for their risk tolerance and amount of capital needed to get started.

    The syndications can be great also if the sponsor is experienced and the investment structure works for both parties. You can diversify risk and put smaller amounts of capital to work.   

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    0Reply
  • Jonathan W.
    Los Angeles, CA · Member since 2019 · 512 posts · 301 votes
    7y

    @Daniela Skrein I wouldn’t put it all in real estate.

    If you were twenty I’d say be risky. If you were 70 I’d say be super conservative

    Since you are neither I say, diversify!!!

    Put some in bonds, put some in mutual funds and put some in stocks. Dividend paying stocks...

    I’d put less then half into what you are reading about/real estate. One, because experience and reading books are two different things and if the worst thing happens at least you have other money in other places.

    If and when you reach success in real estate I would start selling off the first things I told you to buy and then buy more real estate

    I guess my advice is simple, don’t put your eggs in one basket!!!!!

    Hotels have the best ROI for real estate investment but also require the most work

    I’d say quad-plex and etc would be the next best thing.

    If your good at sales then maybe consider investing in a small self storage place.

    there are different things I’d recommend based on your knowledge and talents but I don’t know your background. Whatever you do though don’t invest it in a restaurant unless you’ve been in it. The world has enough wanna be restaurant owners

    Either way, educate yourself plenty and don’t let the money make you make an anxious decision

    if you go into anything commercial I recommend reading Paco Underhill, Why we buy

    Good luck !!!!

    3Reply
  • Theo Hicks
    Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
    7y

    One thing I wouldn't do is purchase a property using all $1 million (which it looks like you aren't going to do anyways). I think you next steps will depend on your current level of real estate experience and knowledge and time availability. 

    If you have minimal experience and knowledge, I would browse the BP forums for various investment strategies to see which one/ones resonate with your goals and interests the most. Then, I would spend a few months educating yourself on that strategy. Then, I would start with one small property following that investment strategy. I would definitely take advantage of the relatively low interest rates and secure a loan rather than pay all cash.

    In the meantime, I would investigate some passive investing real estate strategies like apartment syndications. That way, you can put a portion of that million to work immediately.

    1Reply
  • Account Closed
    Multifamily Syndicator · Conifer, CO · Member since 2018 · 80 posts · 84 votes
    7y

    @Account Closed 

    There are several ways to build wealth; I'm from the school of go big with syndication.

    If I were you I'd get to know, trust, and align myself with a reputable team of operators that utilize 506b exemptions in their syndications and:

    A) Qualify each other and build a substantive relationship so you can begin to analyze their deal flow and ultimately invest in their opportunities. 

    B) Partner with them on the active side and learn as you go you have substantial amount of capital and this may be a viable option.

    Hope this was helpful; don't hesitate to reach out.

    Dino

    0Reply
  • Kate J.
    Rental Property Investor · Austin, TX · Member since 2016 · 294 posts · 104 votes
    7y

    @Michael Noto why note funds? Can they beat sp500?

    0Reply
  • Jason D.
    Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
    7y

    @Daniela Skrein plain and simple, I would be a lender. I'd join a local REI group and get to kn now people. Learn who has experience and when you trust that they are legitimate and you can see what they've accomplished, offer to be the funding partner.

    I would also move out of California... that million will disappear quickly in Cali.

    1Reply
  • Jack Martin
    Specialist · Scottsdale, AZ · Member since 2014 · 626 posts · 700 votes
    7y

    @Account Closed

    1Reply
  • Account Closed
    Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    7y

     Seriously?. . . you shout out to the world you have $1,000,000 to play with?

    Here is sage advice:

    1. Change your phone number pronto.

    2. Change your domicile immediately.

    3. Pay any taxes that are due.

    4. Take a vacation for at least 30 days to think things over.

    5. Delete your Bigger Pockets account and open a new one with the name "A. Nonymous"

    6. Re-ask the question as "I'm new to real estate, how do I begin to decide which type of investing is for me?".

    7. Never admit how much money you have, just say "I think that I can swing that type of investment" or "No, that one isn't for me".

    8. Learn, Learn, Learn

    9. And finally, eat two scoops of double chocolate fudge ice cream, book a flight to " . . . . . wherever" and take a sheet of paper and a pen and write down every idea that comes to mind. Then, sit back and relax.

    Now you are ready to begin.

    3Reply
  • Ned J.Pro Member
    Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
    7y
    As a new millionaire, no way am I becoming a new active landlord...... people become active landlord to become millionaires.... once you achieve that level you start to delegate that wealth and become more passive.....no way am I dealing with tenants and toilets if I have that kind of capital to work with...... not even worth dealing with a PM for a bunch of SFH or even smaller MFR. Go larger and more passive....still requires a lot of work to pick the right avenue, but its way more efficient that doing a ton of SFR's etc.
    2Reply
  • Alina Trigub
    Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    7y

    @Account Closed

    Welcome to BP community! Congrats on your inheritance. Here's what I'd do:

    1) never announce on social media how much money you have. I'd go as far as removing and rephrasing this post to something that doesn't reveal the specifics of your inheritance!

    2) since you didn't mention your background or full story, I don't know if you're investing in Wall Street. I'd split the funds and invest half in Wall Street ) either through self-education or financial advisor.

    3) invest the second half into real estate. Pre-requisite: you must determine whether you'd want/can be active or passive investor. After that pick a niche within the strategy that you selected and learn it inside out. only after that take action.  after you pick a strategy, happy to recommend some books, feel free to PM me.

    My best!

    1Reply
  • Tony Gunter
    Investor · Canton, GA · Member since 2014 · 728 posts · 500 votes
    7y

    Oops! Seemed to have crossed the line regarding mentioning money, lending, borrowing etc.

    An unintentional faux pax on my part...most assuredly.

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

    The person mentioning treasury rates it doesn't make sense to do a 10 year treasury when the rate is almost the same now as a 3 or 6 month rate. The curve is pretty much flat.

    I do have clients that have lots of money tens of millions or more and instead of what the bank is paying out they will put in temporary tresuries,bonds, CD's,etc. for 2 plus percent while they figure out what to do with the money for longer term investing. They typically only leave in there for 3,6 months to 1 year at a time in intervals so that the money stays liquid when they need it.

    2% returns do not cut it long term as you are not even keeping up with inflation and then getting taxes on your so called laughable gains.

    In NNN the returns can be much better than that but it does take a lot of money. As an example lowest down payment is usually 30% for STNL so a 2 million property is 600k down plus closing costs of say 50,000 or so.

    If you do not mind not having control with the property or the exit then investing in syndciates might work for you. You could say put 100k into a property worth 5 million and own a small slice of a really nice property and area that likely you could not buy on your own.

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    NNN Invest53 Reviews
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    0Reply
  • DeWayne Mann
    Rental Property Investor · Washougal, WA · Member since 2015 · 82 posts · 18 votes
    7y

    @Account ClosedWill you be my mommy?

    0Reply
  • DeWayne Mann
    Rental Property Investor · Washougal, WA · Member since 2015 · 82 posts · 18 votes
    7y

    @Account Closed Find a great commercial broker and put your money in NNN commercial investments. Trinity Real Estate investment services in Fort Worth, TX. Tell them I sent ya! Talk to Branson Blackburn.

    0Reply
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