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Have Capital, Looking for Investors to Put it to Work!

Stephen Groves
Rental Property Investor · Greenville, IL · Member since 2018 · 26 posts · 4 votes

What is the best/most effective way to invest in real estate if you are a person with access to capital, but no desire/skills to become a landlord yourself?  If you had 100k - 200k to invest in real estate, and wanted to be as uninvolved with the day-to-day as possible, what options would you consider?  

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Steve K.
Honolulu, HI · Member since 2017 · 247 posts · 315 votes
7y

first thing I would do is ignore all the offers you are probably getting in your inbox...

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    7y

    I'd probably look into a REIT (real estate investment trust) which is kind of like a mutual fund for real estate.

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  • John Casey
    Member since 2019 · 2 posts · 1 vote
    7y
    This is not what I have done, but a few things come to mind. Let a Rental Manager take a 10% or(??) and handle it.(I have never done that) You may want to focus on flipping, but there are a thousand people looking for a deal. There are ways to provide a 2nd mortgage for a home purchaser, such as a contractor with poor income history(on paper) and have the payback at 25%+ in 18 months. This would be a bit more risky. My Broker brother set something like that up many times. You may want to look into vacation rentals w/property managers. This is what I have been learning about lately.
    0Reply
  • Rene D.
    NV · Member since 2019 · 254 posts · 57 votes
    7y

    What about turnkey, private lender?

    0Reply
  • Ivan BarrattBusiness Member
    Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
    7y

    Are you an accredited investor?

    Even if you want to be passive in real estate (which is a great option) you'll still need to get educated on what a good passive deal looks like.

    A fool and his money are soon parted! :)

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Stephen Groves:

    What is the best/most effective way to invest in real estate if you are a person with access to capital, but no desire/skills to become a landlord yourself?  If you had 100k - 200k to invest in real estate, and wanted to be as uninvolved with the day-to-day as possible, what options would you consider?  

    • Lend it
    • Buy Turnkey
    • Buy into a Syndication
    1Reply
  • Michael Evans
    Real Estate Consultant · Lancaster, CA · Member since 2014 · 423 posts · 223 votes
    7y

    Become a private money lender. Make money by being a partner in a Joint Venture. You put up the capital for the equity position and the partner manages the investment and then you split the profit after the return of your capital. 

    1Reply
  • Stephen Groves
    OP
    Rental Property Investor · Greenville, IL · Member since 2018 · 26 posts · 4 votes
    7y

    Thanks to all for commenting here!  This is helpful.  I actually self manage 9 doors (between 3 buildings) right now, so I understand some of the basics of rental real estate.  While I have enjoyed the journey of renting these properties, I am trying to figure out if my next step is to purchase more properties, or find some other more passive way to be involved in real estate.  Hoping to find an investment for 100k-200k that can yield better average returns than what I could get by just throwing it in an index fund.  Whichever way I decide, I definitely know I need to network more to see what all is out there.  My dream scenario would be the one that @Michael Evans mentioned where I find the right partner who will manage the investment, while I front the capital, and then we split the profits.  

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Stephen Groves:

    Thanks to all for commenting here!  This is helpful.  I actually self manage 9 doors (between 3 buildings) right now, so I understand some of the basics of rental real estate.  While I have enjoyed the journey of renting these properties, I am trying to figure out if my next step is to purchase more properties, or find some other more passive way to be involved in real estate.  Hoping to find an investment for 100k-200k that can yield better average returns than what I could get by just throwing it in an index fund.  Whichever way I decide, I definitely know I need to network more to see what all is out there.  My dream scenario would be the one that @Michael Evans mentioned where I find the right partner who will manage the investment, while I front the capital, and then we split the profits.  

    what your describing is partnering with a quality small builder top end rehabber.. I know in our world in new construction at least for the last 6 or 7 years.. returns are 50 to 100% COC when marrying the cash to construction loans.. so half of that would be 25 to 50% apr for you.. sometimes we even do better..

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  • Stephen Groves
    OP
    Rental Property Investor · Greenville, IL · Member since 2018 · 26 posts · 4 votes
    7y

    @Jay Hinrichs . Thanks!  That is helpful to know and something I will certainly look into more. 

    In your experience, what kind of time table are you looking at for those investments?  Also, how would you suggest I go about looking for/getting connected with someone in this business?  

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Stephen Groves:

    @Jay Hinrichs . Thanks!  That is helpful to know and something I will certainly look into more. 

    In your experience, what kind of time table are you looking at for those investments?  Also, how would you suggest I go about looking for/getting connected with someone in this business?  

    I can only talk about our time lines.. quickest start to finish with shovel ready lots tends to be 9 months and longest about 18.. so if we get it done quicker than 12 of course that juices our APR substantially.

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  • Spencer Hilligoss
    Investor · Alameda, CA · Member since 2016 · 132 posts · 170 votes
    7y

    @Stephen Groves - that's a great problem to have!

    there are a handful of passive investing strategies. To @Ivan Barratt's point above: educating yourself on the various strategies is critical, so you don't jump into something with a wrong-fit partner/type/market, etc and find yourself down $200k.

    a few options come to mind: 

    • private lending ("be the bank")
    • investing as a Limited Partner in a syndication (most options only open to Accredited investors)
    • turnkey rental investing (granted, i think of this more as "semi-passive" since you still have to manage the property manager, requires a phone call or email every other month or so. at least, that's been our experience)

    you mentioned "no desire/skills to be come a landlord" and I think that's a reasonable expectation IF, you focus heavily on your skills that focus on the analysis and decisioning at the front-end. said simply: it's likely worth picking a strategy and then focusing your limited time/effort on developing the following: 

    • goal - have you set them? what are you looking to accomplish? trying to generate a specific number of monthly income? don't need income from it, but are happy with a killer return by a specific time period? (e.g. # of years)
    • your investment criteria - the returns and conditions you would you accept for the deal
    • partner vetting questions/criteria - sounds fancier than it is, but this is a list of questions you decide are the must-haves that you'll ask a potential partner you'll be investing with. if they knock them out of the park, you can feel good about the "who" component of your investment choices

    i could keep going, but I think that folks tend to get into bad deals when they seek the killer returns of real estate but think that they'll get them at an acceptable risk-level without investment in education on the front-end of the deal. great outcomes require some level of effort up front. well worth it, in my opinion. good luck on the planning!

    1Reply
  • Duke Giordano
    Investor · Passiveadvantage.com · Member since 2019 · 164 posts · 91 votes
    7y

    I think you need to think of the tax implications as well which has not been mentioned.  In addition whether this money (100-200k is coming from cash/brokerage account or a SDIRA or other pretax vehicle.  If you are someone that is not interested in adding to your taxable income, then lending may not be a good option for you since the returns may be decent but the tax treatment is poor.  However the turn key and syndication options offer much more tax advantages from a depreciation and capitol gains standpoint.  Just other aspects to take into consideration.

    1Reply
  • Stephen Groves
    OP
    Rental Property Investor · Greenville, IL · Member since 2018 · 26 posts · 4 votes
    7y

    @Spencer Hilligoss .  Thanks for all that insight!  To give a little more context, I currently own and manage 9 doors so I have some, albeit it limited, experience in the real estate market.  My end goal would be to build enough passive income to supplement my other investment income, so that I could transition to a different career.  Specifically, I am looking to net 40k per year through my real estate investments.  Having managed rentals for a bit and having had enough time to build some liquid capital, I am wondering if fronting capital for a fix and flip would yield better returns for me than being a landlord for my rentals.  My background is in math and finance, so I thoroughly enjoy researching deals, running the numbers, keeping the books, etc.  What I struggle with in self managing the rentals is the maintenance and repair side of things.  I live in the rural midwest, where low cost fix and flip opportunities seem to be a good strategy.  I would love to work with someone who would oversee the repair and resale process while I front the money for the initial investment.  If I could repeat this process one to two times per year, I think it is realistic to think I could generate my 40k mostly or solely through this strategy.  

    I would also be open to an even more hands off strategy, such as loaning money for fix and flips like @Ashley Hum mentioned.  If I could generate a high enough return on those loans, that could also help me achieve my goals.  

    I think my next step has to be more networking to find someone I trust and that I can work with.  

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  • John FortesPro Member
    Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
    7y

    @Stephen Groves I come across this question far too often. First you have to ask yourself a few questions and one of those questions you already answered. You have no desire to be active. Sounds like you are already headed in the passive investing direction. That was your biggest hurdle, the rest is homework. Finding syndicators, vetting them, educating yourself just enough to be confident in investing in these passive opportunities. All while lining it up with the end goal in mind. What is your end goal and how does passively investing fit into your investment criteria? 

    Happy investing!

    1Reply
  • Stephen Groves
    OP
    Rental Property Investor · Greenville, IL · Member since 2018 · 26 posts · 4 votes
    7y

    Thanks @John Fortes!  I should clarify about my goals and intentions.  It's not actually that I don't have any desire to be active.  I am currently active in self-managing 9 rental units.  Instead, my goal is to explore other real estate investing avenues that are less active and see if I like them more/less than managing rental properties and to see how the returns compare to self managing rentals.  My end goal is to produce $40k-$50k income per year from all of my real estate ventures combined.  In terms of investment goals, I would need at least 12% return on my cash invested to make it worth it for me.  Hopefully I could exceed that return number.  If not, then I need to pursue other things.  In your experience, what is a ballpark estimate for expected returns in investing syndicators or lending down payments to flippers/rehabbers?  Thanks for your time and input!  

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  • John FortesPro Member
    Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
    7y

    @Stephen Groves I'll quote my good friend @Account Closed!

    "as a passive investor, lets just say I decided to sit on the sideline. Where am I putting my money? Is it going to be in the stock market? I could lose 20%-30% in the next recession, that's not going to feel good. I could have it in savings and over time, I'll lose money with inflation...

    If projections are 15%-20%, lets just say worst case scenario: I tried and invested in many deals to spread it out. I'm looking for a blended return with all my investments of around of around 20%. But if there is a deal that somehow misses. If it misses I'm hoping it misses in the 8%-12% range. Which again, is still really good compared to the stock market and you throw in the tax benefits. So even at the height (state of the market), I still look at and compare what else is out there and I haven't found something as compelling as what we are seeing right now (with multifamily investing)." - @Account Closed


    Let me know if that answers your question. 

    1Reply
  • Steve K.
    Honolulu, HI · Member since 2017 · 247 posts · 315 votes
    7y

    first thing I would do is ignore all the offers you are probably getting in your inbox...

    4Reply
  • Trevor Ewen
    Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
    7y

    @Stephen Groves

    This post is sure to bring out all the responses, but I think you have gotten that sentiment a few times here.

    One thing I would consider is how spread out you'd like to do the investment. Many syndicators do 50k minimums, so you could get experience with a few syndicators and different asset classes.

    On that note, I would also give some thought to what kind of assets you find most compelling. Syndications can include wineries, nursing homes, or workforce housing (and many other things). The behavior & returns of those different assets will vary. Additionally, they will be more resilient / sensitive to different market dynamics. You should decide what kind of investment you are looking for. If it's a hedge, know what you're hedging against. If it's for income, know what kind of income floor you want to have.

    1Reply
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