Best use of large amount of cash

107 Replies

@Mark Seery You’re welcome!

Syndications are great, I invest in one (Wellings Capital). Two benefits are that they can give you exposure to segments that otherwise would be difficult to access (in this case mobile home parks and self storage), and are great for passive investing (you need to decide if you’re ok with being a landlord or not).

If you go the route of buying your own rentals, my advice is that if you’re going to own one you should own three (or more). As others here have said, it spreads your risk. Buying the first property is hard, you do most of your learning on that one, but once you’ve done that the next are easier. You can of course pace yourself with the speed of acquisition so that it doesn’t distrust your life which is you know the whole point of all this: a good life!

Originally posted by @Patrick Campbell :

So, not a great time to buy real estate, let alone investment property anywhere.   In the Bay Area specifically, you need very high equity to make a property cash flow at all. 

Hi Patrick, my share is 600K after the split (after I payoff my mortgage that was taken out to payout someone else). The Bay area dynamics do appear to be a stumbling block to me executing some strategies. Whether this is a good time to invest in real estate is something on my mind for the reasons you mention. There are those that say people should not try and time the market, but just take action.I am thinking through both perspectives. People have already started dropping prices in the Bay area, you can see it every day. Have they dropped to a sustainable level yet? Hard to know. There are still those voices in he Bay area asserting prices will continue to climb.

Originally posted by @Kevin McGuire :

@Mark Seery You’re welcome!

Syndications are great, I invest in one (Wellings Capital). Two benefits are that they can give you exposure to segments that otherwise would be difficult to access...

...If you go the route of buying your own rentals, my advice is that if you’re going to own one you should own three (or more). As others here have said, it spreads your risk...

...the whole point of all this: a good life!

Thanks Kevin, great thoughts!!!

Originally posted by @Janet Behm :

Dude, Take a BREATH

Thanks Janet. Because I have been doing spreadsheet modeling for large corporations for a very long time, I tend to have confidence in my ability to model things. That said, I should get a CPA on this and my other activities. So perhaps the first step is to get the virtual team in place. Breath taken. 

Originally posted by @John Lawrence :

in The Woodlands for a while. Market in Texas is hot right now although not as expensive as other areas, yet. I am looking at syndicators to buy into a few MF projects/deals with 120+ units in varying metros with good rent outlooks. I look for COC and value plays for 4-6 year run out on full return. LUINC is a good system to look into if you are in it for the long haul.

Thanks John, I will take a look at LUINC. I lived in The Woodlands in the early 90's. Great place. It was one of the happiest times of my life.

Originally posted by @Brandon Berkowitz :

Anyone giving you advice here without asking your risk tolerance preferences is not giving good advice.

Are you a gambler? You can buy properties that are turn-key in less-than-desirable areas and generate decent yields and have the properties fully managed. Roofstock has a sizable supply of those kinds of properties but I have never bought anything from them so I cannot give an honest review.

What if you were to put the $600K into a high-yield dividend stock account and then use that stock account as collateral to be able to draw equity from. While you don't have a property, you can earn some decent returns and then when you find something you like you can pull from the stock equity line and buy as if you were paying cash.

I am moderately handy. I am not patient. I am probably more in the gambler category. I'll take a look at Roofstock as part of the portfolio.

I am interested in the idea of putting a small DP on a new small place to lay my head, and then generating cash flow from the rest of it. I'm not dead yet, but I am not 30 either. I am probably more interested in developing income streams that long term wealth (in general, I would light to develop long term wealth for my children).

I am a newbie at real estate also, but I think that I have a bit of a different perspective that could add at least a different bit of spice to this discussion. I live in Oklahoma City and have been here for 30 years. I lived in Visalia and Bakersfield, California for about 12 years (that is the Central Valley of California for those not familiar with California). My father lived in the Bay area for about 50 years before passing away a few years ago. I lived with him for a few years and went to high school in the Bay area back in the early 70's. When my father died,  his house (1500 sq ft.) and converted garage apartment (600 sq ft) brought in $1,050,000 (this is not a typo). The neighborhood is actually working class and some of the house were in such poor condition that the termites were holding hands to keep the houses from falling down.  Now what I am about to say may make Californian's mad, but so be it. Californians, in general, are quite ignorant about what the rest of the country has to offer. You could buy 3 houses totally paid for in Edmond, Oklahoma for $600,000. (Edmond, by the way, is one of the most affluent areas in Oklahoma). We have 20 something females where I live (The Village, Oklahoma) that can go jogging the neighborhood at pretty much all hours of the day without concern for their safety. Can you do that in the Bay area or anywhere else in California? My inheritance share of my father house was life changing for me. I know for a fact that Visalia (called the jewel of the Valley by many), is priced like Oklahoma because it's too far to commute to LA or SF. By the way, the weather in Oklahoma is actually cooler int the summer and has more sunshine in the winter than the valley. The cost of living here is like dying and going heaven next to California. Don't even get me started on the traffic in California where it is an absolute nightmare. The person who bought my father's house is probably paying over $10,000 per MONTH mortgage payment. Since you are starting fresh, I would encourage you to use a little bit of that money and travel to some different parts of the country and open your eyes to the possibilities. The increase in lifestyle and decrease in stress of living outside of California has to be experienced to be believed.

Assuming that you have qualifying income to take out a mortgage (w-2 or 1099), I would suggest you buy 2 duplexes in San Jose. The duplexes I bought in San Jose in 2014 and 2015 have produced 30x and 6x cash on cash returns. Bay Area remains a a strong job producer and the prices of duplexes have not yet recovered following the start of the pandemic. 

Originally posted by @Philip Kauppila :

I am a newbie at real estate also, but I think that I have a bit of a different perspective that could add at least a different bit of spice to this discussion. I live in Oklahoma City and have been here for 30 years. I lived in Visalia and Bakersfield, California for about 12 years (that is the Central Valley of California for those not familiar with California). My father lived in the Bay area for about 50 years before passing away a few years ago. I lived with him for a few years and went to high school in the Bay area back in the early 70's. When my father died,  his house (1500 sq ft.) and converted garage apartment (600 sq ft) brought in $1,050,000 (this is not a typo). The neighborhood is actually working class and some of the house were in such poor condition that the termites were holding hands to keep the houses from falling down.  Now what I am about to say may make Californian's mad, but so be it. Californians, in general, are quite ignorant about what the rest of the country has to offer. You could buy 3 houses totally paid for in Edmond, Oklahoma for $600,000. (Edmond, by the way, is one of the most affluent areas in Oklahoma). We have 20 something females where I live (The Village, Oklahoma) that can go jogging the neighborhood at pretty much all hours of the day without concern for their safety. Can you do that in the Bay area or anywhere else in California? My inheritance share of my father house was life changing for me. I know for a fact that Visalia (called the jewel of the Valley by many), is priced like Oklahoma because it's too far to commute to LA or SF. By the way, the weather in Oklahoma is actually cooler int the summer and has more sunshine in the winter than the valley. The cost of living here is like dying and going heaven next to California. Don't even get me started on the traffic in California where it is an absolute nightmare. The person who bought my father's house is probably paying over $10,000 per MONTH mortgage payment. Since you are starting fresh, I would encourage you to use a little bit of that money and travel to some different parts of the country and open your eyes to the possibilities. The increase in lifestyle and decrease in stress of living outside of California has to be experienced to be believed.

Not upset at all. When you say California, you're talking about a very large area of land with cities that have vastly different characteristics. For example, I agree that the summers in Visalia are very hot.  Most of Central CA is miserably hot in the summer and I would never consider living there (or investing there for that matter). On the other hand, SF, LA and SD have some of the nicest summers in the country. I'm in LA and I've hardly used my A/C this summer. So I don't think it's accurate to just pick and choose all the bad parts of living in the Bay Area (crazy traffic, outrageous RE prices) and all the bad parts of living in Visalia (feels like the face of the sun) and then compare it to Oklahoma.

Also, sorry to hear about your father.  But get this....depending on when your father's house was sold, 1.05M sounds really cheap for that kind of square footage. Houses that need full rehab are selling for that amount right now in LA suburbs like Redondo and Torrance and almost double that amount in West LA/Santa Monica. I would imagine they are going for even more right now in prime locations in the Bay Area. You can easily imagine what my point is given what prices are right now....

Many Californians that choose to invest local aren't ignorant of the great potential in other parts of the country. Believe, we are well aware. It's just that even despite that, we choose to stay local. If I lived in the Midwest, I'd definitely be scooping up deals in the Midwest. Nothing wrong with either pathway because they both can generate a lot of wealth when done properly.

Did you look into Sacramento? You can purchase a nice duplex here for 600k which should cashflow around $3800/month for you. 
Or, 3 duplexes with 25% down on each and still have about 150k left over for expenses. If your income can support 1.3m financing of course. 

Hello Mark- if you're staying in the Bay, I might suggest considering a house hack in downtown San Jose. Japan town is a great buy. The city has recently changed rules regarding ADU's, with the right agent who specializes in multi family cash flow deals, you should be able to leverage your cash into a 3/2 w mother in law unit minutes from googles new campus. Values are going up quickly. Inventory is very tight. Reach out if you'd like to discuss further.

Pick some suburban markets in the Midwest, contact some local brokers and property managers. Narrow it down to a couple areas and go from there. Roofstock was mentioned before, I’ve picked up 3 units through them successfully over the last couple years and they help take a lot of legwork out. No substitute for studying, but a good place to start. 

If you think the Bay Area housing will continue to rise, house hacking makes sense. But in my eyes, you would buy 10 houses with $40k down ($120-$150k each), keeping $200k to compensate for your inexperience and weather any changes. Rent for your primary residence - you’re in a transition, focus on yourself and your new real estate business and get really good at analyzing profitability and managing managers. Houses are expensive everywhere, but leverage is cheap and if you can get the 1% rule in decent neighborhoods I think you’re gonna be good long term. I’m still able to make nearly turnkey properties cash flow, so there’s definitely opportunities out there.

I would rent and split up proceeds into 4-6 multifamily, MH park, self storage, industrial, or medical office syndications with 2-3 operators in 2-3 markets. Specifics depend on your goals and preference between cash flow and upside. 

Can someone explain the syndications as it seems I would be interested in. In in the Florida market which is crazy as well. So I'm looking to venture out of my comfort zone to explore other areas as well as other real estate options. Thanks !

Originally posted by @Stephen Wells :

Can someone explain the syndications as it seems I would be interested in. In in the Florida market which is crazy as well. So I'm looking to venture out of my comfort zone to explore other areas as well as other real estate options. Thanks !

Give your money to an operator. They put it into one of their properties. And you get a monthly payment,  and or, payout at the end of the term - usually 5 to 10 years.  These signification operators have a system to find distressed properties. Usually these are large, have occupancy, and structural - physical issues. So they find properties with a lot of upside, pool investor money together, reposition the property, and profit. Read the terms. Some start to pay out after the 1st year, some pay immediately.   Expect a 5% to 7% monthly return. Some syndications will pay up to 10% monthly, without a payout at the end of the term. Some will pay you a lower percentage rate but give you a large payout in addition to your original money, at the end of the 5 to 10 years

Those are just examples. But basically, you are lending your money to professionals, make sure you vet the syndicator out, and they give you a return.  You are basically passively investing into rental property. Tax benefits are different. But you pretty much don't have to do any of the usual work will work of owning directly

I'd invest in commercial and multifamily real estate. Preferbably in the midwest where the dollar goes farther.

Hello Mark Seery. I am in a similar position in Tampa, Florida as I just signed a contract for sale on my last Rental that I lived in for three years to make it a Tax-free Sale of my Residence. Selling a 3/1 all fixed up block house for $206,850. It's a Cash Sale, As Is, with all Closing Costs and he is paying half of my property tax. I sold four Commercial lots last year and paid Cash for a 3/3 Townhome with garage and small pool outside of town in Valrico, in a newer, quiet, centrally located neighborhood. I have no Debt and the problem is, "where to park all the Cash?" My brother has a paid off Townhome in Campell and we were just talking about the insane price of housing in California. He said people are leaving San Jose and moving South to the Valley out in the desert to find affordable housing. You need to bank the Cash and do some studies. The BP guys also need more info to give better advice. Do you have a JOB or a Business? Are you fed up with San Jose and able to move? Do you know how to do a Search on Zillow? I just looked at everything under a million and there is one house for $699,000, 2/2, 1588 sq. feet with big garage on 1109 Spiro Dr. 95116. Like new on the inside. There are more Townhomes starting at $598,000 for a 2/2. There are many more Condos starting at $695.000 for a 3/2 with more sq. footage at 1200. And a lot of Manufactured homes starting at $119,000 for a 2/1 with 800 sq. feet. You need a Home and I always tell the Newbies that they need to, "Work Smart and Not Hard." Buy a property and make it your Residence for 2 out of 5 years and when you sell it as your Residence it is a Tax-free Sale up to $250,000 per owner. You can have one part of your Investment Portfolio as your Home and get one Rental that you would live in after you can sell your Residence at a Tax-free profit. You could also study with Dell Wambsley at Lifestyles Unlimited for your Real Estate Business Plan. Do a Google Search and just watch all of his youtube videos. Beyond that I have learned how to Daytrade the S&P Emini Future on my laptop for my retirement and the rest of my paid off properties are in Brazil. You could buy one of the Manufactured Homes and make that your Residence. Hold onto the rest of your Cash for the next year and see if we are going to have a downturn in the Markets and wait for better opportunities while you study and work and wait to pounce. It's funny that Zillow does not show any Manufactured homes For Rent. But, there are tons of 1/1 Apartments and Condos, 550 sq. feet or slightly larger, starting at $1300 a month. You could buy a three or four or more Manufactured homes. Live in one and rent the others and have a nice monthly Cash Flow. You could get a 3/2 Manufactured home and House Hack that one...your in a good place if you have a Profession and a Day JOB. 

Originally posted by @Philip Kauppila :

You could buy 3 houses totally paid for in Edmond, Oklahoma for $600,000. (Edmond, by the way, is one of the most affluent areas in Oklahoma).

Since you are starting fresh, I would encourage you to use a little bit of that money and travel to some different parts of the country and open your eyes to the possibilities. The increase in lifestyle and decrease in stress of living outside of California has to be experienced to be believed.

Thanks Philip. Is buying houses, completely, with cash a good investment strategy? That would be an interesting discussion to have. I guess it may be a way of generating income streams which would be a good thing for me. I'll take a look at Edmond, thanks for the suggestion.

My children live in CA and my business contacts in Tech are in the Bay area. I probably will be looking to be in the Bay area most of the time. But the point you make is good and worth consideration. Thanks.

-Mark

Originally posted by @Michael Haynes :

You need to bank the Cash and do some studies. The BP guys also need more info to give better advice. Do you have a JOB or a Business? Are you fed up with San Jose and able to move? Do you know how to do a Search on Zillow? 

I spend a great deal of time on Zillow, I have a business but maybe transitioning to a job, I am not looking to move at this time. Thank you for your other suggestions, much appreciated!

Originally posted by @Mark Seery :
Originally posted by @Igor Musiyets:

Did you look into Sacramento? 

No. Thanks for suggesting, I will take a look

Check it out. A large portion of my clients are out of Bay Area, buying up properties here in Sacramento.  And every one of them is telling me it's hard to make the numbers work in the Bay that's why they invest here.  It's close enough to SJ, it's the capital city of CA, our job market is very diverse, we have an incredible shortage of housing so rentals are in huge demand, unfortunately 600k duplexes are out of reach for most local residents, but very affordable for Bay Area investors. 

Btw, if you're interested in a BRRRR- I have a fourplex coming up for 750k-ish with an ARV of 1.1-1.2m.

Become a private lender for truly passive RE investing.  If you lend out that $600K at 8% - which is low, you'll generate $48K in income and that's not counting points you would charge on top of the interest.  After 2 years, you have another $100K to lend out and so on.....