How to Invest $600,000

Buying & Selling Real Estate
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How to Invest $600,000

Jack Oregon
Vendor · Boston, MA · Member since 2015 · 1 post · 2 votes

Hi guys,

I’m pretty new to the community and I am so glad to have found this place for suggestions and feedback.

Here is our situation:

  • $600,000 cash on hand from inheritance
  • Desired return of 8-10%
  • Live in Greater Boston Area
  • 100% equity on home
  • Working full-time in public accounting and making roughly $50,000/year

I talked to some financial advisers and none of them suggested the real estate route. I was told that it was too risky and that I would be putting all my “eggs in one basket.” They said that if we invested in securities, I can expect 3-4% returns while being charged fees about 1.5% on total assets. So a return of 1.5-2.5% sounds really bad to me, which brings me to my question: What else can we do with this money? I should mention that it might be difficult to obtain financing. My credit score is 640ish on Experian but higher on the other two with a score of 700+. My age is 28 and the only income we have is my salary. We’re looking at properties in MA. We have no experience in running a business/being landlord. Also, we are very nonconfrontational and “soft” people. So I believe we will be using a management company. I read about partnerships that invest in RE but I’m not sure how to find them. I would appreciate if I can get ideas that would put us towards the right direction. Thank you!

-M

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David Hays
Investor · Malaga, Andalucía · Member since 2014 · 150 posts · 73 votes
11y

Hi Jack,

Welcome to BP. You´re going to get some people coming in and telling you how you shouldn´t be advertising your investable assets like that (and I agree with that), because you´re going to find people reaching out in a hurry to take advantage of you. Unless you really want to get involved with the active management of those investable assets, I´d encourage you to interview a few financial managers (not advisors, actual managers) and see what they can offer you. If you´d rather stick with real estate, there are turnkey companies that offer developed and rented properties for cash flow. These services vary and will absolutely require due diligence, but that may be a viable option for you.

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  • Billy Smith
    Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
    9y

    Like what Kurt said, use Vanguard for passive income stream low fees plus over a certain amount they will give advice and yes do your home work!! I would diversify into real estate too around 5 to 10 percent. I like single family homes in the right location for passive income.

    0Reply
  • Clayton MobleyPro Member
    Birmingham, AL · Member since 2014 · 875 posts · 947 votes
    9y

    @Jack Oregon Welcome to BP! You've gotten some very good advice already and I would second some of it, namely:

    1) You don't need to deploy it all at once. Start with a fraction.

    2) Use the resources on BP to LEARN as much as you can.

    In addition, I would ensure that any financial advisor you work with is bound by Fiduciary Duty - meaning they are legally required to keep your best interests at heart. Usually this equates to "they aren't allowed to sell you on a product they make a lot of money on if there is a better option". There are still ways an unscrupulous advisor/manager can screw you, but this gives you some legal back-up.

    I would also say that, while cash can be a good position to be in, there are a ton of ways to put your money to work before you jump into RE. If you feel good about the long-term bullish trend of the market, you can put some in a low-fee ETF, for example. A good example is the Vanguard S&P 500 Index fund which has a 0.05% expense ratio and an average annual return of 11%+ (since 2010 inception), including taxes and fees for selling position. You can invest in this type of equity security without paying a manager (but you do pay trading fees like you would investing in stocks) and you can pull out when you like, unlike a mutual fund. 

    I'm not saying you should definitely go this way - everything depends on your risk tolerance and personal preferences/view on the market - I'm just saying you can put your money to work for you while you learn, without paying someone else for the privilege. Maybe consider keeping some in cash as a back-up account, keep some for RE (but don't deploy until you've learned the ropes) and put the rest in a decent long-term investment with an easy exit strategy (in case you get really good at RE and want to deploy more into that asset class). You may even want to use some to bulk up your 401k or IRA depending on your post-retirement financial plan.

    With $600k, you have plenty of options, so don't rush into anything until you do your research and feel comfortable with your decision. Your money isn't going anywhere :)

    If you have any questions about turnkey, or anything I've said here, feel free to shoot me a note any time.

    Best of luck!

    Clayton

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  • Irwin Haddox
    Delaware City, DE · Member since 2016 · 25 posts · 13 votes
    9y

    Buy and hold in cheap real estate markets. DO NOT BUY PROPERTIES IN FULL!! Always take out mortgages for positive cash flow. With any luck you should be able to replace your current income and become financially independent/retired. Then after 30 years your income should more than double (or if you want you can just pay off one house at a time using the positive cash flow.)

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