How to invest $10 million?
FL · Member since 2016 · 912 posts · 107 votes
How to invest $10 million?
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesthere is ONLY ONE thing to buy.. and that is double TAX FREE MUNI's
of triple a rated cities. engage a broker to help you. forget real estate far to much work and risk
if the money is coming to you and you did not have to work for it IE its inherited / given
you can make 300 to 500k a year tax free protecting your principal.. then get a job so you are fulfilled in life.
58 Replies
- FL · Member since 2016 · 912 posts · 107 votes9y
Originally posted by @David Faulkner:
Originally posted by @Patrick Philip:
Originally posted by @David Faulkner:
Well Patrick, you have a bunch of RE guys telling you to NOT buy RE ... so you can't say we're all biased towards REI :)
I agree with Jay on muni bonds ... I'd do that 50%. I'd also do 45% blue chip stocks from the "Dividend Aristocrats" list, and 5% cash ... live off the interest and dividend income so you never need to liquidate any assets ever unless you choose to. Stocks will provide growth to keep pace (and likely exceed) inflation which is important if you will be fairly young when you get this inheritance, cash is in case there are any bumps in the road. All hands off passive investments allowing you to work, travel, contribute time to charity, whatever.
But what if I WANTED to stay in real estate with some of it. How would I get it to grow at faster than 6%? I see two options:
1. Invest in a private equity firm
2. Learn how to do this myself.
If you WANTED to stay in real estate with some of it, then you can start now, you don't need $10M ... learn how to do it yourself with more limited funds, buy a simple cosmetic fixer as a primary house hack and you can learn, grow, and answer your own question that way and have the knowledge and experience by the time you get the money. It won't be passive, as mentioned, at least not at first ... passive and RE would be an REIT for a newbie passive investor or if you have the knowledge and experience for the due diligence a private placement with an appartment syndicate, note fund, etc. Don't try the private placement route without some hands on knowledge and experience 1st.
I already have a house. I don't need to house hack. I think my best bet would be to BRRRR something and then sell it. I think this is what large firms do.
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
Originally posted by @Patrick Philip:
Originally posted by @David Faulkner:
Originally posted by @Patrick Philip:
Originally posted by @David Faulkner:
Well Patrick, you have a bunch of RE guys telling you to NOT buy RE ... so you can't say we're all biased towards REI :)
I agree with Jay on muni bonds ... I'd do that 50%. I'd also do 45% blue chip stocks from the "Dividend Aristocrats" list, and 5% cash ... live off the interest and dividend income so you never need to liquidate any assets ever unless you choose to. Stocks will provide growth to keep pace (and likely exceed) inflation which is important if you will be fairly young when you get this inheritance, cash is in case there are any bumps in the road. All hands off passive investments allowing you to work, travel, contribute time to charity, whatever.
But what if I WANTED to stay in real estate with some of it. How would I get it to grow at faster than 6%? I see two options:
1. Invest in a private equity firm
2. Learn how to do this myself.
If you WANTED to stay in real estate with some of it, then you can start now, you don't need $10M ... learn how to do it yourself with more limited funds, buy a simple cosmetic fixer as a primary house hack and you can learn, grow, and answer your own question that way and have the knowledge and experience by the time you get the money. It won't be passive, as mentioned, at least not at first ... passive and RE would be an REIT for a newbie passive investor or if you have the knowledge and experience for the due diligence a private placement with an appartment syndicate, note fund, etc. Don't try the private placement route without some hands on knowledge and experience 1st.
I already have a house. I don't need to house hack. I think my best bet would be to BRRRR something and then sell it. I think this is what large firms do.
Just because you already have a house doesn't mean you can't house hack ... sell or turn to a rental and house hack away ... serial house hacking is a great way to start to build a portfolio. BRRRR could work too ... you can combine the two ... forget about what large firms do, you are not a large firm nor should you start off trying to invest like one; embrace your smallness, small can be beautiful and has its advantages. Good luck.
- Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes9y
Hi @Patrick Philip, if you’re looking to take a more passive role in real estate and want the benefits of diversification there are funds available to accredited investors that are designed to allow investors the opportunity for ownership of institutional investment grade property that is occupied by regional, national, and Fortune 500 credited companies. Happy to answer any questions.
- FL · Member since 2016 · 912 posts · 107 votes9y
Originally posted by @Leslie Pappas:
Hi @Patrick Philip, if you’re looking to take a more passive role in real estate and want the benefits of diversification there are funds available to accredited investors that are designed to allow investors the opportunity for ownership of institutional investment grade property that is occupied by regional, national, and Fortune 500 credited companies. Happy to answer any questions.
Can you tell me how to find these funds? Is there a guaranteed (or a normal) percentage yield?
- FL · Member since 2016 · 912 posts · 107 votes9y
Originally posted by @David Faulkner:
Originally posted by @Patrick Philip:
Originally posted by @David Faulkner:
Originally posted by @Patrick Philip:
Originally posted by @David Faulkner:
Well Patrick, you have a bunch of RE guys telling you to NOT buy RE ... so you can't say we're all biased towards REI :)
I agree with Jay on muni bonds ... I'd do that 50%. I'd also do 45% blue chip stocks from the "Dividend Aristocrats" list, and 5% cash ... live off the interest and dividend income so you never need to liquidate any assets ever unless you choose to. Stocks will provide growth to keep pace (and likely exceed) inflation which is important if you will be fairly young when you get this inheritance, cash is in case there are any bumps in the road. All hands off passive investments allowing you to work, travel, contribute time to charity, whatever.
But what if I WANTED to stay in real estate with some of it. How would I get it to grow at faster than 6%? I see two options:
1. Invest in a private equity firm
2. Learn how to do this myself.
If you WANTED to stay in real estate with some of it, then you can start now, you don't need $10M ... learn how to do it yourself with more limited funds, buy a simple cosmetic fixer as a primary house hack and you can learn, grow, and answer your own question that way and have the knowledge and experience by the time you get the money. It won't be passive, as mentioned, at least not at first ... passive and RE would be an REIT for a newbie passive investor or if you have the knowledge and experience for the due diligence a private placement with an appartment syndicate, note fund, etc. Don't try the private placement route without some hands on knowledge and experience 1st.
I already have a house. I don't need to house hack. I think my best bet would be to BRRRR something and then sell it. I think this is what large firms do.
Just because you already have a house doesn't mean you can't house hack ... sell or turn to a rental and house hack away ... serial house hacking is a great way to start to build a portfolio. BRRRR could work too ... you can combine the two ... forget about what large firms do, you are not a large firm nor should you start off trying to invest like one; embrace your smallness, small can be beautiful and has its advantages. Good luck.
Well I bought a house in August that was at $150k. It's now at $180k from market appreciation alone. I have made improvements, such as a new roof, a new electrical panel, upgraded some electrical fixtures, fans, and am getting ready for a new paint job. I plan to sell this house and buy an empty parcel in a rural area. I will sign an owner builder affidavit and hire out the work. This way, I can get a lot of house for a relatively small amount of money. I don't think it would make sense to rent my current residence because that would only get me a few hundred per month and where would I live?
If I had $10 million, I could certainly start thinking like a large firm, at least.
- 9yBrian BurkePro MemberInvestor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
Originally posted by @Patrick Philip:
Returns vary, figure somewhere between 10% and 18% depending on the operator, strategy and risk. The hard part is differentiating between forecasted returns and reality. A lot of groups inflate their projections in an effort to attract investors that don't know better. Or perhaps the sponsor themselves don't know better.
The key is to find a group that has been around long enough to have survived market cycles and has a proven track record and can show you a side by side comparison of their forecasts and actual performance. You want to align with groups that underwrite conservatively and not just talk the talk but walk the walk.
Finding good sponsor groups is tricky--mostly by word of mouth and referral. Even with a referral you want to do thorough due diligence and check references. Align with the right group and you can have a solid flow of great opportunities. Align with the wrong group and you can be in for a nightmare.
There are sponsors on BP--watch for posts discussing syndication and you'll find them, or at least people who can give you referrals. You might also check out websites such as Crowd DD.
- FL · Member since 2016 · 912 posts · 107 votes9y
Originally posted by @Brian Burke:
Originally posted by @Patrick Philip:
Returns vary, figure somewhere between 10% and 18% depending on the operator, strategy and risk. The hard part is differentiating between forecasted returns and reality. A lot of groups inflate their projections in an effort to attract investors that don't know better. Or perhaps the sponsor themselves don't know better.
The key is to find a group that has been around long enough to have survived market cycles and has a proven track record and can show you a side by side comparison of their forecasts and actual performance. You want to align with groups that underwrite conservatively and not just talk the talk but walk the walk.
Finding good sponsor groups is tricky--mostly by word of mouth and referral. Even with a referral you want to do thorough due diligence and check references. Align with the right group and you can have a solid flow of great opportunities. Align with the wrong group and you can be in for a nightmare.
There are sponsors on BP--watch for posts discussing syndication and you'll find them, or at least people who can give you referrals. You might also check out websites such as Crowd DD.
Thanks!
Even 10% is solid.
- Real Estate Agent · Lehi, UT · Member since 2016 · 136 posts · 91 votes9yPatrick Philip I just helped a client with a similar situation who came into $5 Million. There's lots of things you can do, real estate is the safest and most secure if you buy good units in a good area that's growing and has a good job base. As far as returns go you can expect well over 10%, I personally have gotten over 15% returns on my own properties which includes my tax writes offs, cash flow, and appreciation. It might be good to talk things over with someone who can help you analyze your potential investments and help you buy the best return but also the thing you're most comfortable with. I'm happy to help, message me if you'd like to talk specifics. Good luck!!
- FL · Member since 2016 · 912 posts · 107 votes9y
Originally posted by @Sam Newell:
Patrick Philip I just helped a client with a similar situation who came into $5 Million.
There's lots of things you can do, real estate is the safest and most secure if you buy good units in a good area that's growing and has a good job base.
As far as returns go you can expect well over 10%, I personally have gotten over 15% returns on my own properties which includes my tax writes offs, cash flow, and appreciation.
It might be good to talk things over with someone who can help you analyze your potential investments and help you buy the best return but also the thing you're most comfortable with.
I'm happy to help, message me if you'd like to talk specifics.
Good luck!!
I PM'ed you.
Are these properties that I will be putting a down payment on? Is that how my cash will be used? How do you define returns? Is this after improving and selling the property?
- Lender · Morrisville, NC · Member since 2015 · 610 posts · 131 votes9y
@Patrick Philip The answer to your question depends on when in your life you plan to inherit the money and what the market conditions are at that time. It also depends on what your end goals are. Speaking for today, with $10M in cash on hand you can do so much more than wholesaling. Using debt as leverage you would have $40M buying power, targeting large multifamily projects would probably give you the highest return and security. Now lets say we also had preferred equity partners to the mix as well as debt now your buying power is somewhere between $60M and $100M. You could easily buy 7 to 10 high cash flowing properties and make greater than 20% return.
- Investor · Tampa, FL · Member since 2017 · 122 posts · 87 votes9y
Originally posted by @Patrick Philip:
Originally posted by @Ben S.:
What kind of experience do you have now in real estate investment? If little, then start with a small pot, say $100k - $200k depending on your market, and learn. Put in the rest in a few safe things investments until you are ready for bigger things.
And do what with that $100-200k? I certainly wouldn't want to tie up all my cash.
Depends on what interests you. Flip a home, buy a rental unit or two and manage it yourself for a bit. It won't be as much for the money as it will education. Gradually build up as you go and move into small multi family units (4-12 maybe) which moves you to the commercial world a bit, hire a manager, learn more. Maybe you will start with the small stuff and realize you don't really like real estate, so don't do it, or maybe you will love it, so keep doing it.
I'm sure there are other options that don't require this sort of thing, but I've gotten the good advice many times that you should invest in things you know. If I got $10 million tomorrow, I would invest about half in an apartment building and mobile home park and maybe something else (storage units) to diversify my real estate a bit, and the other half in munis/savings and a bit in gold/silver, but I have a decent amount of experience in SFH real estate and would want to use that money to move up to a more commercial level. I also have other business and invention ideas not related to real estate, so I would budget some amount of money that I could freely test out some other businesses (technology, again investing in something I know).
Regardless of what you do, spend less than you make from the muni/savings income, and if your other ventures fail for awhile, it won't hurt you long term.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Patrick Philip one thing you can do but again its risky with money that is just laid in your lap.
you can team up with a proven HML source take a ownership interest in the company use the 10 million to secure a 30 million dollar lending facility and boom your a for real HML company. but having been a for real HML company of that size or a little better.. when the 08 crash happened I lost millions of personal equity not 10 but half of that personally.. so its a bitter pill to swallow if the market has a big bust cycle.
ergo depending on your age and your wish to leave something for your decendants ( which there may be no wish) you could also just figure out how much money you want a year.. put it all in CD
s and spend it until its all gone .. usuaing a annual budget.
- Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes9y
If I'm reading between the lines, you want to passively invest in real estate while traveling? Do you have an annual amount in mind that you want to live off of? Do you want to stay at hostels, or the Ritz? Do you eat off the $1 menu, or surf and turf? Do you want to fly private, first class, or coach? How many personal residences do you want? How many years do you expect to need this amount? Some crucial number-crunching items are needed to be known.
- Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes9y
Originally posted by @Patrick Philip:
Originally posted by @Leslie Pappas:
Can you tell me how to find these funds? Is there a guaranteed (or a normal) percentage yield?
Yes I'd be happy to answer any questions. I think the best way to help you right now is for us to have a quick phone chat.
- FL · Member since 2016 · 912 posts · 107 votes9y
Originally posted by @Nathan Click:
@Patrick Philip The answer to your question depends on when in your life you plan to inherit the money and what the market conditions are at that time. It also depends on what your end goals are. Speaking for today, with $10M in cash on hand you can do so much more than wholesaling. Using debt as leverage you would have $40M buying power, targeting large multifamily projects would probably give you the highest return and security. Now lets say we also had preferred equity partners to the mix as well as debt now your buying power is somewhere between $60M and $100M. You could easily buy 7 to 10 high cash flowing properties and make greater than 20% return.
Is that called a mezzanine loan?
- FL · Member since 2016 · 912 posts · 107 votes9y
Originally posted by @Ben S.:
Originally posted by @Patrick Philip:
Originally posted by @Ben S.:
What kind of experience do you have now in real estate investment? If little, then start with a small pot, say $100k - $200k depending on your market, and learn. Put in the rest in a few safe things investments until you are ready for bigger things.
And do what with that $100-200k? I certainly wouldn't want to tie up all my cash.
Depends on what interests you. Flip a home, buy a rental unit or two and manage it yourself for a bit. It won't be as much for the money as it will education. Gradually build up as you go and move into small multi family units (4-12 maybe) which moves you to the commercial world a bit, hire a manager, learn more. Maybe you will start with the small stuff and realize you don't really like real estate, so don't do it, or maybe you will love it, so keep doing it.
I'm sure there are other options that don't require this sort of thing, but I've gotten the good advice many times that you should invest in things you know. If I got $10 million tomorrow, I would invest about half in an apartment building and mobile home park and maybe something else (storage units) to diversify my real estate a bit, and the other half in munis/savings and a bit in gold/silver, but I have a decent amount of experience in SFH real estate and would want to use that money to move up to a more commercial level. I also have other business and invention ideas not related to real estate, so I would budget some amount of money that I could freely test out some other businesses (technology, again investing in something I know).
Regardless of what you do, spend less than you make from the muni/savings income, and if your other ventures fail for awhile, it won't hurt you long term.
I'm all about ROI, therefore flipping is better than rentals.
- Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes9y
What is the money currently doing, just sitting in a bank or invested somewhere? How much are they earning on it now?
You could buy equity as a silent partner in a small business, equity in larger apartment portfolios, angel invest, etc. Just would depend on how active or passive you'd want to be.
Personally I would try to replicate what I'm doing in Detroit since I'm all about the ROI as well, it's worked extremely well with very high returns.
- FL · Member since 2016 · 912 posts · 107 votes9y
Originally posted by @Ujwal Velagapudi:
What is the money currently doing, just sitting in a bank or invested somewhere? How much are they earning on it now?
You could buy equity as a silent partner in a small business, equity in larger apartment portfolios, angel invest, etc. Just would depend on how active or passive you'd want to be.
Personally I would try to replicate what I'm doing in Detroit since I'm all about the ROI as well, it's worked extremely well with very high returns.
What are you doing in Detroit?
- Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes9y
20%+ returns are really hard to find without imputing labor of your own in the projects. Some on BP have invested in a bunch of syndicated projects across crowdfunding sites and claim they made 20%. This likely doesn't account for their time properly, but even without that accounting 20% is pretty darn good. Keep in mind interest rates have been at emergency levels for 10 years now and thus hard assets have had a nice bull run. The market cycling is a great equalizer.
You really need to start with goals and work backwards. With the heap of money you'll be inheriting WHY do you need the money to work so hard? Maybe you can take some small portion of your portfolio and use it to play with, learn, and then make larger investments as your education goes up. Believe me that you can lose your *** if you don't know what you're doing. Learning to invest actively takes a long time and requires a great deal of skill. That is why quality sponsors are compensated so handsomely.
Brian Burke's range is about what I have seen too. You can probably do low teens with hard money loans passively. To get higher yields your risk threshold will go up. Closer to 20 passively is likely to be coupled with some ground-up development project, a major rehab on a small project, a more junior sponsor, or several of these items. Putting a lot of capital to use in projects like this will not be very passive. You'll invest a lot of time vetting deals and sponsors.
- 9yMark RobertsonPro MemberInvestor · Salisbury, NC · Member since 2014 · 313 posts · 385 votes
Do your research before investing and take your time. Diversify, diversify, and diversify. Stocks, bonds, real estate, international, commodities etc. Stay away from high fee providers. This includes a lot mutual funds, "advisors", and DST's in real estate. #1 rule, don't invest with someone that finds you online or cold calls you a home.
- Austin, TX · Member since 2016 · 42 posts · 13 votes9y
Originally posted by @Ujwal Velagapudi:
What is the money currently doing, just sitting in a bank or invested somewhere? How much are they earning on it now?
You could buy equity as a silent partner in a small business, equity in larger apartment portfolios, angel invest, etc. Just would depend on how active or passive you'd want to be.
Personally I would try to replicate what I'm doing in Detroit since I'm all about the ROI as well, it's worked extremely well with very high returns.
Is this the same Detroit that Brendon talks about in most of the podcasts?? I am also curious what investments are available. I am guessing the commercial space?
- Newport Beach, CA · Member since 2016 · 2 posts · 0 votes9yHi Patrick, get in touch with me I can help you buy properties on cash on a ridiculous rate, you can take your money out by applying for a mortgage with the bank within in 6 month. We can rent it for you so it pays the mortgage amount and in 15yrs you will own the property and you get to keep your money too Ankush
- Real Estate Attorney · Manhattan, NY · Member since 2014 · 129 posts · 106 votes9yI am a retired tax attorney so I always think about how to save on taxes because I saw how such a structure can make a huge difference today and in the long run Since I retired relatively young I wanted freedom, no hassles and safe long term income Btw I retired relatively young (many years ago) thanks to investing in real estate and paying usually no more than 15% in tax to compound my returns So my suggestion to you, if and when you inherit the $10mil net is: 1) Move to Puerto Rico (best tax incentives for US citizens and Carribbean weather plus direct flights to many US cities inexpensively) 2) Invest in the funds there that deal with historic properties 3) you will make 8% tax exempt income per year with no tax, no hassles, and no problems Way better than municipal bonds or anything else You can private message me and I can share with you how I have done it and where Btw I would not do flips (too much work) I would not buy Apt Bldgs (too many hassles) I would stay away from cold places and move to Carribbean weather or at least a warm place like California PR Florida of Puerto Rico is not so exciting for you I would certainly stay away from any direct debt or leverage and just enjoy health through good food, sleep and exercise and happiness through positive goals and good relationships All the best
- Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes9y
@Charlie Nghiem @Patrick Philip lol it is the same Detroit that they talk about on the podcast. I've bought a few small commercial rentals exclusively to start off, and they've provided for really good returns on cashflow but also appreciated really well. I'm working with a very small fraction of the potential capital you will be inheriting, so my gameplan is slightly different, working in the lower end neighborhoods of the city.
However, I know a few investors that have had much higher success by having the required capital in cash during the last few years and purchasing small-medium sized commercial buildings in prime locations in the downtown areas in Detroit. For example, I lease a small retail space in a 7 story building, for my little sports bar and am pretty much the only tenant besides storage space upstairs. That building was purchased for $900k (or less) in 2013, and the owner has not touched it since they bought it and is now worth around $4-5M (pending offer). This gentleman also had a similar inheritance of a few similar commercial buildings. I'm very vested in the city, and can see major growth developing near my business in the prime neighborhoods, especially downtown, as opposed to primarily just the cash flow in the low end neighborhoods. That's definitely where I'd look with $10M, small office/retail buildings in prime areas of the city, that I could look to develop and lease.
- 9yShiloh LundahlPro MemberRental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
@Patrick Philip a good place to start would be to define your goal. What is it that you want?
Do you want to be involved in the investing process or just invest passively?
Do you want to have all of your money is one place or in several places?
Do you want a more secure investment at a lower interest rate or do you want to earn more interest at possibly higher risk?
Do you want to make as much money as possible or are you looking for just enough to live the lifestyle you want?
Defining your goals can make the decision making easier.
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