If he lacks experience and wants a passive opportunity, he should consider hard money lending or investing with a syndication team that buys value-add commercial multi-family. There are plenty of individuals or teams out there that have deals but no money. I see a couple of benefits from this approach:
1. Less experience and expertise required
2. Can find a truly passive opportunity
3. The opportunity to work with and learn from those who have "been there done that"
In the mean time, he should learn, then learn a bit more, then when he truly masters a concept.. go back and learn about it some more. It sounds like time is on his side, so don't rush anything and be confident in the deal. Hope this is a good starting point, and best of luck to you and your friend!
$100k is a good start for down payment of 4plex, which is the best multi units configuration. Max cashflow under fannie mae terms and conditions. I would find a good loan mortgage company and get pre-qualified as to fico score, and how much can borrow. It is best to leverage your money to buy more. For example, no point in buying $100k condo for $100k cash. Better to put down 75-80k, and for $320k property.
Look for multi-units that cashflow at least 1% of purchase price. If 4plex, then 4 x monthly rents should be greater than 1% of purchase price. If rents are 800x4=3200, then max sales price should be 320k.
If he does not have a home yet, then go FHA, which is only 3.5% down but has PMI (mortgage insurance).
It sounds like he doesn't want to be hands on with the investment, so he should think about being a hard money lender. He can loan money out to rehabbers and collect interest and watch his money grow.
However, you also stated he wants passive income to retire. The other option to purchase value-add income property. He could buy an two-flat or apartment building, depending upon your area, that needs a gut rehab. He can buy it cheap, fix it up and get it rented, and then refi to pull his money out. He can then turn around and do the next property and keep stacking them up and accumulating rental income.
100K is a tidy down payment for a property. I would ask him to get a preapproval for non-owner occupied mortgage. The tenants will be paying for majority of the mortgage if not all. Do not be too ambitious see if you can get a positive cash flow property in a decent area not worrying about crime.
With $100k, I see it a few ways.
1. Invest in a $400k building(s) on his own
2. Invest in a larger building with his money and a partner or 2 with money.
3. Invest in a syndication or several or crowdfund deal
4. Use his money to lend as hard money
5. Go to Vegas and make an extra $100k
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.