Strategy: What To Do With My First 100k Cash?

5 Replies

My best friend from HS has been working diligently for a long time and has managed to accumulate about 100k in cash savings. He only has one house but wants to jump into RE. Bc I am obsessed with RE, keeps asking me what he should do with his money and I said I would look into it for him (hence why I’m here). Just wanted to know what YOU would do with 100k right now if you were just starting out. In terms of goals, he wants passive income to support his lifestyle so he can ultimately quit his day job. It doesn’t sound like he wants to flip bc he doesn’t have any real experience or connections in terms of a trustworthy team. Also, he lives in NJ. Obviously I’m going to advise him wait and learn as much as he can before making a decision but I just would like some ideas to steer him towards from the pros. Thanks!

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!

@Lou Ruggieri

$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).

Terry

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.

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