$450k. Ideas on how to invest it

19 Replies

Scenario:  $450k to invest

Background: Currently have 7 SFH rentals (turnkey purchase) that are currently financed with 1 commercial loan (so that I could get HELOC to pay off house and car notes quickly) and 1 tear down / new build under my belt. Have a busy W2 day job and not a lot of free time.

Goal is growth of current portfolio to ultimately fund retirement. I am currently 54 yrs old.

Given the above info, how would you invest the $450k? All SFH rentals? Another tear down/new build? Learn and do MF investment (small or join large deal)? Notes? Raw land flipping?

Just looking for ideas and opinions. Bring it on!

@Jon Horton I'd start by searching to see if this question has been asked before...

$400k results 

$500k results

I think at this point in time, I would certainly want to diversify that amount over a number of projects and over some time - probably relatively low risk syndicated deals - MF and housing developments for example.  Or possibly mix in some private lending.  Here's a BP article I wrote on Three Key Routes for Passive Real Estate Investing .  You might find it a helpful read.

Larry Fried, Real Estate Agent in OR (#201211636)

@Jon Horton congrats on your portfolio to date and you have cash to get further. Small apartment complexes are a great investment; I have a 12 unit that is an ATM machine. I would take some of the 450k and use that as a DP on a MF-10-12 units, that gets the per door price to a reasonable level and lots of cash flow potential. Keep some cash on hand for maintenance and CAPEX. The very worst thing that can happen to an investor is to not have access to ready capital.

If you run short of money or run out of time the vultures start circling!

@Jon Horton I think the answer to your question largely depends on your desired activity level (passive vs. active) and your risk aversion. If you like passive opportunities on investments with downside protection built in, I would recommend looking in to syndication deals - multifamily, self storage, mobile home parks, etc. At 54 I wouldn't take too many risk, but as @Larry Fried said, you can certainly find low risk deals. Here are some blog articles I wrote to get the wheels turning:

What is Apartment Syndication?

8 Reasons Apartment Syndication is an Appealing Investment Vehicle

Happy to connect and discuss so don't hesitate to reach out!

Originally posted by @Jon Horton :

Scenario:  $450k to invest

Background: Currently have 7 SFH rentals (turnkey purchase) that are currently financed with 1 commercial loan (so that I could get HELOC to pay off house and car notes quickly) and 1 tear down / new build under my belt. Have a busy W2 day job and not a lot of free time.

Goal is growth of current portfolio to ultimately fund retirement. I am currently 54 yrs old.

Given the above info, how would you invest the $450k? All SFH rentals? Another tear down/new build? Learn and do MF investment (small or join large deal)? Notes? Raw land flipping?

Just looking for ideas and opinions. Bring it on!

I am not shy about promoting self storage as a phenomenal niche for building both cash flow and wealth.  Check out my little blog here on BP if you have any interest. Its called "All Things Self Storage". As recently as a year or two ago, I would have said that a full time W2 job would be a pretty big barrier to maximizing your returns in this space but I have since learned of and implemented some awesome strategies that have me managing almost $3 Million in storage assets on under 5 hours per week. Whatever you choose, I wish you well!

Mike

Now that you have the experience of SF rentals, property management and flips you could conceivably go into MF 5-7 units. But have you considered holiday rentals? My husband and I bought two units in MS last year and it worked out very well. So, well, in fact, we often ask ourselves, "why didn't we do this sooner" and are planning to purchase several more. The key, of course, is to find a desirable area that is up and coming and draws families who want to get away. Look for beaches, amusement parks, shopping, casinos, restaurants, popular yearly events, etc. With $450K, you could easily use portions to of it as down payments to secure several units. There's a lot to consider, of course, such as facilities, HOA, management company reputation, marketing, etc. We really enjoy it.

@Jon Horton , One possibility regardless of the sector you want to go into would be to take the cash available and combine it with some strategic 1031 exchanges.  You've got some interesting possibilities.

1. Combine the cash, 1031 and debt to launch into a much larger asset MF or commercial (or several) - consolidation exchange.

2. Combine the cash and 1031 to reposition your portfolio how you'd like but do it without debt (or simply use the 450K to pay off select current portfolio if you're feeling defensive at all). - a diversification exchange.

3. If you like the build and hold, tear down, or significant value add projects and would like to transition your portfolio the newer construction to avoid cap ex exposure.

Lot's of good ideas in the previous posts.  Your options could be more than you thought.

@Jon Horton

I Recently helped someone with a similar question...

Originally posted by @Dino Pierce :

I'd Find a Team Of Multifamily Apartment Operators (B/C Class Operators) That have a Proven Track Record, leverage their expertise, and build a substantial relationship with them. Ask them to start presenting opportunities to you.

We have a huge demand for affordable housing in the US and it’s NOT going away!

There are numerous Unique Benefits Associated with Multifamily assets.

For example, they provide the opportunity to hire professionals that conduct cost segregation studies.

This identifies, and reclassifies, the asset allowing us to compress the depreciation time for more favorable taxation purposes. Cost Segregation reduces income tax obligations with the primary goal being to identify all construction-related costs that can be depreciated over a shorter tax life. Typically you can shorten depreciation to 5, 7 &/or 15 years. This means you are, legally, allowed to keep more of your income.

I'd definitely consider becoming an Equity partner in a large Multifamily Community!

Unique Tax Advantages, Superior Performance, and Generational Wealth!

It's Passive Too!!!

They are essentially offering a turnkey model for the passive owner/investor.

This model pays you quarterly and, when they refinance or sell the asset, it will pay you profits!

You are a passive Equity Partner which entitles you to unique tax benefits, cash flow, & profit (at sale or refinance) proportionate to your percentage of ownership.

Hope this helps-

To Your Wealth,

Dino

The question isn't how to invest it, but what are you looking to do with the return? Are you wanting to live on the income, or just build working capital? What is your tax situation? How liquid do you need to be? What's your risk tolerance? How much leverage are you comfortable using?

If I had $450k to invest with a busy day job and wanting to retire anywhere from 5-15 years, I would consider Mf syndication or private money lending with established rehabbers is strong markets. This is out of my area of expertise, but I'm sure that there are plenty of investors here who could point you in the right direction and help educate you as to how to go about this.

There are also plenty of seasoned investors here who are always looking for more equity partners. My equity partners get 60% of the net if they fund the entire project. Last deal I did was $92k all-in... $24,200 net (after closing costs, commissions, and everything but taxes.) My equity partner made a little over $14.5k on the $91k investment for an 8 month project. That's 15.7% in 8 months. That's actually the most profitable return that I've had to date doing large rehabs, so not the norm. This may be a space worth checking in to... you just want to ensure that you are working with someone capable and reputable. I believe that Austin would be a great market for you to do this in, so you wouldn't even have to go out of state.

@Jon Horton Hey Jon, first congratulation on what you've accomplished thus far. 

AS for the SFH rentals, if they are performing assets, then you should seriously consider leaving those in your portfolio as part of your retirement plan.

As for the capital to invest, you should probably diversify within real estate, so perhaps invest by partnering with a great flipper in your area and joining an MF syndication and even private lending is one most people overlook. 

In all of these choices, however, the key piece is people, so make sure you vet partners/sponsors before deploying capital in any investment opportunity. 

Hope this helps. Goodluck. Thanks! - Ola 

@Jon Horton   Congratulations looks like you want to be passive investor,  before jumping to the next step,  read some books about syndication,  The Real Estate guys have a good event,  the returns and great if you choose a good partner to invest,  

(786)-529-4075

if you want to be passive just diversify .. try a syndication most you can get into for 100k... you can buy whole notes .. you can do short term HML with a great broker .. you can invest in NPN funds..

lots of things.. If your burnt out on landlording you can leave that drama to others and take the position of the banker. I like be a banker. LOL

@Jon Horton Very interesting question to pose to the collective masses.

I think it all comes down to your goals on a more specific level than retirement income. Questions like "How much income do I want to generate by when", and "will it all be passive? how much will be from active investments like reselling?" come into play. Also, your risk tolerance, and your ability to mobilize those funds are factors to consider. 

I would say in a perfect world go out of state and throw down on like 70-80 units in a C neighborhood for a cool 2M, but would someone finance you on that property given your current portfolio? I personally prefer to invest my money in my rental property acquisitions/sales business because I get my highest ROI on my dollar there- much higher than when it's invested in passive income... but I'm by no measure retired doing this, I work quite a bit.

If you want to be 100% passive I would make a cash flow play where you can get a high return on your dollar. Grab an SFR or a Duplex or even 5 units to start if you're comfortable, do it with financing, maybe buy a second 6-8 unit building after... after 6mo-1yr of that you'll have kept a lot of your funds free and will be able to mobilize them towards a bigger deal, and you'd probably be able to pick up 15-20 units in one grab. Then another 30-50 after. It might take a few years to get the experience you'll need but you'll sure be off to the races over the span of 2-3 years with a much higher ROI on your dollar than reinvesting that large sum of money into a package of SFR's with lower cash flow.

...but that is what I simply envision for myself based on my preferences, my risk profile, and my goals. How does that kind of approach sound to you?

Hi Jon,

Since you are in Austin, let's grab a coffee. A lot of good ideas to explore. You've had your hand at active opportunities. Maybe you look at syndication. Start out w/some passive plays and w/intention, see if that drives you to want to be more active in CRE investing or simply continue to diversify passively into a pool of attractive niches, sponsors and geographies and do some other active things on the side you enjoy. Three niches I like right now (value add MF, self storage and manufactured home parks) and why.

https://www.biggerpockets.com/blogs/9145/70861-top...

https://www.biggerpockets.com/blogs/9145/53820-why...

https://www.biggerpockets.com/blogs/9145/62927-6-r...

@Bill F.- never thought of that- always just asking new questions. I'll be keeping this in mind :)

@Jon Horton The only advice I can think of is not to let the cash you have to invest blind you into doing a deal that wouldn't be good enough if you had to raise other people's money for it.

Good luck! :)

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