What to do with $100,000
Real Estate Investor · Chula Vista, CA · Member since 2010 · 2 posts · 1 vote
If you have little to no experience with rental property (just bought a book on landlording) and had $100,000 to invest only in real estate, where and how would you invest it?
1. buy as big a multi unit complex that you could qualify for (leaving some left for misc expenses of course)
2. buy a few properties in different locations?
3. or just pay off 60% of your mortgage balance.
Any other options I am forgetting in real estate only (I am already heavily invested in the stock market).
thank you for any help.
But if you want to be a landlord.....you must want to work harder. Good luck
First of all, you can't make 3% any more. 2 if you are lucky and usually less.
Second, you aren't going to turn your money 10 times a month. Back to backs are getting tougher to put together. With alot of marketing you might (big emphasis on might) get to 10 transactions a month but it won't be 10 100K transactions.
Also, he would have to turn down alot of possible deals because they are over 100K.
It is a good business but luring him with 30% monthly returns is ridiculously pie in the sky.
In my experience, the reality is 2 or 3 transactions a month for 1.75%, but I don't make it my full time business.
None of the above, look into transactional funding. Think about the velocity of your money, turning say 3% 10 times a month.
But if you want to be a landlord.....you must want to work harder. Good luck
James,
I think you first need to identify your goals. That alone will give you a more defined direction as to where you need to go investment wise. But I agree with Financexaminer. Unless you have tons of time on your hand or have a passion for being a landlord, I'd steer clear of the rental property.
But if you want to be a landlord.....you must want to work harder. Good luck
First of all, you can't make 3% any more. 2 if you are lucky and usually less.
Second, you aren't going to turn your money 10 times a month. Back to backs are getting tougher to put together. With alot of marketing you might (big emphasis on might) get to 10 transactions a month but it won't be 10 100K transactions.
Also, he would have to turn down alot of possible deals because they are over 100K.
It is a good business but luring him with 30% monthly returns is ridiculously pie in the sky.
In my experience, the reality is 2 or 3 transactions a month for 1.75%, but I don't make it my full time business.
James,
Pick up several properties with 100k. You need to partner up with someone familiar with creative financing and maximize your $.
---Sorry I should have specified my situation a bit. I am married, with an 8yr old child. I work full time, wife is going back to school and I would like to go back to school when she is finished. I would like our money to work for us in a way that interferes the least with our family life. I realize finding a vehicle to provide passive income and free time are somewhat inversely related--the more one has of one, the less they have of the other. If nothing else, I would at least like to further secure the future of my family. We already own a home (don't really need a bigger one) and are heavily invested in the stock market (401ks, and personal stock accounts).
thanks for any help
If you want passive income and no headaches or work DO NOT become a landlord. Sure youll make 200-500 a month but it SUCKS.
I would say hard money lending is the best easiest job.
---Sorry I should have specified my situation a bit. I am married, with an 8yr old child. I work full time, wife is going back to school and I would like to go back to school when she is finished. I would like our money to work for us in a way that interferes the least with our family life. I realize finding a vehicle to provide passive income and free time are somewhat inversely related--the more one has of one, the less they have of the other. If nothing else, I would at least like to further secure the future of my family. We already own a home (don't really need a bigger one) and are heavily invested in the stock market (401ks, and personal stock accounts).
thanks for any help
Post in a public forum that you have $100K to spend and watch the solicitations for that money roll in! Some might be truly good offers for you, some just might be scamming you.
Some things are better off not being so widely publicized.
Sorry I didn't get back sooner.
Transactional funding is simply 1. filing the gap for funds created by new lending restrictions and 2.to fund deals for investors who don't have the money to do back to back flips.
You simply lend money to a buyer/investor that has a deal on the table that will pay you off the same day or within a very short period of time.
The velocity of money is more important than the rate of interest charged when you have funding fees. Okay, I mentions three per cent, and 1.75 was mentioned, let's lower that to one point!
I loan out 100,000 for an hour, that's 1,000 in my pocket.
The greatest limitation to lending your money is not the market for your money, it's the ability to do the due diligence to ensure you're being paid off, and that can be covered pretty easily with your closing instructions with any closing agent.
If you only do three deals a month, taht's 36% annualized for very little risk, from rolling those same dollars over and over quickly.
Being on the financing side of deals beats buying property any day with X dollars, IMO.
I have acquired properties in most all of the startegies available to the average investor, and while you can obtain much higher yields from a great flip or buying a property that is identified the next week as being need to put a development together causing the value to skyrocket (think Branson Mo., if anyone is familiar with a 15 degree sloping propety wull of rock is needed for the next music theater parking lot or hotel) there is considerable risk involved in accepting title to properties.
If there are funds at the table of a second buyer, title is good/insured, all documents are properly executed, etc. there is ZERO risk of my money being shoved twice across the table.
I would not suggest funding deals for just anyone, as there are compliance issues that must be addressed and more than a common knowledge of legal issues, but if you have the capacity of playing the stock market and not losing your tail, RE financing can be a slam dunk!
At the rate mentioned, this means you have the potential of doubling your business in three years, 3X in 6 years and so on. I don't think rents or appreciation will get anywhere near that kind of growth. It gets to be more fun when you use borrowed funds, but again, compliance and legal issues arise, but after getting past the legal issues, you can take off.
A close second is buying notes at a discount and then refinancing the note purchased. But doing this will require knowing conventional financing inside out, IMO. Knowing a very good mortgage broker might work, but you're risking your investment on their knowledge.
Next would come the financing in a JV relationship, and expanding to ownership positions.
After you have a system set up for your lending efforts, it takes less than two hours to approve a deal if you have the ducks in a row.
But to do financing, you must understand RE transactions, appraisal issues and the market for the types of deals considered.
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With your wife in school and you wanting to go back to school I would stay away from rei until you are both back working. It isnt what you want to hear but it is the safe bet and with a child you cant risk it. If you had a few million extra or were single it would be another story. Buy a bond and wait until you guys both have jobs to start with the higher risk investments. If you can afford to loose this money look into real estate.
People always talk about rentals. Buying 100k worth of rentals is a part time pain in the ***. I almost want to say you have to do it full-time and play with a lot more money to make it worth it.
I am a landlord and figure I need about 200 units in my area to make the living I want. That is a lot of units. I am 1/4 of the way there and the market has slowed down.
For those that have, how did you go about getting into transactional funding?
Did you create your own company & then advertise?
Did you lend your money to a transactional lender that was already set-up?
I have been following this thread and others about transactional lending and it seems very interesting but I have yet to figure out how one would practically get started in this type of RE business.
Well, here is a totally different perspective.
As others have said you have to identify your goals. If I had $100k to invest, I would start an automated marketing machine. I am starting this on a smaller scale now, but am planning to scale up. For about $2k a month, you should be able to get deals rolling in.
When you find deals, you can then either JV or wholesale the deal to another investor.
There are several different target audiences to mail to, absentee owners, burned out landlords, etc. The key is to do it on a consistent basis.
If you spent $2k a month mailing to about 3000 people (targeted audience) for 1 year, you will spend $24,000. You should be able to get at least 2 deals where you make $18k each, that should not be difficult targeting the right audience, in your area. Your return on investment would be 50%.
This should not take that much of your time, if you set it up like I recommend, then you only talk to motivated sellers.
Here is how I recommend setting it up:
1) Automate the hand addressing of letters. If you google "hand address letters" you can find several companies that will hand address letters for you. Typically, they charge about $.25 for the service, on top of the postage & printing costs. They make it easy, just email them a word doc for the letter and spreadsheet for the list. They will take cae of the rest.
2) set up a call center. This can be done pretty cheap. I am using one now that I pay $25 a month, plus $0.80 a minute. You just provide the call center with a list of questions, then once they get a call, they collect the info.
3) when you get a message from the call center, call the person back and get more details, the key piece of info being, when do they NEED to sell, if they reply they don't NEED to sell, then they are not motivated.
Doing it this way, you should only be spending a few hours a week.
I would focus on your local area, that way when someone calls, you already are somewhat familiar with the area.
The key is consistency. You must commit for several months. You cannot just try one mailing, saying, "oh, I did not get any call backs, I guess it didn't work".
For further details I would recommend reading articles in the BP articles and blog area. You can find more info there are target audiences and sample letters, etc.
Just my two cents,
Brian
James - I am a landlord.
It's not too much work, in fact, it looks like the least amount of work of all the other suggestions made here.
If a PASSIVE income of $800 a month (net) is enough for you (while you're going back to school, and I'm assuming you have other sources of income) then you can get it out of a $100k property that you'd purchase for cash.
In 5-6 years when the market will recover you'd be able to sell this property for 160k.
All you have to do is knowing how to find a good qualifying tenant that will pay you the rent every month.
On average I spend about 3 hours a month dealing with my 3 properties and my net income (from the properties) is $2,300 per month.
You have to take care with Tom's advice. There are a lot of members here on BP, but it is unclear how many are dreaming and how many are making money.
HM lending is best done with a larger amount of money and spread over lots of deals. This will limit the risk. Do not put all your eggs in one basket.
If you do lend to someone make sure they have skin in the game. Also, why can't they get a loan or line of credit from a bank?
Holding cash while you are sourcing deals takes time and erodes the value of dollars though. You also have to learn to underwrite deals properly so that you don't lose the money to some "investor" that doesn't know what they are doing with your collateral.
I have no problem with transactional funding or hard money loans, but they certainly aren't sit-in-the-hammock passive income activities.
I see merits to both approaches. My personal preference is to own property because it will eventually be held free and clear and continue to produce money with a third party manager managing it. Hard money is a business that I wouldn't ever want to delegate to some third party and it requires constantly sourcing new deals to maintain.
To each his own...
there are hard money brokers on bigger pockets that will make your money very passive and off hands...they'll take care of all paperwork, make sure the borrower is credit worthy and has a track record, and make sure the deal is good...all you do is wire money and collect points and interest checks...joel soforenko is a broker that comes to mind on this forum...
Joel might be great. He never brought me any business but I stay local and he is not in my area. I am picky cause I am not interested in foreclosing.
Otherwise, my experiences with HM brokers have been extremely poor without exception. I won't even talk to them anymore and I definitely would not be hands off and let the ones I have met pick my deals.
yes, sorry i should have elaborated....the broker should wade through the crap and present you with a few good deals from which you should choose....this is what i think, but i've never been on that side of the relationship yet....at any rate, the broker is free for you as the borrower pays for his/her service as well
I agree Tom, HML is the way to go if you only have 100k. I know in the Memphis market, you can do 2 deals with 100k and turn that 100k at least 4, maybe 5 times. Normal fee is 5% up front. I used to pay 12%, but you can probably get away with higher now. Also make sure you get an appraisal of the property from one of the appraisers that will be doing the refinance to get your borrower out of the loan. Also, I would only loan 65% LTV. Tom did a loan for me and it worked great.
100K is not really enough to lend long term or even 6mos as in rehab loans or construction financing, IMO. Short flips of your cash will yields the highest return and is is done with less risk than with longer term financing. Rehab or construction financing is no place for a begginner.
Turning your cash over to a HM lender is an option, but you'll take less on the return, but might be good to start as you will need to see the loan file and the due diligence.
As pointed out, a broker's trak record is something you need to check, but frankly, Ole Burrnie probably had a good track record to show too. If you're going to invest in the lending side, it's like investing in any thing else, you need to understand it. How some brokers or HM lenders collateralize loans from individuals can be a house of cards, as most try to stay away from SEC and state banking regs, so they are practically unregulated. Know how to collateralize you loan and understand what happens if.....
Waking up this old thread..
Can Bill or someone else please comment on where to look information on Transactional Funding?
Mr. Google reveals quite a few resources for HML, but how I am supposed to find a transactional borrower? Craigslist? Newspapers?
Also, how much funds should one posses for HML or transactional funding? Me and my partner have around 170K.
Hang onto it until Facebook goes public...