What to do with $300,000

Question

Hey guys! I currently have a single family home I rent as well as a duplex. I’m looking to get involved heavy with multi family and was recently approached by my uncle who offered me a $300,000 loan to invest with. How would you guys approach investing in real estate with this kind of money? Buy, fix up, rent, refinance and do it again with several properties or just use that money for 25% down payments on several rentals and use the income to fund other multifamily purchases?

Andrew Hogan · Answer

Larry, I would say to continue to educate yourself until you feel confident enough that you don't have to ask for advice. One great way to learn with low risk is to invest as a limited partner in a larger syndicated deal before you do your own. There are plenty of opportunities out there that only require a 50k min. investment but if you're not an accredited investor, it will have to be a 506b offering which means they can't advertise and you'll have to have a previous relationship with the sponsor.

Keep networking. Keep educating yourself, and one day you can be managing that 300k with a lot more zeros on the end of it!

Kyle J. · Answer

The answer to this question is largely going to depend on how/when your uncle wants to be paid back.

If he wants to be paid back in a relatively short amount of time, you're not going to be able to use those funds for a down payment on anything because then you'd be 100% leveraged on that property and how would you pull the money back out to pay him back?

If you were using the money to flip properties you could pay him back when the properties sold, but it doesn't sound like you want to get into flipping.

So I think the first thing to do is find out what your uncle's investment goals are and make sure they're in alignment with yours.  It can be difficult doing business with family so you want to make sure if you're going to do it that you're on the same page before you get started.

Dan Schoenbaechler · Answer

Larry, I do think that value-add is the best strategy for all investments, whether it's single family houses or 400+ unit buildings.  I will add, the most common thing you'll hear from investors that scaled up into large multi-family assets is that they wish they did it earlier and didn't waste their time on the smaller units.  It's much easier to scale with large assets and can become a more passive activity.That being said, follow @Yonah Weiss's suggestion in how to approach getting involved in multi-family.  Why re-create the wheel when there are already so many people who have successfully done it already?  Fortunately for you, there are a lot of successful people involved in multi-family right here in NJ.  Feel free to DM me for suggestions on who to speak with locally

Yonah Weiss · Answer

@Larry Landwher The best thing you can do with the money is to partner with an experienced multifamily operator. Breaking into multifamily is not easy, but you can cut the learning curve significantly by spending time alongside someone who has successfully purchased and operated MF properties.

Spend time networking with brokers so you can get their list, and actually find deals.

And if you're serious I highly recommend @Joe Fairless' book The Best Ever Apartment Syndication Book.

What to do with $300,000

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