How would you invest one million dollars if it was given to you free? Why would you invest that way?
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@Katie Miller 100k to charity (store up treasures in heaven!), the rest of the 900k in 4 paid-for SFHs @ $225k each with reserves
Howdy @Katie Miller ! In that scenario I would use a construction loan to purchase a multifamily property around $4,000,000, seeking to be "all in" at that level, but achieve an appraisal value of around $6,000,000 within 18 months through the right value add renovations, stabilization through excellent management, and other strategies to add to the Net Operating Income "bottom line".
Then, I'd pull as much of the initial $1MM back out as possible, then rinse and repeat this a few times in the next decade.
It'd be a lot of hard work and many bumps along the way, but I would likely end up with about $25,000,0000 in real estate holding AND the $1MM in cash at the end of that decade.
I would do exactly what I’m doing now. Nothing would change in my investing style.
I would do the same, i would maybe start an additional project.
Hi @Katie Miller , a $1MM gift would be the perfect boost for our existing real estate investment strategy! We would take $500K and purchase 4 fix & flip SFH properties in our target market to generate a near term return and some capital to invest in multi-family rentals. We would use the other $500K to BRRRR 4-6 properties in our target market for long term cash flow and fuel our BRRRR cycle of investing!
Depending on the area, I would buy 5-10 SFH's with minor rehabs and lease them out to tenants.
A Million Bucks would be ideal to start up a dream of real estate investment portfolio. I would set it up something along these lines.
- 1. Keep $100,000 security blanket (insurance). Invested this money into low risk low yield (dividend) stocks easy for liquidity. Example GSY on $100,000 buy you 1982 shares right now that would generate 2.5 additional shares monthly that reinvest back into your portfolio. All money should be working for you to make you money.
- 2. Invest $100,000 into syndication's as a Limited Partner for Passive income. With the right investors this would generate your money back and up to 50% returns.
- 3. Invest $400,000 in Self Storage Facilities. With that much money you could likely steel some solid deal with a cash offers, refi the money out (70%) and buy another one. Cap Rate average not to exceed 7.5% aim for $4.10 dollars per Sq ft of storage space (nationwide average).
- 4. Invest $400,000 in rentals (small apartment/ duplex or quadplex) use that as a 30% down on a $1.2M (about 360k , 40k for repairs/upgrades).
- 5. Your income foundation has been stabilized, time to grow multi generational wealth:
- Year ONE. SAVE EVERYTHING (maybe back to that stock I said earlier).Determine a market.
- Year TWO. Money saved will support my soon to be addiction and act as my real estate financing for BRRRRs. BRRRRs would have to be 9-12% CoC Return, with 30% equity after repairs.
- Year THREE - FIVE. After 4 green houses time to upgrade to the red house, after 4 red houses time to get into the 50-75 unit rentals.
- Year SIX - At this point the revenue generation from general asset wealth should be free flowing. Save for year six research and develop more markets
Effective marketing has the highest ROI. Therefore, I would spend as much as 50% on my existing proven marketing campaigns and expand into other markets. The rest would be allocated on operating capital, reserves, and seed money for solo & joint venture acquisitions.
I would leverage the $1m.
I would act upon a most opportune market for new construction Townhome community. Row style 8-plex too 12-plex in horse-shoe multi-structure configuration with common courtyard spaces.
Why townhomes, in short you get the highest tenancy class, one of if not the highest-grossing revenue per sqft being into the lower rung of whit collar professionals, millennial consumer desires of having things without the responsibility of care for them, and can tap the countless "free" money resources to offset development costs to better increase revenues.
I would use that $1m to approach city council members as verification of how serious I am in pursuing development in their city, if they can simply "help to make it happen". Forging a mutually beneficial project.
Politics done, would incorporate that network into assisting in tapping into various funding potentials such as development tax credits, various workforce development initiatives etc etc. In the same vein approach local commercial lenders in the area to "assist" in best amplifying the leveraged power of the liquid capital at hand for a "project of area benefit".
Next step in leverage is to approach ideal building partners in the area to lobby for limited partnership into the venture, offering minority stake for capital investment into the project via liquid capital placement OR equitable contributions. Ideally earning a 1-2-3 punch of not only having our go-to builders set, who is also a vested interest in it's best performance, but additionally amplifying our capital power and in theory earning a smaller charged margin on the development costs.
In summary, I would leverage the $1m liquid capital multiple times over, in psychological power, networking power and in total financial capacity manner. End of day goal would be a $7m + asset leveraged from that $1m capital, with an equitable position in excess of $2m so finalized step would be the "Rinse & Repeat".
If I had a million dollars (If I had a million dollars) I'd buy you a green dress (But not a real green dress, that's cruel)
I would do the same thing I've done in the past with this new million- hold it until I had a very solid opportunity and not settle for merely mediocre ones.
Use it as down payment to buy five new built fourplexs with each value about $800k, with five 30-year fixed conventional loans.
Acquire 41 single / multi-family doors, looking for properties with high equity baked in, retire from our corporate jobs, manage those properties, enjoy life. (It took $1.2m however, and 26 months). The follow-on (in progress) is: sell the lower performing properties that we bought (in the beginning) to recover market & forced appreciation and reinvest the proceeds in higher net earning properties. Refinance higher interest rate properties now that rates are lower to also lower the term of the loans and / or do cash out refinancing to free up additional capital to invest in additional opportunities.
Use it to put 20% down on a duplex that's under $400k. Invest the rest in an index fund.
- $200k additional to operating capital for my syndication business
- $515k of investable capital for my deals
- $200k broken into $50k chunks for passive syndication investments. One Multifamily, two MHP, one Self Storage
-$70k to pay off my mortgage
- $15k for a vacation overseas when Covid is over
Find and purchase 4 distressed 10 unit properties locally; a 10 unit in my market would sell for $500k at full market value, I would want to buy it at 50%, invest 20% in a full rehab of the main components (electrical, plumbing, heating, roof) and lease it out. I would use the $1M for the purchases & get hard money for the rehab portion for the tax offset. Once the units were fully leased I would get the $1M back and go back and repeat the process.
$500K would be invested in equities with a total portfolio dividend income target of 5%.
$500K would be used to purchase and BRRRR five properties.
Cash out refis proceeds, rents, + equities income would continue to feed the real estate business.
It depends on where I am in my career. If I was new, I would pretend I didn't have it and I would learn to make it in this business without it. Where I am now, I know exactly what to do in order to safely fetch a strong ROI. I know how to protect that money first and then have it make money second. I would also focus on what my end goals are and how that plays into them.
If I had $1,000,000 liquid capital readily available to invest, Id invest in the following:
- 25% privately lend
- 12.5% investing in performing notes
-12.5% SF/small multifamily Flix & Flip or BRRRR
-50% put towards a stable and operational commercial property (probably multi-family since the future of office spaces is looking a little bleak.)
I would save half of it for taxes so that I don’t end up owing $1M to IRS a few years down the line.
I would set aside 10% for reserves, and purchase four STR or Short Term Vacation Rentals ($3,000,000 total cost) with the rest as downpayment of 30% and commercial blanket loan representing 70% LTV on all four. This would generate a the following return and investor advantage (estimates):
- $248,000 in free cash flow annually after expenses and debt service
- $1,150,000 in bonus depreciation from cost segregation study (Year 1), more depreciation in years after year one
- $31,000 in principal pay down annually
- Realize a better than 25% cash on cash return
- The market I would invest in has a track record of about 3% appreciation annually or $90,000 on this portfolio of four STRs.
This would yield a return of capital in less than four years tax free with the bonus depreciation. Then I would have no cash in these four by the end of year four. I would take the cash generated and purchase an additional house each time I had enough returned to down 30% down purchase. At the end of ten years, you could potentially be free cash flowing nearly a million a year.
Let’s make two assumptions... 1. I’m starting from scratch, and 2. I have to invest it all. I.e. no vacations, cars, or charitable donations.
First thing: 6-month emergency fund invested in a low-yield fund comprised of mostly bonds. Let’s say $100k.
Second: Index funds tracking major indices (Small cap, large cap, international, etc.). Easy to buy and sell and provides additional liquidity and diversification. Let’s say $300.
Third: I like apartments. I’d take another $300k and split between several syndications with solid operators - minimum investment in each.
Fourth, and final: the remaining $300k would be mine to invest in my own real estate projects... right now, that’s more apartments. That would be $50k-100k in each of our next few syndications. In the meantime, I’d park the money in an investment account that is about 40/60 stocks/bonds - mainly to preserve capital with a smidgeon of growth.
Or maybe some expensive ketchup, like Dijon ketchup
I'd invest half of it in undervalued, underperforming self storage deals. SBA loans only require 15% down and the interest rates are insanely low. Plus self storage does well during difficult times. I'd hold on to the other half for taxes and dry powder for future deals. In today's environment it makes sense to think defensively.