Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
Hello All!
I have a client and friend who invests generally out of state. She is going to be inheriting around $400K and asked me what I would do. She wants to go with MFU and doesn't have a ton of time to be hands on (so no STR). I gave her a few ideas but thought I would throw it out there to get other's opinion. She wants tangible assets (so no DST or REITs).
Real Estate Agent · Memphis · Member since 2021 · 41 posts · 25 votes
2y
Hi Rick,
MFU are no more passive than owning multiple single family homes when utilizing a good property manager. SFHs however provide more diversification and provide better exit strategy options with the ability to sell to owner occupying buyers or investors. I would recommend researching experienced TK providers that provide customer service focused property management.
I have a client and friend who invests generally out of state. She is going to be inheriting around $400K and asked me what I would do. She wants to go with MFU and doesn't have a ton of time to be hands on (so no STR). I gave her a few ideas but thought I would throw it out there to get other's opinion. She wants tangible assets (so no DST or REITs).
I favor finding properties "Off Market" doing “Subject To” and selling on “Lease Option” for great cash flow and nice profits. Such as:
Real Estate Agent · Memphis · Member since 2021 · 41 posts · 25 votes
2y
Hi Rick,
MFU are no more passive than owning multiple single family homes when utilizing a good property manager. SFHs however provide more diversification and provide better exit strategy options with the ability to sell to owner occupying buyers or investors. I would recommend researching experienced TK providers that provide customer service focused property management.
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
2y
If she's doing long-term holds right now in this higher interest rate, higher insurance environment, she'll likely need to put more down that the minimums in order to get the properties to cash flow. With that amount of money and not wanting to invest with someone else, I'm not sure I would get too cute. You as an agent can find her smaller properties with strong upside. LA might not be the right market with property costs, but personally, I wouldn't get overly cute with the structure.
Memphis, TN · Member since 2021 · 82 posts · 37 votes
2y
@Rick Albert There are some great turnkey companies on here who specialize in SFH homes that are for LTR. Single family homes on average are better for that long term safe steady investment play without the headaches that can come with the STR. Please let me know if you have any questions or need any additional information.
Real Estate Broker · Greensboro, NC · Member since 2023 · 79 posts · 45 votes
2y
I would suggest investing in cash flowing properties in the area that you like.
Look for areas that are growing financially and people/companies are moving in.
Important thing to note is that with this cash you can get a portfolio of houses with 400k down and create positive cash flow given you get a good property manager.
Realtor · Phoenix, AZ · Member since 2021 · 523 posts · 239 votes
2y
Without a ton of time on her hands, I doubt she wants a large amount of exposure. I would recommend she puts it all into a $1 million dollar multi family property that will cash flow nicely for her. If she wants multiple properties, I would look into two properties around $500K each.
Lender · Orlando, FL · Member since 2016 · 340 posts · 115 votes
2y
a lot of investors are purchasing the houses we financing ground up for build to rent. The cash flows have been squeezed down over the last year, especially with today's interest rates if financing but the 2-4 unit projects are still solid for long term rentals. These are are mostly in FL, so might be a stretch if she is in CA. Perhaps adding an ADU to her home would be an option out there? Seems like great comments from everyone on this thread!
my answer would have been different a year ago. but it sounds like she's already a real estate investor? has her OOS approach been working for? what does she want?
all you ruled out were STRs and REITs, leaving... tons of other options. =)
are there really 500K-1M MFs that people with no experience can easily buy and maintain that will cash flow nicely, at today's rates?? that's a big bite to recommend to someone.
are there really 500K-1M MFs that people with no experience can easily buy and maintain that will cash flow nicely, at today's rates?? that's a big bite to recommend to someone.
Yes with 40% down you can find properties that cash flow with property management in place which is necessary for someone with no experience and not a lot of free time.
For a clean, easy(ish), simple option we're honestly seeing some good new build value in Reno, NV for a standard single family.
They also tend to command premiums on rents, lack of maintenance (generally), easy to get a PM to manage, etc.
Also easier to liquidate down the road if needed. Not sure how much she wants to push the "easy" button, but this is what we're seeing out here at least.
that's a lot of eggs in one basket though - that's every penny of the 400K.
Your going to get a better return on more units than a median priced single family. I would argue that $400K in one multifamily property is as safe as it gets right now because of the instant equity and lack of vacancy in today's market.
are there really 500K-1M MFs that people with no experience can easily buy and maintain that will cash flow nicely, at today's rates?? that's a big bite to recommend to someone.
Who doesn't have experience? The client who invests out-of-state? If you are setting aside "x" amount for equity on a MF that cashflows, that price is going to be contingent on those factors, not some price range that is made up. These are funds used after addressing your personal debt and improving your DTI.
I have a client and friend who invests generally out of state. She is going to be inheriting around $400K and asked me what I would do. She wants to go with MFU and doesn't have a ton of time to be hands on (so no STR). I gave her a few ideas but thought I would throw it out there to get other's opinion. She wants tangible assets (so no DST or REITs).
real question is what is her expertise ?
on the hand of smart investor 400k could become 600k in 3-5 years ; but on other hand it could be gone quickly if it's managed unwisely.
I would however diversify a lot : invest 30% into debt-fund HML invest 20 single family rental inest 30% into CD invest 20% into alt. investment/public investments (all kinds)
If she has relative experience with public/alternative investments including understanding all the risk of different type of investment involved, I would diversify with lot of good asset class.
If she's/he's average then just put everything to CD or some rentals are acceptable although it may not be the most highest R/R at this time.
Looking at latest NAHB appreciation forecast, the next 5 years appreciation return is not too excited, with mortgage rates still lingering around 6-7% in 2025 and appreciation is only 2-3%, basically mild market.
In high rate environment, it is wiser to allocate more into debt investment, such as HML, or gov. bonds.