Inheriting $400K, what would you do?

Multi-Family and Apartment Investing
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Inheriting $400K, what would you do?

Rick Albert
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).

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Rick Luebbert
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. 

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  • Julien J.
    Investor · CO · Member since 2016 · 757 posts · 1k+ votes
    2y

    @Rick Albert

    That would depend on her goals and how much risk she is willing to take on. Once that is figured out, work your way backwards to the the strategy and appropriate asset call.

    2Reply
  • Arran Mcconnell
    Flipper/Rehabber · Orlando, FL · Member since 2021 · 5 posts · 4 votes
    2y

    I know its a real estate form but I'm making 4.7% interest just putting it in a money market account with the interest rate increase. If REI isnt totally for him them I wouldn't push it on him and give him options. If he's set on REI then I would find him 2-3 block homes in working class neighborhoods and see how well he can BRRR without becoming his property manager.

    2Reply
  • Ali Nichols
    Investor · Member since 2022 · 235 posts · 127 votes
    2y

    Scaling up a portfolio of small multi-family properties. Something we would be happy to connect over.

    0Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    2y

    Pretend you don't have it. Learn your market and learn to market.  Wholesaling is a great place to do that.  Once you do enough deals you will know exactly what to do with 400k.

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Ian Walsh she "doesn't have time to be hands on" so I don't think wholesaling is an option.

    @Rick Albert what size are the multis OOS?  are we talking 2 units, 10 units, 100 units?


    @Mason Weiss OK, what size multis offer fixed debt?  4 or less?  would still love to see numbers.  and i still don't see why you'd tie down the entire 400K.

    1Reply
  • Mason WeissBusiness Member
    Realtor · Phoenix, AZ · Member since 2021 · 523 posts · 239 votes
    2y
    Quote from @Nicholas L.:

    @Ian Walsh she "doesn't have time to be hands on" so I don't think wholesaling is an option.

    @Rick Albert what size are the multis OOS?  are we talking 2 units, 10 units, 100 units?


    @Mason Weiss OK, what size multis offer fixed debt?  4 or less?  would still love to see numbers.  and i still don't see why you'd tie down the entire 400K.

    1425 E ROOSEVELT ST, Phoenix, AZ 85006

    Purchase Price - $775K

    Gross Rents - $5K

    Down Payment (Let's say $350K)

    PITI - $3,300 at an 8% interest rate.

    Hold your wealth here, have cash flow after other expenses like PM, trash, minor landscaping, tenant pay down will be over $500 a month day 1 and then appreciation with holding long term. Obviously this property is turn key as well with long term tenants in place and the potential to refinance in a few years to have great cash flow. Cash on cash you aren't getting a money market return but you can't get that in RE unless you go direct to seller but if you want to store wealth in RE, these are the moves that high income earners are making right now.




    [email protected]480-818-7745
    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Mason Weiss

    I don't mean to go off on a tangent here but that property has all sorts of red flags.  It sold for 220K in 2019; it's been listed for 100 days and hasn't sold; and the tenants apparently won't allow showings... 

    0Reply
  • Mason WeissBusiness Member
    Realtor · Phoenix, AZ · Member since 2021 · 523 posts · 239 votes
    2y
    Quote from @Nicholas L.:

    @Mason Weiss

    I don't mean to go off on a tangent here but that property has all sorts of red flags.  It sold for 220K in 2019; it's been listed for 100 days and hasn't sold; and the tenants apparently won't allow showings... 


     I don't think you have ever purchased a fully occupied multi family property because that is the standard until after contract acceptance. Multi family evaluations are done based off rental income which is why the property has grown in value. The entire Phoenix multifamily market has seen a 100% growth since 2019. Days listed just creates more opportunity for negotiation. I am not going to keep going down this forum with you because it is a waste of my time and judging from other forum posts you just like to argue with people. If you have better credentials I'd love to hear them.

    [email protected]480-818-7745
    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Mason Weiss

    It's all good.  I just thought I would try to contribute to this post since it seemed legitimate - sometimes the posts that start with "I have 1M, what should I do?" seem fake.  This one seemed real, since the poster has 1200+ posts and the friend is already an investor.

    Me: I'm an intermediate investor.  I have bought small occupied multifamily.  And what you call "arguing," I call asking questions.  People are too quick to offer advice or say "go for it" on the forums.

    The property you posted may or may not be a good deal.  It's not an obvious slam dunk to me based on what I pointed out.  That is a very narrow point.  I thank you for chiming in and value your contributions.

    1Reply
  • Rick Albert
    OP
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    2y

    @Mason Weiss, where are you getting $3300/month for PITI. I'm getting about $3,900 not including utilities, etc. With $5K a month in rents you would be lucky to break even but if one fix happens you are in the hole.

    @Nicholas L., she has a fourplex and a triplex. 

    0Reply
  • Mason WeissBusiness Member
    Realtor · Phoenix, AZ · Member since 2021 · 523 posts · 239 votes
    2y
    Quote from @Rick Albert:

    @Mason Weiss, where are you getting $3300/month for PITI. I'm getting about $3,900 not including utilities, etc. With $5K a month in rents you would be lucky to break even but if one fix happens you are in the hole.

    @Nicholas L., she has a fourplex and a triplex. 


    Your property taxes and insurance is most likely off. Google calculator isn't right about this which is why I go off local tax records from the MLS. Utilities are $250 monthly for the property owner (shown in proforma docs provided by the seller). I am not saying it is a slam dunk, if you want safe go buy a $400k single family home or put your money in a money market fund and don't take on any leverage. Just give your client their options and let them decide the risk they want to take on for the future payout.

    [email protected]480-818-7745
    0Reply
  • Robert EllisBusiness Member
    Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
    2y
    Quote from @Dustin Lauer:

    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!

    I'd like to talk to you about columbus oh Build to rent, I'll shoot you a PM. 
    [email protected]786-494-6766
    Section 8 Launch52 Reviews
    WebsiteView Page
    1Reply
  • Alexander King
    New Haven, CT · Member since 2020 · 62 posts · 18 votes
    2y

    Leverage it to purchase a big enough multifamily where it makes sense to hire a manager since she doesn't have much time on her hands! 

    1Reply
  • Dustin Burke
    Investor · Wichita, KS · Member since 2017 · 133 posts · 41 votes
    2y

    We have opportunities and can handle all the monthly responsibilities.

    https://www.blueskypropertieskansas.com/

    https://investornoteservicing.com/

    https://elitecontainerhomes.com/

    1Reply
  • Min ZhangBusiness Member
    Real Estate Agent · Member since 2022 · 1k+ posts · 1k+ votes
    2y
    Quote from @Rick Albert:

    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).

    Hello Rick! I'm glad that I was able to bump into your blog. 400K is definitely a huge amount of money. I think Columbus, Ohio will be a great market for your friend. Columbus has experienced so much growth in recent years, partly due to the influx of tech giants like Intel ($20 billion), Meta, Amazon, and Google establishing warehouses and data centers in the area, which has contributed to an increase in property prices and more people moving into the city for job opportunities. Let me know how I can help!

    [email protected]614-412-2912
    Reafco.512 Reviews
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  • Timothy Hero
    Lender · United States · Member since 2020 · 1k+ posts · 499 votes
    2y

    I'd keep it simple and aim to put it in a multi family property. $400k is a good lump sum, but it's not enough to spread it out into multi (at least in quality, strong markets, since values are $1M+).

    25% down gets you around $1.5M after closing costs.

    Depends on the market you're in, but for $1.5M, I'm aiming for 8-15 units.

    1Reply
  • Alexander King
    New Haven, CT · Member since 2020 · 62 posts · 18 votes
    2y
    Quote from @Dustin Burke:

    We have opportunities and can handle all the monthly responsibilities.

    https://www.blueskypropertieskansas.com/

    https://investornoteservicing.com/

    https://elitecontainerhomes.com/


     I am open to seeing the options 

    1Reply
  • Dustin Burke
    Investor · Wichita, KS · Member since 2017 · 133 posts · 41 votes
    2y

    Sent you a PM 

    0Reply
  • Kevin Kohler
    Real Estate Broker | Investor | Property Manager · Plantation, FL · Member since 2015 · 228 posts · 68 votes
    2y

    I could think of a few ways to either get an asset via JV so the other partner is the "managing member" that runs the day-to-day oversight, invest into a syndication as an LP, etc. Let's connect and talk it through.

    0Reply
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