I've decided I'm going to liquidate my holdings (SFH's) in an appreciating market. I should come away with $300K. Would love to get seasoned investors advice on what they would do with the cash. i.e. SFH's package? MF property? Major metro area or tertiary market? It would likely be an out of state investment as my local SLC market is way too inflated for my cash flow goals. My goal ultimately is to work toward 10K/month net passive income. I realize I will get several diff't answers which is exactly what I'm looking for- to see all sides of the cube. thanks in advance.

Why liquidate a cash flow in the goal of creating more cash flow?  I'd look at refinancing in order to keep the current cash flow AND add new ones.  

Thank you @Dooreuhn Cee for your suggestion! I should have mentioned, the 6 SFH's have appreciated a great deal and don't cash flow that well.

OIC.  Well if you put 300k down on 6 2-flats, you would end up with cash flow from 12 rents.   $200/unit would get you 2.4k/mo, almost 25% of your goal. 

@Kate Weinberg depending on whether you want your cash flow to be active or passive you could become a passive investor in a MF syndication and probably fetch between 8-10% cash on cash annually. However, you typically have to be an accredited investor to participate. Message me if you have any questions! BTW, I used to live in Provo and miss Utah!

@Abel Sng took the words out of my mouth. (Except I have never lived in Provo!)

@Kate Weinberg

As someone who is an active out of state investor, I have to say that you do need a good system and team in place.  This takes time and research.  I highly recommend doing all this and also talking to other out of state investors who have a successful track record.  Best of luck and feel free to let me know if you have any specific questions.

Definitely recommend tertiary market. Like cities with ~50,000 people. Every city is so unique so I don't want to categorize them too hard.

Multifamily or flipping SFH... im pretty 50/50 on this one. One will generate you cash flow, but youd still be short of your $10,000/month goal unless you get yourself a RIDICULOUS deal for your $300,000. It's still technically possible, but youd have to look for just that right market, and at just the right time with just the right bidding price, and the seller has to be cool with you getting the loan approved or whatever. $300,000 with an additional $600,000 in loans could very well get you that property that gets you maybe $5,000-$6,000 / month. My numbers are rough.

I like commercial or multi family/mobile home. With $300k that is a decent down payment and could help you with some nice cash flow. You could also use that money to partner passively or actively with others. Out of state can be great if you're willing to research and trust others, however, in state is best if you can find the deals 

Hi @Kate Weinberg , have you considered a 1031 exchange? 

As others have mentioned, if you're an accredited investors you do potentially have the option to consider syndication. By reinvesting in 1031-qualified DSTs (Delaware Statutory Trusts), you purchase ownership interest in multimillion dollar properties that offer long-term income where you don't have to be the landlord. 

I would suggest to stay in your own state UT since properties are affordable compared to CA, NY, or TX, but there are cheaper areas, more headaches.  I have heard south west UT (Saint George)  is becoming popular area for retirees or anywhere near student population.

@Leslie Pappas

What kind of return for those trusts? How liquid are they?

I would put a portion of it into property to rent out.

@Abel Sng and @Jared Kenealy what cash-on-cash return could Kate expect with syndications during an economic downturn?

Wow.  Thank you all for some great advice!  I'm not necessarily opposed to syndication, I was just somewhat hoping for better than 8-10% retirn.  Perhaps I need to adjust down my expectations. I was fully assuming to use the 300k as down payment and finance the rest.  I should mention I will have significantly more than 300k out of my liquidation but only wanted to use 300k of it initially.  I have thought about doing a 1031 but Didn't want to be confined to a timeline- it's already difficult to find a good deal, didn't want to add in the complexity and constraint of a timeline/deadline.  Again, could be misinformed.  

As exciting and tempting it is to scale up by partnering with someone, I'm extremely weary of who the partner is how to find him/her and how to gain trust.  I know this will also be the case when finding a team but I have more ways of vetting a team/company than an individual.  For some reason it just scares me- wld love to hear how to avoid this or any tips because I know it can be wildly successful too.  Thx again for your input!

If you're putting down 25% of the purchase price (say $300K on a $1.2MM property), you can generally earn more than 10% if your cap rate is three points higher than your interest rate on your financing. (This is just a very general statement and not exact by any means). 

For example, if you put down $300k on a $1.2M building at a 7.5% cap rate, your NOI will be $90k. If your mortgage is 4.5% over 30 years, your debt service will be $54,722.01 per year. That leaves $35,277.99 in cash flow, or 11.76%.

Of course, you should have extra capital set aside for capex, reserves, and the oops! factor, but that's how the numbers would work. 

I think it is a great idea to cash out now while the market is high. All of my own cash is sitting on the sidelines in safe, financial alternatives. I'm waiting for the market to become sane again before I take on "equity" risk. Private lending may sound risky on the surface, but it's actually a very safe, secure position. The investor borrowing the money is taking on the risk. I'm either going to make a very nice, risk-adjusted return or I'm going to inherit the collateral securing the note.

When you sell, you should consider using a Monetized Installment Sale. This is an alternative to a 1031 exchange that will defer your taxes for 30 years, but you'll walk away from the closing with cash. Happy to explain further. PM me if you'd like more details.

Originally posted by @Kate Weinberg :

Wow.  Thank you all for some great advice!  I'm not necessarily opposed to syndication, I was just somewhat hoping for better than 8-10% retirn.  Perhaps I need to adjust down my expectations. I was fully assuming to use the 300k as down payment and finance the rest.  I should mention I will have significantly more than 300k out of my liquidation but only wanted to use 300k of it initially.  I have thought about doing a 1031 but Didn't want to be confined to a timeline- it's already difficult to find a good deal, didn't want to add in the complexity and constraint of a timeline/deadline.  Again, could be misinformed.  

As exciting and tempting it is to scale up by partnering with someone, I'm extremely weary of who the partner is how to find him/her and how to gain trust.  I know this will also be the case when finding a team but I have more ways of vetting a team/company than an individual.  For some reason it just scares me- wld love to hear how to avoid this or any tips because I know it can be wildly successful too.  Thx again for your input!

Paying taxes on that gain, only to reinvest it immediately into rental properties is silly. Taxes are on your gain include depreciation recapture. Punch the numbers and my guess is you would be better to overpay a little for a multifamily deal rather than paying those taxes. I would look into a 1031 and explore that option more. 

A couple good Airbnb mfh's could get you there.

@Kate Weinberg the 8-10% is your cash on cash return. Doesn't factor in your appreciation on the back end. Typically syndications should net you around 80-100% total return over a 5 year hold. So between 15-20% annualized total return. My family and in-laws both have done well for themselves through SFH investing and have both since started to liquidate their SFH and putting their funds in our syndications. When you do the math on a typical buy and hold your cash on cash isn't much better and definitely not passive.

@Mike Dymski wish I had a crystal ball to tell you that! But if I had one I would be on bigger pockets ;). However, it will all depend on the sponsors, deal structure, asset, location, etc as I'm sure you know. We only invest in strong economic markets such as DFW and ATL and typically in C+/B-ish class assets. Additionally, we put FNMA agency debt on most of our deals. If you look at the report they just came out with in August, they only had around a 1% delinquency rate through the crash in their MF holdings. Pretty good if you ask me. IMO, if there's an economic downturn everyone's returns get hit however with our business model it will definitely get hit less than most other investment vehicles! If you have any questions I can help answer please feel free to reach out!

Ha! @Abel Sng does it again! Great answers to both @Kate Weinberg and @Mike Dymski . He's faster than me!

We are a very similar model to Abel only in the Kansas City market. Our investors generally need 8-10% cash on cash and IRR in the 20%+ range over a 7-10 year hold.

@Kate Weinberg , Pressure on inventory with good potential is high most places.  Groups like syndicators and turn key companies with established pipe lines are going to have an advantage over you when you leave your backyard.  

So I think the first question has to be - Do you really have to leave your backyard?  If yes, then can you really leave active and become passive in terms of management, returns and attitude?  For some active rei is the way they fill their days.  For others it's a mean to an end.  

Truth be told folks with last names like Rockefeller and Carnegie have done pretty well making 8-10% over the last couple of centuries. If you can really achieve that totally passively  in real estate and retain your tax benefits in a 1031 exchange it's worth pursuing.

@Kate Weinberg Based on your goal ROI for your investment, you'd need to something more aggressive. You would need to do a larger project like a value add MF property. We've done some deals where the passive investor takes a minority stake in a new LLC with the hands on investor taking majority. You would put up the down payment and the majority holder would obtain financing for the purchase and rehab. After the building is stabilized with raised rents, you can get more conventional financing and get the building cash flowing with the return you need.

I would be cautious of anyone that can promise $10K a month return on any other type of purchase.  The only thing that comes to mind is acting as the private lender for a fix and flip, charging interest plus points, and getting a portion of profits on the back end.  

once again, I thoroughly enjoy all this wonderful insight.  I thought I had a pretty clear direction but now many other options and strategies have opened up thanks to you all.  

1) I will look more into 1031's

2) will look into syndication

Does anyone on here have experience with BOTH owning a Multi themselves (out of state) as well as participating in a syndication- who is not the syndicator themselves?

@Kate Weinberg I'm glad I'm not the only one in SLC who realized the market is ridiculous right now. There's a ton of options in a ton of places besides here. Sadly. I'd rather stick close to home but alas... 

Good luck and happy hunting!