What would you do with 100k to invest in RE?

Question

Have a desire to make a long term, conservative investment in real estate.  What strategy would you pursue?

Saul Gomez · Answer

I would buy a distressed 30 unit apartment complex and do repairs and get a high occupancy.  Then I would get it appraised and cash out on the new loan.  Then I use that extra money to put down on another apartment complex.

Sharon Vornholt · Answer

I would use that money to make downpayments on 5-6 single family homes in good neighborhoods (that were great deals). Then I would work on paying those off by wholesaling other deals.

Raymond B. · Answer

Joe A,
I would advise you, to never post anywhere, in any forum, the amount of $$$, that you have available to invest.

The "scammers" are always looking for that kind of information.

Raymond

Justin Stamper · Answer

if you have the extra time and connections to do this,i would say this is a great way to spend 100k.

Mike Knowles · Answer

Evan Scott

I invest in Chicago; there are plenty of opportunities for you here.  However, I do think parts B and D of your plan are contradictory...you won't get the highest risk/reward combination from investing in working class neighborhoods (Albany Park, Humboldt Park).  There are good returns there (15%+ CoC, with leverage), but South Shore, Grand Crossing, etc. can be higher.  I looked at a small apartment building down there last week which rents for about $8k per month when full and the asking price was under $300k.

My initial advice is to find some partners that you trust who are already doing what you want to do.  Whether that's other investors, or just a realtor or property manager that you know, it's helpful to have another brain and set of eyes working with yours.  At least, it's been invaluable for me.

Looks like you've thought about buying a multi-unit, living in one, and renting the others.  A LOT of people get started that way in Chicago.

James H. · Answer

Jon K.,

I did not mean to imply that one should not take latitude. I usually reply with an eye toward the actual post as the title almost never contains the entire question. I'm a pretty conservative person and was really wondering folks really thought the advice was actually conservative or not.

Evan Scott · Answer

I'm in a similar situation, so how about some specifics and we can develop a plan in theory:

A. I have around $50k cash to invest, but will likely have much more in 6-12mos (I have a $150k/yr salaried job that pays a large bonus in addition to that, but I'm young and just finished paying off college debt, so low savings). I'm 24 with no debt/kids/expensive wife/etc.

B. I'm looking for the highest absolute returns possible and I am okay with high risk (losing entire principal is acceptable) to get these returns. I would prefer less risk than that, but at this point I will always accept higher risk/return over less risk/return.

C. I live in the Chicagoland area, but do not restrict myself to that area. I would prefer Chicago, but am open to Charlotte, Austin, Dallas, the rest of the Rust Belt (Pittsburgh/Cleveland/Michigan/etc.).

D. My target is to be receiving as high of cashflows as possible with little interest in speculative buying. I like SFHs in decent/working class areas that easily rent and may participate in some upside should the economy turn around. I have 0 interest in flipping or gut rehabs, but am okay with places that need some plastic surgery / cosmetic work.

My current plan is as follows:
-Buy as many SFR or 2-4plexes as my cashflows and debtload can handle, while meeting the 2% rule.
-Continuously reinvest income through an LLC to buy more SFRs or multi-family properties.
-I may do an FHA loan on a place I would live in that would also be a multi-family 2-4plex, but in a nicer area/non-warzone (less upside, but still a decent investment).

The goal would be to have 50+ rented units and/or 25 SFRs within 5-6 years.

Any thoughts/concerns/etc.?

Jon Klaus · Answer

Since he titles the thread "what would you do?" I think we have latitude to say what we would do.  I'd be aggressive since I have plenty of conservative stuff.  Spec build.  No, it's not long term, but the money is. Rinse and repeat or roll it into an income property.

Joel Owens · Answer

The bottom line is Joe hasn't told us what annual return he is seeking for his hands off investment and how much of a return he is currently getting on his 100,000.

Until we know that everything is a shot in the dark.

James H. · Answer

Well, if you want conservative, put 50K down on a house that costs around 80 to 100K. Keep the other 50K as reserves. You PITI would likely be around 450/month and you should purchase such that your rents are 1200/month (in my area at least. Now you are clearing 750/month after PITI. If you buy a place in good repair and select a good tenant, you should see most of that by the end of the year. 750*12 is 9,000. If you like what you are getting into, take some money from the 50K you have and combine ti to make a DP for a second rental. This is a conservative approach that will put money back into your pocket. If then you feel like you want to get more involved, you can refinance the first rental to get some cash back if you want to use more leverage on additional projects. This might not give you the best COC return and your expenses will definitely increase as time goes by, but you could grow your retirement worth easily by two or three houses , get a way better return on your money than a savings account and still be plenty conservative while getting some cash back every month.

These other suggestions to by 5 or 6 houses or buy an apartment complex and do a cash out refi to buy another one right away are certainly strategies, but do y'all really think those strategies are conservative?

What would you do with 100k to invest in RE?

Most Popular Reply