Real Estate Broker · Portland · Member since 2019 · 3 posts · 4 votes
You get a phone call from an out of state attorney who informs you that a long lost relative has passed away. You are the closest living relative and you have inherited $10,000,000.00 USD.
What is your long term strategy? What would you do? Where would you invest? How would you scale? What would be your target goal? details please!?
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
6y
My strategy would be to protect the money optimally from the government and from other potential filters and to optimize my time to do what I enjoy doing instead of worrying about real estate ventures. Any real estate ventures would be things I consider fun where I can participate in some fashion without doing the bulk of the work and I would derive some autonomy, mastery, and purpose goals from.
Rental Property Investor · Milwaukee, WI · Member since 2017 · 77 posts · 86 votes
6y
@Sonal Chopra what a great question, thank you for asking this to this community.
Long-term goal would be the same goal my wife and I have today; Build, passive on going revenue streams that exceed our current and future expenses with the ultimate goal of giving away 80% of what we make to charities and causes we want to support. This creating more time freedom in our lives, while providing generosity to the world.
We’re currently pursuing this through both active and passive investments in Real Estate Syndications. With a $10MM windfall, we put a vast majority towards passive investments with a diversified group of experienced syndicator partners. We’re well versed in market and investment analysis so we we insure the assets we invite into are spread out across different geographic locations, different MSA clusters types, and varied asset types & classes. Warren Buffett says “wide diversification is only required when investors do not know what they are doing.” In essence he was just saying invest in what you know. I know, like, and trust in the long term powers of large scale real estate providing quality returns that out perform the market. This is in part why most of the funds would be invested into this area.
Typical syndications would yield anywhere from 6-10% cash on cash annually, and 15+% IRR over the course of the holding periods. Assuming an average 8% CoC return and factoring in none of the backend, if I invested a total of $5MM into several syndications (assuming some of the windfall went to taxes), we would yield $400,000 annually.
Depending on your current and future desired lifestyle you could continue to live modestly, and reinvest a large portion of the dividends earned. For my wife and I, we would continue this process until 20% of the dividends exceeded our desired future living expenses, and donate a vast majority towards worthy causes.
Lastly, we would also use a tax levered savings vehicle for the long-term “storage” of our money as well. There are several trusted ways to do that, but so won’t go into it on this post.
Again, @Sonal Chopra this was a very fun exercise to reflect on our long term vision. Excited to see what everyone else is looking to create in their futures as well with this fictitious windfall.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
@Sonal Chopra I am with Jorjio. Some, likely most, would go into passive deals across various asset types and sponsors. Some would be used to create my own deals, but on a scale that professional management can be utilized.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
6y
What I would do, seeing as I have my own syndication investment company, is use a large portion to invest in my deals as they come. I would put some in passive syndications with responsible sponsors that I trust, I would invest some in the stock market, precious metals and bitcoin. I would also invest some in tech start ups, medical companies and other start ups.
If I was just starting the first thing I would do is learn. I would spend 6 months+ learning about different investing opportunities, asset classes and risk profiles. I would use that time to network as well. Then, when I was ready, I would slowly invest my money.
Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
6y
My strategy would be to protect the money optimally from the government and from other potential filters and to optimize my time to do what I enjoy doing instead of worrying about real estate ventures. Any real estate ventures would be things I consider fun where I can participate in some fashion without doing the bulk of the work and I would derive some autonomy, mastery, and purpose goals from.
Rental Property Investor · Baltimore, MD · Member since 2016 · 109 posts · 31 votes
6y
@Sonal Chopra This is a great question. Here are a few thoughts:
What is your long term strategy? Build a portfolio of cash flow producing single-family homes in a high-cost market with high barriers to entry.
What would you do? Apply BRRRR strategy to single-family homes in parts of the city that are in the paths of progress, while renting out to tenants whose rents are subsidized by the government (Section 8).
Where would you invest? Washington DC
How would you scale? Develop 'core four' and add additional team members to increase the number of properties going through the process.
What would be your target goal? Develop a portfolio of 500 homes.
Rental Property Investor · Fresno, CA · Member since 2018 · 112 posts · 166 votes
6y
@Sonal Chopra Great question, I like some of the responses already. I think I’d invest at least half with commercial syndications in Multifamily and self storage (mostly in my own syndications, some passively). I’d use the other half as a long term play in ground-up developments.
Rental Property Investor · Indianapolis, IN · Member since 2016 · 559 posts · 463 votes
6y
Most folks would do a wonderful job of losing most or all of the principal. I'd recommend keeping it in the bank until you have learned enough to make intelligent investment decisions.
Personally, I would do the following:
500,000 - Gold, Bitcoin - Always prudent to hedge your bets.
1,000,000 - Cash. Personal liquidity and some "dry powder"
2,500,000 - Quicker Return Investments. Looking to double money every 12-24 months. (heavy rehab deals, flips, personal lending, etc)
6,000,000 - Multifamily Syndications - With lower risk, greater diversification, and a 7% annualized preferred return paid out monthly, That's 35k/mo in true passive income while the invested principal is doubling or better every 5 yrs.
I wouldn't spend a dime of the principal on houses, cars, fun, OR CHARITY because I can do that with the cash flow and end up giving more in the long run :)
This strategy follows the commandments of investing:
1. Don't lose money
2. See rule number 1
3. Find Yield
Heck... who knows, once I get to this level, I'll probably put 90% with a trusted and experienced sponsor, keep 10% locked away for a rainy day, and with all the cash flow donate and serve various charities around the world. I think that would make me the happiest and most valuable to the world :)
There sure are a lot of threads about what to do if you suddenly get rich.
The truth is that building wealth is a slow process and the odds of hitting the lottery, inheriting massive wealth, or suddenly getting a huge lump sum are absolutely tiny. Instead of worrying about that sort of thing I prefer to focus on how I can use real estate to EARN that sum.
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Sonal Chopra would probably invest 50% in syndications as a passive investor: apartments, mhp, storage, etc. and 50% in Vanguard indexed funds. The key concept with both being passive!
Rental Property Investor · Baltimore, MD · Member since 2016 · 109 posts · 31 votes
6y
@Sonal Chopra If your short term goal is to reach a net worth of 100MM in assets within a time period 10 to 15 years, you'll need to grow and scale a business to a considerable size. You can do this with the syndication model where you acquire real estate using capital provided by passive investors. Over time you'll need to acquire more assets and increase the size of the properties you're acquiring. But eventually you'll get there. You can apply this model to different types of real estate but multifamily, mobile home parks, and hotels are better options given the ability to buy larger assets over time.
Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
6y
@Sonal Chopra first it would be a loss of a family member which is never a good thing to lose someone.
For the sake of the exercise. I'd be a sponsor who signs on debt to back the asset. I'd take that role on projects as I built more and more relationships to be able to sponsor with proven operators.
Would be the most ideal way to build wealth passively. Also I would put someone of it to work as well as I hate losing to inflation. So having it in an account sitting would not be ideal for what I seek to do.
Rental Property Investor · Phoenix, AZ · Member since 2019 · 146 posts · 77 votes
6y
@Sonal Chopra excellent "What if" scenario! My ultimate goal, as I'm sure is many other's, is financial freedom through passive income. If I do not need to raise capital for a deal because I had all the cash required then that would be most ideal for me. I'd leverage that $10M over $40M of cash flowing assets, preferably multifamily and storage, aiming for a cash flow of 10% producing $1M in passive income annually and then assist other real estate entrepreneurs get started and assisting them and mentoring them in their own deals. Naturally I would also have to keep buying assets as to prevent having to pay taxes on my annual income of $1M.
Lender · Chicago, IL · Member since 2016 · 653 posts · 313 votes
6y
@Sonal Chopra I would buy several multifamily complexes in diversified markets across the country. Ranging from cashflow based to hedging based. Obviously, hiring a management company to take care of day to day operations. Any money left would go to syndications or smaller deals to park cash.
Specialist · Carolina Beach, NC · Member since 2016 · 390 posts · 496 votes
6y
I would invest about half in a low-cost index fund (something with moderate to low returns and risk) with Vanguard or Fidelity or some other "low fee" funds. I would invest the other half with a diversified mix of cash flowing assets across operator and geography with a focus on assets with good long-term demographic fundamentals, (i.e. Apartments, self-storage, mobile home parks, assisted living facilities, etc.)
Diversify across Asset Class, Operator, and Geography.
Real Estate Broker · Portland · Member since 2019 · 3 posts · 4 votes
6y
Wonderful ideas and strategies! Although I'm surprised that whole life insurance hasn't been mentioned as a strategy. Is everyone familiar with the pros and cons when it is coupled with real estate acquisitions?
Wonderful ideas and strategies! Although I'm surprised that whole life insurance hasn't been mentioned as a strategy. Is everyone familiar with the pros and cons when it is coupled with real estate acquisitions?
Use the cash flow from the above suggestions to buy dividend-paying whole life insurance. Then leverage the cash value to buy more properties.
The guaranteed, permanent death benefit replaces the value of the future taxes due when deferral ends.
Or the death benefit replaces the value of the assets themselves allowing you to use and enjoy more while still alive, and even offset taxes due on other assets such as tax-deferred retirement accounts.
Wonderful ideas and strategies! Although I'm surprised that whole life insurance hasn't been mentioned as a strategy. Is everyone familiar with the pros and cons when it is coupled with real estate acquisitions?
Sonal, Although I am not an expert at whole life insurance as an investment vehicle but I can connect you with an expert that I trust!
Wonderful ideas and strategies! Although I'm surprised that whole life insurance hasn't been mentioned as a strategy. Is everyone familiar with the pros and cons when it is coupled with real estate acquisitions?
I agree! If you were to inherit 10mm, there needs to be some estate planning first and foremost. Using Whole Life insurance is a important cog in that plan.
I would personally put my assets inside a BDIT (Beneficiary Defective Inheritor's Trust), or a SLAT (Spousal Lifetime Access Trust) to freeze the estate at $10mm.
I would purchase any and all investments inside that trust along with a form of Whole Life or IUL policy to be able to use the tax code of 7702 to create a tax free income and ability to leverage my real estate assets.
The BDIT effectively freezes your estate, but gives you the access to funds.
Good strategy for any asset that looks to eclipse the estate tax level.