What to do with 500k in Investable Assets?

Question

Long time BP member and done 3-4 flix & flips. Fortunate enough to have liquidated assets- what to do with 500k in todays market? In Denver, with 7% interest rates the numbers are HARD to make work. Please advise

Simon Ashbaugh · Answer

I think it depends on your goals. If you dont own a primary you could house hack.There are tons of high cash-flowing deals at relatively low PP in Cleveland if you're looking to build passive income. Theres Great appreciation in Columbus if you want to make a long term play

Jimmy Lieu · Answer

Hey Mike, I would recommend Columbus Ohio. I'm from Portland, Oregon and decided to move to Columbus Ohio a few years ago to be a full time real estate investor because of the opportunity cost and the cash flow I get from each market. In Portland Oregon, houses are 800k+ and in Columbus Ohio, houses are 150k+. Tons of reasons on why you should consider Columbus - the rent to price ratio is still reasonable and tons of 1% deals remaining here. In Columbus, you'll get a great mix of appreciation and cash flow still. Literally few weeks ago, I helped a client close a 20% cash on cash return deal so yes, there's still tons of deals here. In addition, there's a lot of catalysts for job and population growth incoming here with Nationwide, Amazon, Intel, Honda, etc. I can keep going lol! As a local investor and agent here, let me know if you have any questions or want to connect!

Ben Rhodin · Answer

Hey @Mike Primsky! That's a very fortunate position that you are in currently and congrats on the success with the Fix and Flips. As for your analysis of the Denver market, yes, if you are trying to purchase a traditional Buy and Hold with long-term renters, the numbers can be hard to make deals pencil. I would second what @Jaron Walling asked and need to understand your goals. Cash flow is only one aspect of the investing journey, and in the current market you either need to get creative (MTR, STR, or other strategies), put more down, or look at the big picture of a real estate investment. Cash flow is not what creates generational wealth. Take a look at the tax savings, the appreciation, and the loan paydown. These are all things that you'll get in excess here in Denver, vs the midwest, where you may walk away with $200 a door a month.

I still have investors creating cash flow and generational wealth here in Denver, and depending on your situation, lending ability, and so forth, your $500k can go far. One of my favorite strategies for clients nowadays is a small multifamily property, and doing a hybrid MTR/LTR strategy. We just closed a quadplex like this the other week, and that will generate a 10% COC once up and running.

Don't limit yourself by saying the Denver market doesn't work, there are numerous investors still making a lot of money in this market. and since you have the knowledge and connections here, you are in a good position to build some wealth!

Tanner Pile · Answer

If you're you're confident in doing rehabs, maybe a BRRRR in the mid-west could be a good option for you. You can get properties that cash flow better and put you rehab skills to the test with organizing contractors

Nick Elder · Answer

@Mike Primsky Good for you. Great position to be in. Are you wanting to be active or passive?

From an active standpoint, SFR's aren't as profitable in this high interest rate environment. You could be in a good position to look at multifamily 5+ units but lenders will likely want to see 30-40% down payment to cover the 1.25 debt coverage ratio. As a result, your annual returns are lower. I would think for an active investment to be worth it you'd want to achieve at least a 10% annualized return. That's my rule of thumb anyway if you're going to put in all the effort.From a passive standpoint, a real estate growth fund or syndication focused on multifamily targeting annual returns in the 17-20% range over a 3-5 year hold period would multiply your equity better than any buy and hold SFR would in Denver right now. That $500k could balloon to $1M over that 5 year period assuming 17% annualized returns are met. I personally think this is the best option based on the current state of the real estate market.  A debt fund with 7-8% returns can get you roughly $35k-$40k in passive income with better liquidity than having your capital tied up in a growth fund.

I think for you it comes down to whether or not your goal is to take on a more active or passive approach. I would also consider your liquidity requirements. Then decide from there.

Ben Einspahr · Answer

@Mike Primsky this is a great question but I hate giving such an open ended answer, but it depends. Are you looking for long term wealth or immediate cashflow? Looking for more of a passive investment or active.

Numbers still work in todays market at 7% interest... But you answer your question, I would invest it in a mixture of Active RE (rentals) in Colorado Springs Market. Just as robust market as Denver but little bit lower price point. I would also take some of that 500k and invest it in some Passive Investments. Heard lots of great things about Ironton Capital. Based out of Denver.  This is what we have had a lot of our investor clients do in a similar position as you and happy with the results.

That way your are still invested in RE but have some diversity. Happy to send more details and run through some numbers with you.

Nicholas L. · Answer

@Mike Primsky

I don't know how to answer this.  What do you like doing?  I grind out BRRRRs.  If I had 500K more, I'd put a bunch in savings earning 5.15%, and grind out some more BRRRRs.  I'll take 0 cash flow if I can get 50K of equity on a deal.  But that's me.

Matt M. · Answer

Rates are going up and going to strain the market more. Lack of supply is pushing values higher at the moment. I'd T-Bill ladder for the time being.

Kerry Noble Jr · Answer

I would use like 100 to 150K to get into subject to properties and other creative finance deals

Sam McCormack · Answer

@Mike Primsky

Hi Mike, it sounds like you are primarily looking for cash flow, stop me if I am wrong though. But Cincinnati might be a good place. Generally, I would recommend midwest of course. But Cincinnati, depending on the area, can offer appreciative friendly areas and cash flowing properties! I would recommend normally at least doing some rehab to really get the full effect. But I have seen recently buyers coming back from their very high expectations. Let me know if any of that sounds good to you!

What to do with 500k in Investable Assets?

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