What to do with $1,000,000.00?
Most Popular Reply
Real Estate Investor · Unadilla NY · Member since 2017 · 418 posts · 297 votes
2yAsk 10 people and youll get at least 3 different answers. It all depends on what the individual would do with their risk tolerance. Each property is also different. You could buy a 1 million apartment building outright and make 65,000 or 30,000 depending how it performs and what market its in. You could put it down on a 4 million dollar property and make 120,000 or zero or negative. Every deal is different.
Personally if I had 1 million just laying around Id probably put some of it into real estate, pay down some existing debts, some of it in treasury bills, and some of it in an index fund.
140 Replies
- 2yEvan HoppleBusiness MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2023 · 284 posts · 420 votes
@Kevin S.
Split it up between multiple smaller multifamily properties. 5+ unit properties are taxed at the commercial tax rate in most parts of the country. Knowing that I'd buy 2-4 unit properties that are taxed at the residential property rate.
If you're on the fence, financing with a higher down payment could be a good option
Reafco Real Estate - Real Estate Agent · Columbia, SC · Member since 2023 · 37 posts · 12 votes2y
Quote from @Kevin S.:
I wonder what do someone approaching retirement do with $1,000,000.00? Buy a single property with cash and have about $65,000/yr in cash flow or use it for DP on a $4,000,000.00 property? Would the cash flow be the same? Or leave it in SP 500 ETF? The question is probably over simplified but a good starting point for feedback. Thanks.
Investing in real estate is generally more of a long-term play in terms of generating solid return, but there are ways to make money in the short-term! Have you looked into private lending for real estate investors? You can fund fix-and-flip projects on short-term loans with a solid interest rate as well. Something to look into if you're not sure about buying property!
- Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes2y
Agree with Dan and Zachary, there are a lot of options and it depends on how active of an investor you want to be.
If you’re looking to take a more passive role in your real estate and want the benefits of diversification there are funds available to accredited investors that are designed to allow investors the opportunity for ownership of institutional investment grade property that is occupied by regional, national, and Fortune 500 credited companies. This might be something for you to look further into based on the goals you’ve shared.
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
Quote from @Leslie Pappas:
Agree with Dan and Zachary, there are a lot of options and it depends on how active of an investor you want to be.
If you’re looking to take a more passive role in your real estate and want the benefits of diversification there are funds available to accredited investors that are designed to allow investors the opportunity for ownership of institutional investment grade property that is occupied by regional, national, and Fortune 500 credited companies. This might be something for you to look further into based on the goals you’ve shared.
Thank you Leslie. I briefly glanced at your company 'Archer Investor' and will look into more depth tomorrow.
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
Quote from @Kevin Johnson:
Quote from @Kevin S.:
I wonder what do someone approaching retirement do with $1,000,000.00? Buy a single property with cash and have about $65,000/yr in cash flow or use it for DP on a $4,000,000.00 property? Would the cash flow be the same? Or leave it in SP 500 ETF? The question is probably over simplified but a good starting point for feedback. Thanks.
Investing in real estate is generally more of a long-term play in terms of generating solid return, but there are ways to make money in the short-term! Have you looked into private lending for real estate investors? You can fund fix-and-flip projects on short-term loans with a solid interest rate as well. Something to look into if you're not sure about buying property!
Thanks Kevin. You get my vote. No, I never considered it and never look into it. Now that you mentioned it you piqued my interest. Need input from you and other investors about the risk level. Do you have any lead/person/company name?
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
Quote from @Evan Hopple:
@Kevin S.
Split it up between multiple smaller multifamily properties. 5+ unit properties are taxed at the commercial tax rate in most parts of the country. Knowing that I'd buy 2-4 unit properties that are taxed at the residential property rate.
If you're on the fence, financing with a higher down payment could be a good optionThanks Evan. What did you meant by your last sentence? Isn't it better to pay less down payment?
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
Quote from @Elise Bickel Tauber:
Quote from @Kevin S.:
Quote from @Elise Bickel Tauber:
I would agree with what @Mike Klarman said. Western PA is a great area. I would say the best strategy would be to pick up single family homes in the $80-$120k range, put $30-$50k in, rent and re-finance. You can pretty quickly turn this into $10million in more of real estate. Between the steady cash flow and appreciation you would be set.
Thank you Elise. From what I hear isn't it better not to use money to rehab, instead buy properties that doesn't need reno/rehab and keep the money for down payment of another house instead? I stay away from contractors and rehab as I have zero knowledge in that department. But your idea definitely sounds tempting. You are a realtor in western Pa?
Yes I am. My husband and i are investors and we also own a real estate firm that specializes in helping out of state and out of country investors for buy and holds, brrrs, and flips.
Do your company also do the property management?
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
Quote from @Eddy Ogbekhilu:
No particular fund(s) in mind as this moment,work in progress hence am sourcing info on the platform.Quote from @Kevin S.:
Quote from @Eddy Ogbekhilu:
The 7% is potential expected/guaranteed return of off 1M invested either by way of dividends and the likes.I am not sure if I answered your question correctly!Quote from @Kevin S.:
Quote from @Eddy Ogbekhilu:
Hi Kevin just a quick note to connect and to say thanks for your thought provoking questions insights and analysis you bring to the forum.
Will be 59 soon and looking to give up active work and the 1M questions was indeed where my emotions has/have been wondering. Am comfortable with income from 1M 4d nxt 30yrs at fairly moderate return of 7% ...Once again thanks and am following ur post keenly.
Thanks for following this thread. Lot of people have contributed to this subject so far with varied and interesting opinions. Each with valid points. I am just soaking it in and hopefully will make it work for me, only to contribute later to help someone else in the future as a way to give back. Going to your response of 7% return, is that from REI cash flow?
You did. I was expecting 7% return from cashing flowing properties. Which funds are you looking at. Many of these high dividends funds especially closer to double digits (9-12%) dividends funds tend to loose value over time(downward trending). The upward trending funds/ETFs gives 3.5-4% at best. Maybe someone can correct me.
Do you happen to have any high dividends funds in mind?Look up dividend aristocrats. I personally am not invested in them as I am already 100% in stocks and therefore trying to get into RE. Lot to absorb here on BP.
- 2yEddy OgbekhiluPro MemberInvestor · Lutz Florida . · Member since 2018 · 103 posts · 34 votes
Quote from @Kevin S.:
Quote from @Eddy Ogbekhilu:
No particular fund(s) in mind as this moment,work in progress hence am sourcing info on the platform.Quote from @Kevin S.:
Quote from @Eddy Ogbekhilu:
The 7% is potential expected/guaranteed return of off 1M invested either by way of dividends and the likes.I am not sure if I answered your question correctly!Quote from @Kevin S.:
Quote from @Eddy Ogbekhilu:
Hi Kevin just a quick note to connect and to say thanks for your thought provoking questions insights and analysis you bring to the forum.
Will be 59 soon and looking to give up active work and the 1M questions was indeed where my emotions has/have been wondering. Am comfortable with income from 1M 4d nxt 30yrs at fairly moderate return of 7% ...Once again thanks and am following ur post keenly.
Thanks for following this thread. Lot of people have contributed to this subject so far with varied and interesting opinions. Each with valid points. I am just soaking it in and hopefully will make it work for me, only to contribute later to help someone else in the future as a way to give back. Going to your response of 7% return, is that from REI cash flow?
You did. I was expecting 7% return from cashing flowing properties. Which funds are you looking at. Many of these high dividends funds especially closer to double digits (9-12%) dividends funds tend to loose value over time(downward trending). The upward trending funds/ETFs gives 3.5-4% at best. Maybe someone can correct me.
Do you happen to have any high dividends funds in mind?Look up dividend aristocrats. I personally am not invested in them as I am already 100% in stocks and therefore trying to get into RE. Lot to absorb here on BP.
- 2yEddy OgbekhiluPro MemberInvestor · Lutz Florida . · Member since 2018 · 103 posts · 34 votes
Thanks Kevin.
- 2yAndrew HoganPro MemberRental Property Investor · Indianapolis, IN · Member since 2016 · 560 posts · 463 votes
@Kevin S. the main point I heard is that you're approaching "retirement" not active management :)
You can partner with proven operators who can effectively spread that 1M across 1,000+ Multifamily Units with less downside risk WHILE you keep your retirement TIME. (Hands off)
Are your living expenses already covered? If not, target 10% COC or 100k/yr in cash flow. If they are, you should be able to turn 1M into 2M+ with the right partners. The key is to vet them out correctly.Happy hunting and good luck with all the sharks that I'm sure have already messaged you :)
- Member since 2024 · 26 posts · 6 votes2y
Quote from @Elise Bickel Tauber:
Quote from @Kevin S.:
Quote from @Elise Bickel Tauber:
I would agree with what @Mike Klarman said. Western PA is a great area. I would say the best strategy would be to pick up single family homes in the $80-$120k range, put $30-$50k in, rent and re-finance. You can pretty quickly turn this into $10million in more of real estate. Between the steady cash flow and appreciation you would be set.
Thank you Elise. From what I hear isn't it better not to use money to rehab, instead buy properties that doesn't need reno/rehab and keep the money for down payment of another house instead? I stay away from contractors and rehab as I have zero knowledge in that department. But your idea definitely sounds tempting. You are a realtor in western Pa?
Yes I am. My husband and i are investors and we also own a real estate firm that specializes in helping out of state and out of country investors for buy and holds, brrrs, and flips.
What are your thoughts on low carrying cost ag exempt acreages?
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
You heard it right and thanks for your input for which I voted for you. I am 100% invested in stock market and zero in RE. What started this conversation was when I saw someone on Youtube say: If you stay in the market and plan to live on your retirement account (401K or otherwise) you will become 'poorer' every year as you draw down money into the sunset. Compared that with RE where your rent/cash flow only increase in time(technically into perpetuity) along with appreciation, leveraging(velocity of money), tax benefits, mortgage paydown etc. In other words you become 'richer' in time. Only caveat is beginning cash flow will be less in RE but will eventually catch up. And of course the passivity of stocks vs active involvement of RE, which can be negated by PM. So in search for that answer I came across BP and decided to put this question out there as members are RE investors (mostly) to hear from them vs CFP who may skew client's investment towards stock market rather than RE(for which I will have another question subsequently).
I have gotten so many valuable input from so many members for which I am thankful. Now, as you mentioned, how do I tell the sharks from those that are not! Hope to find that answer here too! Thanks everyone.
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
Quote from @Jay King:
Quote from @Elise Bickel Tauber:
Quote from @Kevin S.:
Quote from @Elise Bickel Tauber:
I would agree with what @Mike Klarman said. Western PA is a great area. I would say the best strategy would be to pick up single family homes in the $80-$120k range, put $30-$50k in, rent and re-finance. You can pretty quickly turn this into $10million in more of real estate. Between the steady cash flow and appreciation you would be set.
Thank you Elise. From what I hear isn't it better not to use money to rehab, instead buy properties that doesn't need reno/rehab and keep the money for down payment of another house instead? I stay away from contractors and rehab as I have zero knowledge in that department. But your idea definitely sounds tempting. You are a realtor in western Pa?
Yes I am. My husband and i are investors and we also own a real estate firm that specializes in helping out of state and out of country investors for buy and holds, brrrs, and flips.
What are your thoughts on low carrying cost ag exempt acreages?
Hi Jay. Do you mean agricultural acreages? If so, I have zero knowledge of such investments. I do have to admit I always wondered about it. There was one guy I knew who purchased 'land' (not sure if ag land) in middle of nowhere (I was told) in another state. That was 15 yrs ago and unfortunately he passed and I am not able to find out the end result. What happens if the place never develop and you cannot sell it either? Or it cannot be re-zoned? You have something I don't know? Thanks.
- Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes2y
Quote from @Kevin S.:
You heard it right and thanks for your input for which I voted for you. I am 100% invested in stock market and zero in RE. What started this conversation was when I saw someone on Youtube say: If you stay in the market and plan to live on your retirement account (401K or otherwise) you will become 'poorer' every year as you draw down money into the sunset. Compared that with RE where your rent/cash flow only increase in time(technically into perpetuity) along with appreciation, leveraging(velocity of money), tax benefits, mortgage paydown etc. In other words you become 'richer' in time. Only caveat is beginning cash flow will be less in RE but will eventually catch up. And of course the passivity of stocks vs active involvement of RE, which can be negated by PM. So in search for that answer I came across BP and decided to put this question out there as members are RE investors (mostly) to hear from them vs CFP who may skew client's investment towards stock market rather than RE(for which I will have another question subsequently).
I have gotten so many valuable input from so many members for which I am thankful. Now, as you mentioned, how do I tell the sharks from those that are not! Hope to find that answer here too! Thanks everyone.
@Kevin S. I gotta speak up again.. You do realize that drawing down the 401k doesn't "make your poorer" each year, right? You get to keep the money. its still yours. You can keep investing it. Actually, now that the first wave of retirees are hitting, they are finally advising to manage the drawn down of the 401k/IRA accounts so the rmd when you hit 75 isn't so bad... Usually, that means using a Roth where are the fund are tax free for the rest of your life, and fully liquid.
- 2yElise Bickel TauberBusiness MemberReal Estate Agent · Cranberry Twp · Member since 2017 · 385 posts · 198 votes
Quote from @Jay King:
Quote from @Elise Bickel Tauber:
Quote from @Kevin S.:
Quote from @Elise Bickel Tauber:
I would agree with what @Mike Klarman said. Western PA is a great area. I would say the best strategy would be to pick up single family homes in the $80-$120k range, put $30-$50k in, rent and re-finance. You can pretty quickly turn this into $10million in more of real estate. Between the steady cash flow and appreciation you would be set.
Thank you Elise. From what I hear isn't it better not to use money to rehab, instead buy properties that doesn't need reno/rehab and keep the money for down payment of another house instead? I stay away from contractors and rehab as I have zero knowledge in that department. But your idea definitely sounds tempting. You are a realtor in western Pa?
Yes I am. My husband and i are investors and we also own a real estate firm that specializes in helping out of state and out of country investors for buy and holds, brrrs, and flips.
What are your thoughts on low carrying cost ag exempt acreages?
For what use? I know in Pittsburgh there is some farm land that is rented to farms but the cost is so minimal that the only thing I would assume that this would be for would be for appreciation. It isn't a horrible idea. Kind of think of it as a low risk stock. You aren't going to sell tomorrow and make big gains but if you hold onto it for a long time you should see a nice return. Minimal to no monthly expenditures outside of taxes. It's a thought for sure. Especially in areas that are right outside of booming areas. Those should increase in value quicker than land way out in the middle of nowhere.
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
Thank you Elise, isn't that considered more like rolling the dice type of investment? For a land to be considered ag do we have to satisfy certain 'requirement(s)' such as keeping certain number of farm animal on that land at all times or having ag plants being grown on it? Or can it just sit empty? It may be just my misinformation.
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
Quote from @David M.:
Quote from @Kevin S.:
You heard it right and thanks for your input for which I voted for you. I am 100% invested in stock market and zero in RE. What started this conversation was when I saw someone on Youtube say: If you stay in the market and plan to live on your retirement account (401K or otherwise) you will become 'poorer' every year as you draw down money into the sunset. Compared that with RE where your rent/cash flow only increase in time(technically into perpetuity) along with appreciation, leveraging(velocity of money), tax benefits, mortgage paydown etc. In other words you become 'richer' in time. Only caveat is beginning cash flow will be less in RE but will eventually catch up. And of course the passivity of stocks vs active involvement of RE, which can be negated by PM. So in search for that answer I came across BP and decided to put this question out there as members are RE investors (mostly) to hear from them vs CFP who may skew client's investment towards stock market rather than RE(for which I will have another question subsequently).
I have gotten so many valuable input from so many members for which I am thankful. Now, as you mentioned, how do I tell the sharks from those that are not! Hope to find that answer here too! Thanks everyone.
@Kevin S. I gotta speak up again.. You do realize that drawing down the 401k doesn't "make your poorer" each year, right? You get to keep the money. its still yours. You can keep investing it. Actually, now that the first wave of retirees are hitting, they are finally advising to manage the drawn down of the 401k/IRA accounts so the rmd when you hit 75 isn't so bad... Usually, that means using a Roth where are the fund are tax free for the rest of your life, and fully liquid.
You make a valid point. Are you referencing the first wave of retirees' age to be in their 60s? Are you saying they should draw more money now so they don't have to take too much @ RMD? Or they should draw less now so they have more money later during RMD? Are you saying to put unused drawn money from 401k back in Roth as you go? Didn't get that part. Would appreciate if you can elaborate. Thanks.
- Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes2y
yes, so many have these massive multi-million $ portfolios that their rmd's are WELL INTO the 6 figures. RMD is is in the 70's, not the people in their 60's....
There are plenty of articles on this from respectable publications, not just youtubers trying to make money off your views.
First you have to be able to afford it....
Its not a withdrawal. You piecemeal rollover the funds into a Roth IRA for some level of tax efficiency. Use other funds to pay the tax. Now, your pot of funds are in a Roth completely tax free.
Since you can only put earned income into these tax advantage accounts, you want to put in as much as possible while you are earning income. Then, keep as much in there to let it grow tax advantaged. During the recent market down turns, it was excellent time to move assets since you pay less tax. Obviously, you have to be in a position to move the assets.
If you can get your pre-tax account level low, that limits your rmd later in life. Also, it limits the tax liability to your heirs who assumedly would have to pay taxes on it in their high earning years.
That's the basics of it.
- Member since 2024 · 26 posts · 6 votes2y
I don't know about other States but here in Texas only a City can right code, In county out of city limits Land is considered Un-zoned, Even though in some states it would be HWY commercial. If it has animals you can carry Ag exempt land for pennies on the dollar. We have an example of A 10 acres ag exempt + Equestrian Is $8.95 in property tax, once you build the house that one acre is considered SFR while the other 9 Acres will stay ag exempt.
It may be the best bang for buck a buy and hold opportunities out there, low carrying cost with a huge upside, especially in this part of the real-estate cycle.
- Member since 2024 · 26 posts · 6 votes2y
Quote from @Kevin S.:
How do you know if that property will ever become valuable or stay at pennies level(where you bought it) indefinitely? Would that be investing or more like gambling? Do you have such ag investment? If so how do you choose your property?
We are all speculating so every thing we all are doing is a gamble. To give as an edge we look at a specific matrix Like U-Haul moving statistics, state record (1000 people a day move to Texas) and what has already approved to be built (Toll roads, Grocery stores, housing tracks, and roads) We have several Ag properties, HWY commercials and access to a plethora of off market potential purchases (pocket listings).
- Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes2y
@Kevin S. its call land speculation. Its the "original" real estate investment. Before this was a country and we had colonies, the "old" money was made in speculating on the land to the west.. Yes, it was a multi-decade play.
For example, what if you "knew" that Dallas - Fort Worth was going to become a "metroplis?" A century, or whatever, ago I would have loved to have bought up raw land between them for probably a couple $/acre. Then, demand would make that $100's / acre. WOW!!
In many ways, all real estate appreciation plays are speculative since you don't really know if you property will appreciate, or appreciate well. Some areas are getting hit hard with natural disasters, and their insurance premiums are sky high!!! That's depressing or limiting their value. eg FL and the lower areas of TX. In CA and FL many of the insurers have pulled out. It might have looked nice 10-20 years ago.. but now.. hmm...
I have a new neighbor who after spending some $100k to imrpove their CA home for the insurance company, decided to move across the country because the insurance company still found it to be uninsurable. YIKES!!!
- 2yEvan HoppleBusiness MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2023 · 284 posts · 420 votes
Quote from @Kevin S.:
Quote from @Evan Hopple:
@Kevin S.
Split it up between multiple smaller multifamily properties. 5+ unit properties are taxed at the commercial tax rate in most parts of the country. Knowing that I'd buy 2-4 unit properties that are taxed at the residential property rate.
If you're on the fence, financing with a higher down payment could be a good optionThanks Evan. What did you meant by your last sentence? Isn't it better to pay less down payment?
Financing with a higher down would increase cashflow but still leverage your money
Reafco Real Estate
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