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
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
Quote from @Dennis S.:
@Kevin Si
Here is another option out of many already mentioned so far:
Do both - real estate + diversified stock market via low fee dividend ETFs. Split your funds to invest accordingly. Use some leverage to buy the property for tax advantages... At the same time retain access to most of your capital via a line of credit to the properties equity. Structure the entire thing as if you get a pay check every month (from LoC) so its consistent and predictable and let the cashflow from the property pays off the line every month. Let the ETF grow via dividends and use as you need them via the 4% rule...
Why take from LOC and let cash flow pay off line? Didn't quite get that part. Isn't cashflow from properties doing just that, monthly check?
- 2yDennis S.Pro MemberInvestor · Chattanooga, TN · Member since 2013 · 17 posts · 2 votes
@Kevin S. #1 - This way you can create a system that will pay you predictably. So every 1st day of the month, the LOC will pay you just like a pay check and then the cash flow from the rents can pay it off as rents are collected. You are isolating yourself from the monthly collection variances. The LOC normally is based on interest-only so using an example of $8000/month cash flow and a LOC at 8%, the cost per day is $1.8 (very little).
#2 Pay yourself first and this system using LOC can help implement that. - Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes2y
@Dennis S. So, this is like that "velocity banking" (is that the right term) technique? Just partially adopted? Where you use your heloc as if its your checking account?
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
Thanks Dennis. I had a feeling your answer might be just what you said. Guess I wanted to hear it from the horse's mouth, is all. Is there a danger one could end up taking more from the LOC account if say rent doesn't equal to withdrawal due to vacancy or tenant not paying rent etc? If I adjust withdrawal form LOC because of those variables then it defeats the purpose of consistency. That last one was a question rather than a statement btw :)
- Investor · Hopedale, MA · Member since 2021 · 321 posts · 212 votes2y
Quote from @Kevin S.:
Quote from @Jessie Dillon:
when you say 'approaching retirement,' how long are we talking? one option would be using it to BRRRR enough properties to generate the desired amount of monthly profit in the end. as far as cash vs down payment, if you want to build more wealth over time, i would definitely use debt so that you can buy 'more' ($) real estate. leaving it in index funds isn't a BAD idea, but if you have the resources (time/knowledge) to invest in RE & do it wisely, you will likely come out so much farther ahead. another question here is, how much monthly income are you looking for this nest egg to generate in retirement?
How much monthly income can 1M generate in about 9-10 yrs in RE (leveraged)? Try to leave 'it depends' out. LOL. Guesstimate based on normal, average, median, 50% percentile. Thanks.
'the limit does not exist' - you could BRRRR at lightning speed
- 2yDennis S.Pro MemberInvestor · Chattanooga, TN · Member since 2013 · 17 posts · 2 votesYes that is a risk and am not sure if that can be completely removed. It definitely can be mitigated if the other half of your investments in the diversified dividend ETF is doing decently well. Again the stocks/etf can go up and down as they are cyclic however, generally the dividend aristocrats/kings have a history of paying and increasing their dividends for the last 25/50 years respectively. Again dividends are not guaranteed either. Worse case, you can safely use the 4% rule to tap into some cash from this investment if you need to over-draw from the line.
Quote from @Kevin S.:
Thanks Dennis. I had a feeling your answer might be just what you said. Guess I wanted to hear it from the horse's mouth, is all. Is there a danger one could end up taking more from the LOC account if say rent doesn't equal to withdrawal due to vacancy or tenant not paying rent etc? If I adjust withdrawal form LOC because of those variables then it defeats the purpose of consistency. That last one was a question rather than a statement btw :)
Also from the rental income perspective, its common to see variances from monthly cashflow and the projected cashflow (spreadsheet cashflow), but if one is conservative in the projections then most likely the projected cashflow over 6 - 12 months matches the expected withdrawal. - 2yDennis S.Pro MemberInvestor · Chattanooga, TN · Member since 2013 · 17 posts · 2 votes
Quote from @David M.:
@Dennis S. So, this is like that "velocity banking" (is that the right term) technique? Just partially adopted? Where you use your heloc as if its your checking account?
I am not sure and am going to look up that term. But I was just trying to solve for equity being available readily to be tapped into and using that for predictable cashflow.
- 2yKevin S.Member since 2024 · 400 posts · 240 votesOP
Quote from @Dennis S.:
Yes that is a risk and am not sure if that can be completely removed. It definitely can be mitigated if the other half of your investments in the diversified dividend ETF is doing decently well. Again the stocks/etf can go up and down as they are cyclic however, generally the dividend aristocrats/kings have a history of paying and increasing their dividends for the last 25/50 years respectively. Again dividends are not guaranteed either. Worse case, you can safely use the 4% rule to tap into some cash from this investment if you need to over-draw from the line.Quote from @Kevin S.:
Thanks Dennis. I had a feeling your answer might be just what you said. Guess I wanted to hear it from the horse's mouth, is all. Is there a danger one could end up taking more from the LOC account if say rent doesn't equal to withdrawal due to vacancy or tenant not paying rent etc? If I adjust withdrawal form LOC because of those variables then it defeats the purpose of consistency. That last one was a question rather than a statement btw :)
Also from the rental income perspective, its common to see variances from monthly cashflow and the projected cashflow (spreadsheet cashflow), but if one is conservative in the projections then most likely the projected cashflow over 6 - 12 months matches the expected withdrawal.Hasn't many of the dividend aristocrat lost up to half their value? MMM, T, WBA etc...
- Lender · United States · Member since 2020 · 1k+ posts · 499 votes2y
Quote from @Kevin S.:
Quote from @Timothy Hero:
Quote from @Kevin S.:
Quote from @Timothy Hero:
depends on the life you plan to live in retirement. In my opinion, buying homes all cash with no intentions of refinancing them isn't the way to go. You have dead equity that you never plan to ever tap into, which is arguably one of the best advantages of real estate.
Assuming you have $1M and are nearing retirement, I'd keep $250k in the bank and put $750k down on rentals with 80% financing. This depends on how connected you are for investment opportunities , of course.
The mortgages offer tax advantages and allow you to leverage your capital. Pay a management company to avoid having to come out of retirement.
There's no right or wrong. It's what works for you.
Pretty good input and I voted for it. I see you are a mortgage broker not a lender. What is your take on choosing between a mortgage broker vs lender? I am told broker can shop for better rates, has more choices(of lenders) and use one credit hard check vs more than one credit pull if shopping between 2 or 3 lenders. Thanks.
Being a broker, I may sound biased, but here's the reality: when you call a lender, they are going to sell you that they are the best option, because nobody is going to sell you on using their competitor.
But as a broker, there's no reason to be biased. If i quote you with 8 different lenders, I get paid the same amount regardless, so there's no reason for me to play a favorite.
To add, if you're working with an experienced broker, he or she will know the smoothest lender to work with.Thank you. What about credit check? Do broker need credit pulled multiple times when shopping with multiple lenders?
Typically don't need a credit check for a quote, and if you use the same lender, credit is typically good for 120 days.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ 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.
Bet it all on the horseys.
- Investor · Pittsburgh · Member since 2023 · 23 posts · 6 votes2y
@Chris Seveney complete stupidity? I know quite a few people who invest in $1M properties, myself included. I’m not sure that they are all completely stupid.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes2y
Quote from @Spencer Speckles:
@Chris Seveney complete stupidity? I know quite a few people who invest in $1M properties, myself included. I’m not sure that they are all completely stupid.
I also invest in $1M properties but if I was 65 years old and only have $1M to my name, I would not put it in just 1 property. That is what I was referring too, this specific case study.
7e investments53 Reviews - Member since 2024 · 26 posts · 6 votes2y
Quote from @Chris Seveney:
Quote from @Spencer Speckles:
@Chris Seveney complete stupidity? I know quite a few people who invest in $1M properties, myself included. I’m not sure that they are all completely stupid.
I also invest in $1M properties but if I was 65 years old and only have $1M to my name, I would not put it in just 1 property. That is what I was referring too, this specific case study.
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