We have cash, Now what!?

24 Replies

Hi Everyone!

The company my wife works for vested some stocks that she received and we have a chunk of change now that we want to invest.  

My question is how would you all take advantage of this opportunity and what would be your strategy to invest as much of the money without losing it to things like taxes.

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How much cash are you talking? A good place to start would be a 2-4 fam you can move into and use the rent to pay your mortgage. If you already own make it a straight investment. Are you handy with repairs? What is your RE investing experience? Get your feet wet w a 2-4 fam with 20% down and good cash flow. If you're ready for more keep adding to the portfolio or look for a rehab project/flip. Lots of options...

Send it to me and I'll show you how it's done.

Funny Daniel :)

We received around 264 k.  We live in California but are investing in MN, because we have family resources there. We are about to close on our first property in St. Paul, MN, a 4 plex. 

Our investment strategy is to buy and hold and live off the cash flow.  We would like to use as much money as possible to increase our portfolio of properties and increase our cash flow.  We don't want to lose a large portion to taxes.  What are your thoughts on 1031 exchanges?

Hi @Jerry,  In our current conventional mortgage, we have myself as the borrower and my wife as the co-borrower.  Would you suggest we just have the mortgage in one of our names and have no co-borrower?  Also is there a way to not give up half of it to taxes?

everyone will have a very different opinion! We live I'm central California and live investing here! While we don't have nearly your spare change, we have been taking our 60k+ annually and investing it locally and out of state! I have started trying to invest it locally as much as possible. I love the fact that this area has low taxes and instance is appreciating and I can spend $150-230k and get class a properties.

We are investing for the long term so the cash flow isn't need now but for when we want to find early retirement in 14 years!

So it really comes down to you goals, business plans and where you see yourself.

Thanks @Elizabeth Colegrove

I would like to have 100 k of cash flow within 5 years from buy and hold properties and other investments.  I know this is a pretty aggressive goal :)

if your not aggressive you won't be succesful! Our is 100k in 14 years although we are on track to reach those goals much quicker. 

Hi @Jerry Padilla  , In our current conventional mortgage, in progress, we have myself as the borrower and my wife as the co-borrower. Would you suggest we just have the mortgage in one of our names and have no co-borrower? Also is there a way to not give up half of it to taxes?

@Konrad Lightner

If you plan on purchasing more than 10 properties, it would probably be a good idea to put only one name on the loan so you can acquire 20 properties and not only 10. Of coarse you can acquire unlimited properties with other types of financing, but you might as well get 20 loans with great terms!

Best, 

Sawyer 

Not sure about the taxes. It is my understanding that it is a like kind wxchange esl estate for real estate, not stocks for real estate. Plus the money can't ever go in your hands and it sounds like it already is, making it too late. I could be wrong? ..... As far as the mortgage..... If one can qualify..... You can get more mortgages if you each just put them in your individual names - 10 each, instead of together. Guidelines become more strict after 4 properties.... So you can wait a little longer and have less of a down payment with 4 or less mortgages in each name. 

Jerry Padilla, Lender in NY (#NMLS 1084877)
585-204-6923

@Konrad Lightner  you might also want to be open about where you invest. Cash flow can be better in other cities with fewer investors. I'm sure MN has better cash flow than CA, but you may want to think about other Midwestern cities.

Thanks @Mark Shaffar , do you have any places in mind?

On one of @Jeff Brown's articles there is good discussion on some things people are doing to retire.

http://www.biggerpockets.com/renewsblog/2015/02/24/why-most-americans-wont-retire-comfortably/#comment-186943

Curt Smith made a great post on what he does - he puts the rental income in a SD IRA then uses the income to buy more properties inside of the SD IRA since he being taxed less.

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Leverage it up if you can.

$264 can equate to a bunch of downpayments on properties depending on the area you choose, which it sounds like MN is the state you're choosing to invest in.

I know there's a few turn key guys out there to try as an option!

Joe

I would suggest buying a 5+ unit property and financing with a commercial loan. In my short experience, trying to quickly build a portfolio with conventional loans can be difficult, even when you have cash. If you try hard enough you can find a lender who will work with you to get past debt-to-income issues and the number of properties financed. But reserve requirements add up quickly and can ultimately shrink the amount of cash you have to invest.

I agree with Joe, you just need to know what banks require in different areas. From what I hear, more stable markets make underwriters feel more comfortable offering cash out refinancing at 80% loan to value while others are more like 70%. You also need to consider your income when factoring financing. If you are new to real estate investing underwriters may not count the rent you receive when determining your debt to income ratio and it may be difficult to get loans. Also, real estate is nice tax-wise when you can depreciate the the value of the building to offset some of the income from the property. 

As @Paul Garcia mentioned, reserve requirements can add up fast and your debt to income will likely be out of whack pretty quickly unless you have extremely high income. Most lenders will not count the rental income until you have 2 years experience as a landlord/investor. So, looking at a bit larger complex might be a good idea. 

As for deals in Minneapolis, there are very few on the MLS these days. I'm closing on a duplex on Friday and have another short sale in the works, but there are not near the number of deals available like there were 18-24mos ago.

Yeah I agree finding deals has been pretty difficult in the Twin Cities area.  I'd would be willing to invest anywhere as long as I find good trustworthy people to manage the properties.  I would love to find an apartment so I don't have to find multiple deals.  

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