How would you invest 500k in Real Estate to make + 5k monthy?

24 Replies

Hello,

How would you invest 500k in real estate to make at least 5k a month without high risk and any hassle? How would you make it to 8k or 10k a month after a couple of years?

Thank you

I am sure there are a few ways to get this done. You could buy 5 homes turnkey at $100k, possibly a little less and that they rent for a minimum of $1,000 or more per month.  Now this does not take into account taxes, insurance or management fees. 

You could purchase homes that are cheaper with a higher return but will also come with a little higher risk. 

Good luck

1.  single family homes bought correctly

2.  multi unit housing

3.  Land investing ( buy for cash then resell land lots with seller financing)

4.  Seller financing deals.

with 5k, depending on the area you can easily make 5k a month

Account Closed  hit me with some of your land deals I did very well buying lots there a few years ago.. being an old land man and one that does not need cash flow and likes to make bigger pops I like land in the right locations.  you can hit me off line if you like

@Jay Hinrichs So if I invest 250k as a HML with 12% and one point for a period of 6 months, I can make about $5400 a month for that period and if I do another deal with the same rate and investment I can make another $ 5400 for the rest of the year...so I can make about 64k a year? I'm I getting it right or not?

Account Closed  Nope your not getting that right..

250,000  K   1 point = 2,500   250,000 X .12 / 365 X 180 = 14,794 + 2,500 = 17,294 per 6 months.  for 12 months it would be double that 34,589... per annum.

and of course if you put the whole 500k in your double that as well  for a grand total of 69,178.. and you do not deal with the 3 T's and take the risk of running rentals.

But again you must align yourself with GREAT long term established HML in your market and be comfortable with your collateral...

Or you could invest it with me and I would double it again  :) 

Easy...and I base this on my market, which could also be considered many midwest markets:

1 Buy 10 - $50k cash flowing properties (no these are NOT Class "C" problems) with an average of $800/month Cash flow (with no financing).

2 - Hold for 6 months generating about $48,000

3 - Find Partners willing to be credit partners on refinancing for 50% of the deals (meaning 50% of the cash flow, equity, depreciation, Cash Out at Refi, etc...)...they would need NO CASH to put in...just their credit. Resulting CF = about $500/month...split 2 ways, each getting $250/month = about $3000/year...so the REI that started this would end up with about $3k/month, and

4 - Get all of his Cash Back (the original $500k) + half of the Cash Outs on the REFI's.  Each property would Cash out on average at least $6k/each...so that's an added $30k tax free profit.

5 - Repeat the steps from #1 - 4, until your arm gets tired.

6 - Results:
     a - More cash flow than you needed
     b - Profits (TF) from the REFI's
     c - All your original cash back that you started with...never spending a dime.

Account Closed  there are no tax's and insurance other than income tax...

we are not allowed to solicit business on the forum side so if you want any other information about what I personally do you need to PM me.

And I am not soliciting you at all I was just pointing out some alternatives to the rental business... BP is predominantly a rental buy and hold website.. so you have a lot of pretty experienced folks on here in that end of it..

I have been in the HML business though for 30 plus years so I know a little about that.

Account Closed there are several ways to do this. Are you looking for 100% cash returns, or an overall IRR of 1%/month? With leverage your overall wealth will grow when appropriately managed. I often get asked from experienced investors on our FIG projects if they should buy one fourplex or 4 fourplexes leveraged. It's phenomenal to see the returns to to 3 times the returns when leveraged appropriately. Leverage of course impacts cash flow so if you're nearing the end of your earning life cycle and looking exclusively for cash flow then leverage may not be the way. What states are you open/interested in investing in?

@Steven Bond I plan to invest in central Florida. I'm in my 30s and I'm seeking for a business/investing model to make at least 10k in in the next 3 years.

I agree @Jay Hinrichs HML is the EASY toilet free way to invest. You will give up some advantages such as appreciation, depreciation, etc...so consider the plus and minus side and then make up your mind. I personally do both. I do HML inside my 401K (I don't lose any tax advantages like I would if I put RE into my plan). I purchase buy and hold long term rentals outside my retirement plan. With those I get the cash flow, tax advantages, appreciation, and ability to sell at a later date and defer taxes. Are you willing to be a landlord or pay a manager? If not, HML hands down is your best option IMO (whether inside a retirement plan or not).

Originally posted by @Jay Hinrichs :

Account Closed  Nope your not getting that right..

250,000  K   1 point = 2,500   250,000 X .12 / 365 X 180 = 14,794 + 2,500 = 17,294 per 6 months.  for 12 months it would be double that 34,589... per annum.

and of course if you put the whole 500k in your double that as well  for a grand total of 69,178.. and you do not deal with the 3 T's and take the risk of running rentals.

But again you must align yourself with GREAT long term established HML in your market and be comfortable with your collateral...

Or you could invest it with me and I would double it again  :) 

Hey Jay, I have an HML question for ya. Say I align myself with the HML and we agree to go do a deal together--I have cash and he has experience. How is that normally structured?

In your example, I am having a hard time seeing where the upside is for the HML guy you are working with if you are getting the profit from the points AND the financing interest?

Is it common for the HML guy to take, say, the points and pay you (the private money guy) the financing interest? Just trying to get my head wrapped around how this works.

@Nathan W.   in the example the OP put up he I think was thinking of doing it himself.

but normally most HML do it like this

they take the points.. some times they rebate the client 1/2 to 1.. clieint usually is not allowed to earn points depends on state. then the client takes the interest.. If the HML services the loan he or she may charge a servicing fee which might be 1/2 to 1%... or just a flat fee.. or they may charge nothing.. or they may not service at all.

The crowdfunders because of the complicated structures and tax filings etc they defiantly take part of the interest income and they make the points as well.

@John Thedford   nice strategy ...

I'm invested in a few Private Placement Funds (HML, Tax lien etc) that all generate over 10% per year. I would take the 500K and split it amongst 5 such funds. That will generate at least $50K per year pre tax. Maybe up to $60K of some funds outperform.

Originally posted by @Jay Hinrichs :

@Nathan W.  in the example the OP put up he I think was thinking of doing it himself.

but normally most HML do it like this

they take the points.. some times they rebate the client 1/2 to 1.. clieint usually is not allowed to earn points depends on state. then the client takes the interest.. If the HML services the loan he or she may charge a servicing fee which might be 1/2 to 1%... or just a flat fee.. or they may charge nothing.. or they may not service at all.

The crowdfunders because of the complicated structures and tax filings etc they defiantly take part of the interest income and they make the points as well.

@John Thedford   nice strategy ...

 Wow that is incredible.  That interest rate payout, is usually calculated based on a 6 month loan period, right? So 12% over 6 months? So if I was able to be a client a couple times of year, I could see 24% Annual on that money? And the broker does most of the work (with my due diligience in the background I assume)

Hard money and private lending are something that I knew I wanted to eventually move into as my ultimate long term passive strategy, but this just sounds too good to be true.  

@Nathan W. NO INTEREST IS APR ... so

look at my math in my first post.. you simply establish a daily interest rate.

so 100k X .12 / 365 = 32.8 per day  time how ever many days your loan is out.

it is customary though to have 3 month or so pre pay penalty.  Plus if you get points you add that to your overall yield.  if you wanted 24% per annum you would right the interest rate at 24%...

Originally posted by @Jay Hinrichs :

@Nathan W. NO INTEREST IS APR ... so

look at my math in my first post.. you simply establish a daily interest rate.

so 100k X .12 / 365 = 32.8 per day  time how ever many days your loan is out.

it is customary though to have 3 month or so pre pay penalty.  Plus if you get points you add that to your overall yield.  if you wanted 24% per annum you would right the interest rate at 24%...

 Thanks for the clarification.  Of course that should have been obvious to me--I just overlooked it.  

So if the OP were to partner up with an HML, does he have to be an accredited investor to approach the HML if he doesn't have a previous personal relationship? I am not quite clear on how that works.

maybe PM would be better for this but it seems like the OP might hopefully benefit as well.

Anyone that wants to lend in Florida can do so without a license as long as they are lending for their personal benefit. There is no need to work through a broker. I regularly advertise myself as a private lender and turn down lots more people that I qualify (really qualifying the deal rather than the borrower). Many of the loans pay off quickly resulting in a very high ROI with results of 30%+ APR common (this is due to points). Average rates are in the 12% plus points range (they can be found for less-or higher)...but either way they are pretty strong. HML is a great way to generate income...is super EASY...and for the most part problem free. If you have a borrower default, you simply turn it over to an attorney. The borrowers are responsible for the collection costs and generally, you never lose a dime. Whats not to like about HML? I love EVERYTHING about it:)

Thanks for the great information guys.  I'm going to start investigating this a bit more.

One final question I have then is, can I (in Virginia) approach Hard Money lenders and ask them to take my money? Or does there have to be some sort of existing personal relationship prior?

@Nathan W.   unless  your investing in a specific reg D offering that requires accreditation no you can just invest..

Again EACH State is different.. YOu can most defiantly invest in CA in fractionalized DT and be non accredited..

We have been doing some owner finance deals that have been yielding 31 percent a year via arbitrage. The key, make sure everyone in the deal wins. That way you get paid.

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