What would you do with a million?

43 Replies

I’m expecting a liquidity event and I’m considering where and how to invest next. I’m curious about opinions of how you would invest with such cash soon. Thanks in advance!

Become the bank.... or good size multi family and generate some cashflow.

What are your goals @Ricardo Fainsilber

To answer your question, consume some larger MFRs and then loan my balance sheet to investors. 

I second what others have said, get some larger multi-families if possible, they can often be available in nicer areas while still maintaining the profitability of smaller multifamilies in less desirable areas.

@Ricardo Fainsilber  

Depends how involved you want to be.  If you had the opportunity to invest in an asset based fund averaging 12%+ per quarter would you be interested?  120k a year in passive income is pretty nice.  I know there are funds right now offering these types of returns for accredited investors.

If you want to devote time and effort you can lend it out yourself or jump into a big multi as others have suggested.  

12% per qtr. sounds extremely lucrative. Where and what kind of fund is this?

Chris

Bitcoin! JK. Personally, I would buy a 32 Unit apartment deal that has some value add potential and hold it for about 5 years, then do it again.

@Ricardo Fainsilber congratulations.

That's actually an impossible question to answer without knowing what your personal risk tolerance is. And that depends on your personal financial situation. For example, if you're going to be retired and this money is going to be generate all your income, the answer is going to be 100% different than if retirement is 25 years a way, you have income from your job, and anything generated is not needed to be spent but is going to be to help build your net worth.

So please provide more info.If you don't want to disclose that publicly on the forum, you can PM privately, and I'll give you my two cents. I can also share with you within my own portfolio.

I do like the MF suggestions. Although a 12% hands off deal sounds pretty good as well, where would you find such investment?

Hi Ricardo,

I like syndication deals as a limited partner in large value add apartment plays in some of the strongest markets like DFW, self storage in SE markets and mobile home parks nationwide. We have lots of opportunities emerging in 2018 that you can play across niches, sponsors and geographies. CoC in the 8-10% range, w/IRR over 3-5 year typical holds of 16 - 20%. Couple blogs to get the wheels turning.

https://www.biggerpockets.com/blogs/9145/53820-why...

https://www.biggerpockets.com/blogs/9145/54155-sel...

https://www.biggerpockets.com/blogs/9145/62927-6-r...

I would be buying lots from those that don't want to rebuild up in fountain grove or Silverado

wait a year or two then build some spec homes.. probably easily 2X to 3X your cash.. in 36 months or less.

you could join me in my development in Rohnert Park right next to the Graton Casino... 45 minute drive to view your investment LOL... we are not suppose to advertise on BP but since the guys above me talked about their deals I thought I would throw a few out.. also Performing first trust deeds are solid for the passive investor... 8 to 12% is possible you can do that with some crowd funders and local hardmoney lenders.. we have a 9% 5 year product that gives you consistent return with out having to get paid off and find that new deal all the time.

I agree with a lot of the posts above. I personally would invest that into several of my Multi-family value add syndication's. As for what you should do, that is hard to answer. Some options: 

Buy a multi-family/commercial or 2 on your own and operate it - this could be very profitable if done right, but will require time and energy and a learning curve. 

Invest in several syndication deals that offer around 15-20% IRR. With this you could invest between $100-$200k in each deal and be involved in 5-10 deals to spread your risk. You could also invest with a few different companies and different asset classes.

Invest in a low risk, moderate return NNN lease property or a few. This is you Walgreens type building and offers around the 5-6% cap.

Become a hard money lender. You can expect 20%+ returns, but you have higher risk as you are lending to flippers. Depending on how many loans you do, you may need a license. 

Buy distressed or non-distressed notes

Combination of several of these

There are many others, like stocks, buying businesses, franchises, gold, oil, bitcoin, etc, but I'm a real estate guy, so that is how my brain thinks. Feel free to PM me if you would like to talk more about any real estate investing options. 

@Ricardo Fainsilber Congratulations! Couple of things:

  1. Mitigate the risks of losing some of this capital by immersing yourself in whatever asset class (real estate and/or crypto) you decide to go with, especially now that many people will bring you "ideas" (be extremely patient)
  2. Take a long-term view and never invest in GRQ [Get Real Quick] schemes. 

Personally, I would heavily invest in hard assets, the ones I can "touch" and "feel" and as much as I am a forward thinker I am just somewhat reticent on these cryptos mainly because of its intangibility and volatility. 

However, why listen to me? I have not witnessed a $1M 💵 liquidity event in my life (well, not yet at least). 

Hope this helps. Good luck. Thanks! - Ola    

NBSupposedly, it appears you already have your answer as you have posted this on a real estate investment site :)

@Ricardo Fainsilber lot's of good answers posted here. What's your tax exposure on the event?  MF syndication (thanks to the new tax plan) if maximized by the sponsor will generate meaningful losses in year one in addition to cash flow. You could potentially avoid a lot of your tax bill.

If you're looking for truly passive, syndication is the way to go.  Happy to chat further and walk you through some examples.

I'd recommend taking about six months to read books, blogs, and posts, listen to podcasts, and speak with investors to gain an understanding of options and see what best fits with your goals and personality.  Figuring out a passive stock/bond market portfolio can be done in days...determining how to invest in businesses (which is what a properties are) takes a lot longer.  Some real estate investors have been in the business for a long time and still regularly vet and change strategy as the market or their experience changes.

Lots of solid advice her, and Mike summed it up nicely. 

Of course, we like self-storage, and we buy, convert, develop, and syndicate.   

And Because Self-Storage does so well in both boom times, and ESPECIALLY during a recession, our equity investors are seeing returns that are 30-50% higher than what has been stated in the posts above.  

Do your research, and MAKE SURE you look into self-storage. 

Good Luck.  

I wish I had a liquidity event like that. Good for you!

I would be a little careful who's advice you take on this. Very few people have had that amount of capital to invest, myself included. I am going to shy away from giving you advice on something I have not done. 

I do know that invested properly, that sum of money can make you ridiculously in a short period of time. The biggest challenge I see is protecting it while it grows. Lots of people will have "investment opportunities" for you. You want a great return, but you also want to protect the money. 

Invest it in small apartments, Cryptocurrency and AirBnB properties

If it were me, and I'm an aggressive guy, I would find someone with a first name of Mike that lives in Illinois and just lend it to him for say 4%. Now thats me. I'm aggressive like that.  :-)

Seriously. If someone were to give me a million dollars today, I would do what I know best. Use that money to buy SFH rentals. I would leverage hard money and loans and would be willing to bump my typical LTV number from 70% to 80% and come out of pocket that much.

So on a typical deal where I come out of pocket 6k to 8k, I would come out 6k to 8k, plus another 10% (or 15k). 23k would buy me 40 to 50 more houses? Then I'd call it a day. :-)

No way I can tell you what to do. Our level of risk vs labor would not match up. For me I would invest in mobile home parks. 

I’d lay it out on my bed and sleep on it. Just for one night then invest in MFR.

Originally posted by @Dennis Canon :

I'd lay it out on my bed and sleep on it. Just for one night then invest in MFR.

 I wouldn't get a wink of sleep. I get nervous when I've got a couple grand in my pocket on the odd occasion. 

I would put it in a income fund and lay back and relax. Passive investment.

If I were younger I would roll the income back into the fund and continue working for maybe another 10 years. 

At that point the income would be more than anyone needs in life to be very comfortable.

@Thomas S. what do you mean by "income fund?" Crowd funding? REIT?

@Ricardo Fainsilber Some of this has to do with definitely 'how to invest next'.  Specifically, the "next" portion of it.  Do you have real estate today?  Is it in a certain market?  Do you like the market?  There are more than a few ways to skin the cat but dropping $800K (keep $200K for reserves) into something that you have no experience in --- no matter what the category --- is dicey.  I have some apartment buildings so if I magically had $1MM tomorrow then I'd earmarket $800K for a downpayment and look for a $3MM apartment complex in the market where I invest.  The geography is "the devil I know", the property manager is "the devil I know", etc. so it's a somewhat easy decision for me.  Apples-to-apples I can probably afford to "overpay" for the deal because I have that comfort/infrastructure already in place.  

What I (personally) wouldn't do is decide that because I had $1MM I was going to become a hard money lender or take on some other role. That doesn't mean it's wrong for others but I wouldn't let capital decide what path I took in REI. Others would and they're probably correct also.

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