What would you do with a million?

General Real Estate Investing
8yFollow

What would you do with a million?

Ricardo Fainsilber
Investor · Belvedere Tiburon, CA · Member since 2017 · 41 posts · 16 votes
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!
1Reply
72 views

Most Popular Reply

Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
8y

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.

8Reply
See this reply in the discussion

47 Replies

Jump to latestLatest
  • Will G.
    Rental Property Investor · Maryville, TN · Member since 2009 · 529 posts · 414 votes
    8y

    I wish you luck on this..... in the same boat and have been having a terrible time getting it done! R.e. background and have been beating every bush in my area for a multi family deal. All possibilities in last 6 months have been overpriced, and i am old enough to have paid too much for an investment before(still regretting that), so really don't want to do that again.

    REMBER WHERE WE ARE IN THE R.E. CYCLE!

    I have to keep reminding myself of this when making offers on c properties advertised at 6% caps. We are in record low cap rates, so where do they go from here? Lower? What is your cap gonna be at resale in 10 years and how much cash flow will it eat if 2% higher at sale time? What will rising interest rates do to cap rates? I remember getting 5% on money sitting in the bank, could those condition return?

    I have also been researching syndication, and it seems the syndicators are having difficulty finding good deals in cities worth investing in, then there are the issues with vetting syndicators, and they are also subject to the market conditions above.

    I dont want to sound negative, but our world is yield starved right now, treasuries, bonds, bank cd's, etc don't return much. Hence all the pressure on multi family. But we will overbuild that class (multi fam)as we always do in the cycle. The only way i see to position againt this is lower priced properties with cheaper rents, as new developments will necessarily be top of market rents.

    If you can find a deal with rent advantage in a decent area, great, if not, maybe diversify, into; syndication, some reits, online lending(prosper etc) and maybe an alternative asset class like industrial.

    Also don't discount dry powder when the next big stock market correction shows up!

    5Reply
  • Jay Helms
    Rental Property Investor · Gulf Breeze, FL · Member since 2014 · 1k+ posts · 733 votes
    8y
    Originally posted by @Ricardo Fainsilber:
    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!

     Loan out your balance sheet to guys who need the net worth. 

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    8y

    @Kim Puckett

    "what do you mean by "income fund?" Crowd funding? REIT?"

    That is a question you need to work out with your financial advisor. Depends a lot on your risk tollerances. For myself I am in mainly mutual funds and have had returns between 8% and 17% annually over the past years. Good enough for me considering they are truly passive which my real estate definatly is not.

    0Reply
  • Ricardo Fainsilber
    OP
    Investor · Belvedere Tiburon, CA · Member since 2017 · 41 posts · 16 votes
    8y
    Jay Helms what do you mean by loan the balance sheet?
    0Reply
  • Alex J.
    Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes
    8y
    Originally posted by @Ricardo Fainsilber:

    Lots of great ideas, which is what I was looking for, thank you everyone!
    Andrew Johnson I do have real estate already, a decent portfolio, but not nearly what I would like it to be (is it ever?!).
    As you correctly imply, I’m trying to figure out what to do next. This is significant liquidity and I’m trying to decide the best next move.

    Why has nobody asked "what caused this liquidity event /windfall"

    A million dollar payday and nobody is curious but me ?? Hahah

    Do tell... everybody is great at giving advice but few have seen these type of events.

    I've been lucky to see it myself...my approach is buy Cali Muni bond funds that give tax free return and offers liquidity...then go balls to the wall on deal finding

    Goodluck

    Paging Scott trench to this sub

    0Reply
  • Jay Helms
    Rental Property Investor · Gulf Breeze, FL · Member since 2014 · 1k+ posts · 733 votes
    8y
    Originally posted by @Ricardo Fainsilber:

    Jay Helms what do you mean by loan the balance sheet?

    When recourse loans are in play, a person's DTI is considered for loan approval. For an active investor like myself, at times I need a partner with a high net worth to offset my DTI for bank loan approval. I partner with the high net worth individual on an agreed upon plan to pay them a % of the deal and come up with an exit strategy for them (usually 3-5 yrs) to relive them of the debt liability. Make sense?

    1Reply
  • Will G.
    Rental Property Investor · Maryville, TN · Member since 2009 · 529 posts · 414 votes
    8y

    As to the cause of the liquidity event, op lives in cali, so he probably sold an 1100 sf home:-)

    2Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    8y
    Originally posted by @Will G.:

    I wish you luck on this..... in the same boat and have been having a terrible time getting it done! R.e. background and have been beating every bush in my area for a multi family deal. All possibilities in last 6 months have been overpriced, and i am old enough to have paid too much for an investment before(still regretting that), so really don't want to do that again.

    REMBER WHERE WE ARE IN THE R.E. CYCLE!

    I have to keep reminding myself of this when making offers on c properties advertised at 6% caps. We are in record low cap rates, so where do they go from here? Lower? What is your cap gonna be at resale in 10 years and how much cash flow will it eat if 2% higher at sale time? What will rising interest rates do to cap rates? I remember getting 5% on money sitting in the bank, could those condition return?

    I have also been researching syndication, and it seems the syndicators are having difficulty finding good deals in cities worth investing in, then there are the issues with vetting syndicators, and they are also subject to the market conditions above.

    I dont want to sound negative, but our world is yield starved right now, treasuries, bonds, bank cd's, etc don't return much. Hence all the pressure on multi family. But we will overbuild that class (multi fam)as we always do in the cycle. The only way i see to position againt this is lower priced properties with cheaper rents, as new developments will necessarily be top of market rents.

    If you can find a deal with rent advantage in a decent area, great, if not, maybe diversify, into; syndication, some reits, online lending(prosper etc) and maybe an alternative asset class like industrial.

    Also don't discount dry powder when the next big stock market correction shows up!

    Will, fantastic reply on the state of the market.  Also, nice to read a post about all options to deploy capital rather than one promoting/defending "my way".

    2Reply
  • Ricardo Fainsilber
    OP
    Investor · Belvedere Tiburon, CA · Member since 2017 · 41 posts · 16 votes
    8y
    For those of you who were curious. The reason for the liquidity is getting some cash out of a property that no longer has a mortgage.
    2Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    8y
    Originally posted by @Ricardo Fainsilber:

    For those of you who were curious. The reason for the liquidity is getting some cash out of a property that no longer has a mortgage.

    You can get a line of credit and not have to deploy the funds all at once (or have the funds sitting idle while you search for an investment(s)).

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    nothing says you have to do real estate you could find another business venture and add liquidity to let the business expand and you take a position in it.

    also in the Bay area you might consider buying commercial and creating an incubator.. I like that play.

    you exchange rent for an interest in each of the little companies that you provide space for for free.

    or very reduced rent.. this could give you some major hit down the road that would make any real estate play pale.. just depends on if you really need cash flow now.

    I do like the double tax free muni's though for the very cashed up and conservative investor in CA which is a high tax burden state.. a few of my clients that are family offices have those types of investments..

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • Ivan BarrattBusiness Member
    Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
    8y

    @Will G. I hear you. I'm one of those syndicators scouring my neck of the woods for actual good deals. Last year we wanted to do 6 deals but only found three.

    Any comments on the destruction of the dollar while it's sitting on the sidelines?  I like the optionality of dry powder as well but only so much for that bucket! Also, the spread between risk free bonds (~250bps) and existing (cash flowing) workforce apartments is still 550bps+. In short, our approach is long term fixed financing so we can hold (and acquire more deals) when the next correction hits.  In the meantime we still want to put capital to work.

    Central banks are undoubtedly blowing an asset bubble and punishing savers however there will still be winners. For our thesis; workforce housing in B or better locations financed with long term, low rate debt will win.

    1Reply
  • Arlen Chou
    Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes
    8y

    As @Jay Hinrichs suggested, this is a great play, been there done that.  Its almost like angle investing, with the same types of risk and rewards.  But if you don't need the cash flow to live and you can sit on the investment for a period of time, this can definitely give you a huge boost up if you hit it right.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    @Arlen Chou  I saw my first incubator about 5 years ago in Mtn. View when I went to see REalty shares in their infancy and thought hey this is a great idea if you can afford it.

    then when we chatted you confirmed it..  :)   And its one of my goals..

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Ricardo Fainsilber
    OP
    Investor · Belvedere Tiburon, CA · Member since 2017 · 41 posts · 16 votes
    8y

    @Arlen Chou and @Jay Hinrichs what has been your experience with such incubators? I think its a great idea, but the probability of finding a startup as tenant that becomes a solid business is not very high. I think the great majority of startups end up just shutting down. How do you find a good one?

    0Reply
  • David Gonzalez
    Realtor · Camarillo, CA · Member since 2014 · 162 posts · 102 votes
    8y
    I would invest in Commercial Real Estate (specifically Multifamily) and would invest in the Midwest or South. Once the Portfolio was stable I would take the free CF to either buy more properties or invest in paper assets that are riskier such as distressed debt or become a hard money lender.
    0Reply
  • Chris Koenig
    Investor · Danville, CA · Member since 2015 · 8 posts · 4 votes
    8y

    what did you decide @Ricardo Fainsilber? 

    If it was me, 1st: 1st deed of trust hard money lending

    2nd: self-storage

    I think MF is over valued right now with low cap rates and valuing based on 2-3year out rents assuming aggressive annual increases. No huge equity pop there and low cash flow.  

    0Reply
  • Ricardo Fainsilber
    OP
    Investor · Belvedere Tiburon, CA · Member since 2017 · 41 posts · 16 votes
    8y

    @Chris Koenig Since the proceedings will be coming from another property I'm selling, I decided to do a 1031 exchange, but I'm still not exactly sure where to invest next. I'm yet to sell the property though.

    0Reply
  • John Blackrock
    TX · Member since 2019 · 30 posts · 9 votes
    7y
    Originally posted by @Ricardo Fainsilber:

    @Chris Koenig Since the proceedings will be coming from another property I'm selling, I decided to do a 1031 exchange, but I'm still not exactly sure where to invest next. I'm yet to sell the property though.

     What did you end up doing? 

    0Reply
  • Ricardo Fainsilber
    OP
    Investor · Belvedere Tiburon, CA · Member since 2017 · 41 posts · 16 votes
    7y

    @John Blackrock I did a 1031 exchange into multiple SFR in the midwest. From one property into 15 SFR which provide much higher ROIs now.

    2Reply
  • Ricardo Fainsilber
    OP
    Investor · Belvedere Tiburon, CA · Member since 2017 · 41 posts · 16 votes
    7y

    That’s true about the cycle. I did this thing about a year ago, it’s not the same today

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free