How would you invest $200K/yr?

45 Replies

Above/beyond what I'm putting away in 401k/IRA/529/taxable accounts, I want to invest $200K/year for the next 7 years. What would be effective ways to parlay that into a great passive income? How would you do it if you couldn't spend time to do flips/BRRRR or get heavily invested into the day-to-day?

Curious what sort of general strategies people would employ here?  Blow it all on one large MFH each year?  Acquire multiple SFHs?  Invest in syndications?

You’re in the opposite position of me. I have acquired about $2.5m in deals over the past decade. My first deal I dumped $40k in home equity into from my primary. If you take that deal out of the equation then the rest of my portfolio was acquired for a TOTAL of maybe $25-30k out of pocket. I’m very hands-on because of the way I’ve had to acquire them. At this point, I’m craving two things, passivity and anonymity.

So my answer is this...if I had $200k a year to invest then I would find GOOD and TRUSTWORTHY syndicators that I could invest with as a limited partner. Spread it out. Start smaller with several good ones and then give the ones you trust and that perform well for you more as time goes on.

It sounds like you’re crushing it in your day job...this would allow you to continue with that.

Lots of options.  I wouldn't look at this as having 200k/year to invest. This is a great opportunity to compound this "seed money" from the start.  First, you should never look at flipping as flipping properties...you should look at it as flipping your cash.  The property is just the vehicle your dcash is riding at the time.  The make and model of the vehicle (type of strategy and market) depends on you area, and what opportunities are prevalent there at the time you do this...and of course how these opportunities support your overall plan. 

Having said that, I would continue to flip your cash in larger cash the first year.  In other words, grow your seed money.  Then continue to flip that larger seed money, but spend the profits on cash flow vehicles from that point forward.  You're not going anywhere with only 200k/year, but you can grow that 200 into a much larger repeating amount...that you can supplement every year with an added 200k.  This will give you a much greater ability to grow, and a much faster timeline. 

Kenneth - Syndicators allow your investment to be truly passive and typically have access to deals that never hit the market. However, you lose some control with respect to your ability to sell the property and liquidate your investment at a whim.

I’d stay away from turn key SFRs as your financial performance is tied too much to the ability of one person to pay rent.

Best of luck! With a large sum of money to invest, you’re in control!

@Kenneth Lee , Scale is going to be your friend and your enemy.   Passive investing through syndications etc can always provide you plenty of avenues for your cash (whether good or not so good investments depends). But  your profile suggests that you want to become an increasingly active manager of a real estate investing business.  In that case you're going to have to look at sectors that you can scale as an active owner into 14 - 20 mil in assets and not drive yourself bonkers on projects too small to be able to scale where you want at the level of involvement you want to have.

So be wary of smaller investments that will sap your time but not the available capital effectively for the the haul.  And there's nothing wrong at all with staying in cash for a period of time and then cherry picking off a 5-10 million dollar asset at the right time with several years of accumulated investment capital.  Smart money is sometimes still money waiting.  

Your desire for active management also makes you an ideal candidate for development.  There's a rush like no other to put your stamp on a piece of land that becomes a home or community for families and businesses.  From raw land acquisition to actual construction the multiple phases of actual real estate development might be your cup of tea.

Originally posted by @Kenneth Lee :

Above/beyond what I'm putting away in 401k/IRA/529/taxable accounts, I want to invest $200K/year for the next 7 years. What would be effective ways to parlay that into a great passive income? How would you do it if you couldn't spend time to do flips/BRRRR or get heavily invested into the day-to-day?

Curious what sort of general strategies people would employ here?  Blow it all on one large MFH each year?  Acquire multiple SFHs?  Invest in syndications?

I would probably get 8-10 SFR Turnkey properties in the Midwestern markets. Something that will rent for around $1,000 a month and needs no work. SHould be cash flowing right away.

Originally posted by @Joe Villeneuve :

Lots of options.  I wouldn't look at this as having 200k/year to invest. This is a great opportunity to compound this "seed money" from the start.  First, you should never look at flipping as flipping properties...you should look at it as flipping your cash.  The property is just the vehicle your dcash is riding at the time.  The make and model of the vehicle (type of strategy and market) depends on you area, and what opportunities are prevalent there at the time you do this...and of course how these opportunities support your overall plan. 

I undoubtedly want to find a way to snowball this, that's for certain. That having been said, I am skeptical that I would be successful at flipping without a significant active time investment. I'm sure there are those that have come up w/ good systems, but I understand that the out-of-state BRRRR or flip is fraught with peril for "dumb" money. Happy to be told that I'm misinformed, but I suspect this will not play into my wheelhouse.

Year 1: Buy some SFH cash, delayed financing.

Year 2: Same thing, but roll cash in from previous year. 

Year 3: Buy MFH and do delayed financing (no idea if you can do that).

Year 4: Portfolio loan all the previous. Move to private money.

Year 5: Syndicate.

Originally posted by @Brandon Hicks :

So my answer is this...if I had $200k a year to invest then I would find GOOD and TRUSTWORTHY syndicators that I could invest with as a limited partner. Spread it out. Start smaller with several good ones and then give the ones you trust and that perform well for you more as time goes on.

It sounds like you’re crushing it in your day job...this would allow you to continue with that.

Appreciate the advice -- it seems like syndications are a good passive option and having capital locked up for several years isn't a concern.  How would you vet for good and trustworthiness?  There are well marketed ones such as RealWealthNetwork (which seem to have a reasonably good reputation here), and I've seen some proposals but honestly lack the skill/experience to vet whether the plans are for real vs. just well marketed.

I do want to keep the day job -- I enjoy the work and I've been positioned for success/growth.   I project that I will have 7-10 years of increasing earning capabilities before I become "too old" for this line of work :-).  The good thing is instead of upsizing our home, we're pretty good at living within a budget and putting everything else away

Originally posted by @Kenneth Lee :
Originally posted by @Joe Villeneuve:

Lots of options.  I wouldn't look at this as having 200k/year to invest. This is a great opportunity to compound this "seed money" from the start.  First, you should never look at flipping as flipping properties...you should look at it as flipping your cash.  The property is just the vehicle your dcash is riding at the time.  The make and model of the vehicle (type of strategy and market) depends on you area, and what opportunities are prevalent there at the time you do this...and of course how these opportunities support your overall plan. 

I undoubtedly want to find a way to snowball this, that's for certain. That having been said, I am skeptical that I would be successful at flipping without a significant active time investment. I'm sure there are those that have come up w/ good systems, but I understand that the out-of-state BRRRR or flip is fraught with peril for "dumb" money. Happy to be told that I'm misinformed, but I suspect this will not play into my wheelhouse.

I don't believe I mentioned anything about the BRRRR method at all. That's not a part of it. That's a road that leads to a dead end very quickly, and very limited while on that road.

Originally posted by @Joe Villeneuve :
Originally posted by @Kenneth Lee:
Originally posted by @Joe Villeneuve:

Lots of options.  I wouldn't look at this as having 200k/year to invest. This is a great opportunity to compound this "seed money" from the start.  First, you should never look at flipping as flipping properties...you should look at it as flipping your cash.  The property is just the vehicle your dcash is riding at the time.  The make and model of the vehicle (type of strategy and market) depends on you area, and what opportunities are prevalent there at the time you do this...and of course how these opportunities support your overall plan. 

I undoubtedly want to find a way to snowball this, that's for certain. That having been said, I am skeptical that I would be successful at flipping without a significant active time investment. I'm sure there are those that have come up w/ good systems, but I understand that the out-of-state BRRRR or flip is fraught with peril for "dumb" money. Happy to be told that I'm misinformed, but I suspect this will not play into my wheelhouse.

I don't believe I mentioned anything about the BRRRR method at all. That's not a part of it. That's a road that leads to a dead end very quickly, and very limited while on that road.

Sorry for misquoting -- but wouldn't flips require nearly as much effort?  I envision myself being the "sucker" in many of these deals trying to remotely manage things.  How do successful flippers do this at scale?

@Kenneth Lee - Before anyone can answer those questions, I think you have to determine a few things for yourself. 

- Do you want to be an active or passive investor?

- How much liquidity do you need? Illiquid investments aren't scaring when are at all time highs, but people felt differently in 2009-2010. 

- What are your return thresholds?

- Do you want control or comfortable with less decision making ability?

Those are just a few, but they will help you funnel down the options of real estate investing. It's a bottom up approach that will yield more benefits. 

Syndication would make sense if your goal was to get involved with someone that would be very open about their processes. To me, the goal would be to learn what they're doing and how they're doing it.

Then maybe after the second deal/year with them, I would look to do my own deal so you can get even bigger returns.

@Kenneth Lee

I’ve never been involved in a syndication so I guess my advice would be to use BP to vet them. @Ben Leybovich is getting involved in syndications and has a great reputation on BP so he may be a great place to start. Best of luck to you with whatever path you choose. 

@Kenneth Lee  

I would consider the investment of time as well as money. 

  • What happens at the end of the 7 years?  
  • Maximize return on equity?  
  • Is there a skillset that you are trying to learn over the course of the next 7 years? 

I would ask myself, in an ideal world what am I doing in 7 years?  Then I would build a plan from that date back to today to create a path for my goal/ideal world.

Originally posted by @Kenneth Lee :

Above/beyond what I'm putting away in 401k/IRA/529/taxable accounts, I want to invest $200K/year for the next 7 years. What would be effective ways to parlay that into a great passive income? How would you do it if you couldn't spend time to do flips/BRRRR or get heavily invested into the day-to-day?

Curious what sort of general strategies people would employ here?  Blow it all on one large MFH each year?  Acquire multiple SFHs?  Invest in syndications?

 Kenneth - In terms of great passive income from real estate, I would partner with a fund manager that:

  • You can trust 
  • That provides transparency
  • That has a proven track record of performance
  • Can efficiently diversify your real estate allocation to different properties/markets to ultimately minimize your risk

One benefit of fund investing over taking part in syndications is the ability to diversify across different properties and markets all within the same investment.

Originally posted by @Kenneth Lee :
Originally posted by @Brandon Hicks:

So my answer is this...if I had $200k a year to invest then I would find GOOD and TRUSTWORTHY syndicators that I could invest with as a limited partner. Spread it out. Start smaller with several good ones and then give the ones you trust and that perform well for you more as time goes on.

It sounds like you’re crushing it in your day job...this would allow you to continue with that.

Appreciate the advice -- it seems like syndications are a good passive option and having capital locked up for several years isn't a concern.  How would you vet for good and trustworthiness?  There are well marketed ones such as RealWealthNetwork (which seem to have a reasonably good reputation here), and I've seen some proposals but honestly lack the skill/experience to vet whether the plans are for real vs. just well marketed.

I do want to keep the day job -- I enjoy the work and I've been positioned for success/growth.   I project that I will have 7-10 years of increasing earning capabilities before I become "too old" for this line of work :-).  The good thing is instead of upsizing our home, we're pretty good at living within a budget and putting everything else away

If you start out buying some SFH first and doing the delayed financing you'll establish the skill set the evaluate the proposals. You might make few mistakes at first, but as you buy you'll start to understand what works and doesn't for your preferences.

HML

@Kenneth Lee , initially I would say to diversify - some passive investments, some actively managed, a mix of SFHs & MFHs, explore different niches, etc. However, given your desire to be involved passively and continue your day job, I would agree with several above that syndication is a perfect opportunity. With that amount per year to invest, you can still diversify as well - different Sponsors, several markets, different niches, etc., with $50K or $100K in multiple deals per year. Some pros of working with a syndicator in the MF space:

1. Of course, the ability to invest passively.

2. Diversification.

3. Benefiting from forced appreciation - i.e. commercial MFHs value are calculated via NOI/CAP, so small changes to income or expenses can increase the value of the asset dramatically

4. Less liability exposure as a limited partner

Here are several blogs to get you going:

https://www.biggerpockets.com/blogs/10191/68640-wh...

https://www.biggerpockets.com/blogs/10191/66365-8-...

https://www.biggerpockets.com/blogs/10191/67979-po...

Best of luck in your decision making process!

With 200K per year if you want passive you do not want to invest in real state. 200K is a lot of money and invested in a REIT or any income fund would do very well. You could fully retire in less than 10 years without stress or effort.

1.5 - 2M should produce a income of 160K to 240K annually in most good funds. Tons of money for any one.

Originally posted by @Kenneth Lee :
Originally posted by @Joe Villeneuve:
Originally posted by @Kenneth Lee:
Originally posted by @Joe Villeneuve:

Lots of options.  I wouldn't look at this as having 200k/year to invest. This is a great opportunity to compound this "seed money" from the start.  First, you should never look at flipping as flipping properties...you should look at it as flipping your cash.  The property is just the vehicle your dcash is riding at the time.  The make and model of the vehicle (type of strategy and market) depends on you area, and what opportunities are prevalent there at the time you do this...and of course how these opportunities support your overall plan. 

I undoubtedly want to find a way to snowball this, that's for certain. That having been said, I am skeptical that I would be successful at flipping without a significant active time investment. I'm sure there are those that have come up w/ good systems, but I understand that the out-of-state BRRRR or flip is fraught with peril for "dumb" money. Happy to be told that I'm misinformed, but I suspect this will not play into my wheelhouse.

I don't believe I mentioned anything about the BRRRR method at all. That's not a part of it. That's a road that leads to a dead end very quickly, and very limited while on that road.

Sorry for misquoting -- but wouldn't flips require nearly as much effort?  I envision myself being the "sucker" in many of these deals trying to remotely manage things.  How do successful flippers do this at scale?

 You don't need to do it "at scale".

Originally posted by @Thomas S. :

With 200K per year if you want passive you do not want to invest in real state. 200K is a lot of money and invested in a REIT or any income fund would do very well. You could fully retire in less than 10 years without stress or effort.

1.5 - 2M should produce a income of 160K to 240K annually in most good funds. Tons of money for any one.

 Until the market crashes....again.

Fly to where I live and I will spend a day with you, I will buy lunch.

Franklin

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