If you have 500k to invest......

20 Replies

Fairly open-ended question.  If it's real estate oriented, I'd love to become a hard money lender.  Collateralize-debt and if you are selective about only lending on properties you wouldn't mind taking over then even a worst case scenario you could leverage to your advantage.   No tenant issues either. 

@Yan Guo

That's a pretty open ended question. The answer would be "it depends".

1) Are you looking for active versus passive investment?

2) equity or debt investment?

3) what is your expertise in if any?

4) if the answer to #3 is none, then I'd narrow down the strategy (#1 above), and then select a niche within such strategy (#2) and make is as specific as possible. This will lead you to #3 - if the knowledge is not present, then educating yourself on the strategy would be a pre-requisite to taking any action!

Always start with the end result in mind and consideration of the tax consequences. Depending on whether you're W-2 person or a business owner, you may be in a higher or lower tax bracket. With the higher tax bracket you'd want to give preference to investments that offer anything other than ordinary income, which entails most likely turn keys or syndications. 
Here's an article that will provide more details:

If you have more questions, feel free to PM me. 

Originally posted by @Yan Guo :

@Alina Trigub

I am thinking in passive income. 😊

It is a good idea of making a strategy.

I would invest in multifamily syndication because it's easier to scale (typically $35k min investment in each syndication deal). I'd also consider investing in ground-up developments, since they offer greater returns (typically $100k min investment in each syndication).

I highly recommend you not to put all $500 k into one deal because diversification is key!! Especially putting $500k into your first deal. You'll most likely make a lot of mistakes. 

To minimize risk, you should invest in markets that have a healthy growth trend, such as Raleigh, Phoenix, Las Vegas, and many more. You should also diversify your portfolio by investing in different areas with different syndicators that all have a solid track record. Diversification is key to minimizing risk, so you should also consider putting some of the money in stocks.

The first thing I would do is to buy a deal with little headaches, in the larger multifamily space (100 units +)!! A lower return wouldn't scare me away, because if I could get a rock solid location with great cash flow there is nothing better. We own 3,500 units B/C properties, but my favorite deal is a 2003 99 unit in Wilmington, NC. Deal cash flows 7% from day 1. We are refinancing now, and the strategy we are falling in-love with is 65% agency debt, high 3.8/3.9% interest only loan, and fixed for 10 years. We feel this is a great strategy to deploy on the right deals.

@Yan Guo Hi Yan, you're on BP so I assume your really asking, "how would you invest 500k in real estate?" I love this question because it's one I think of personally often as I'm allocating my own resources over time. Aside from paying off consumer debt/loans, etc and making sure I have a healthy emergency fund, I'm going to diversify across several different projects. I have said it before and will say it again that multifamily CAN BE a fantastic investment, especially, well-led syndications, BUT, it's get dicey in certain markets and so one needs to tread lightly. Getting educated about syndications FIRST, is something I'd recommend you pursue as there are fantastic risk/reward opportunities in certain markets, AND there are some great teams out there doing great work. Development makes me nervous in certain markets where delays from permitting and other issues can really hurt the project ROI, however, some projects can be very lucrative. If you have appetite for more risk, and have a trusted developer, this might be where more of the adventurous money can go. So, I'd invest like this:

Multifamily Syndications: 50%

Development: 20%

Smaller Multifamily (2-4 units): 30%

This assumes diversifying across markets and good relationships with partners, syndicators, etc. As previously mentioned, I'd spread it across the sunshine belt in the markets that are seeing strong job/pop growth. Most of this however depends on you and what level of control you need to have. If it's a high level of control and you prefer to be active, then syndications are not going to be the path for you. 

Just my thoughts, but of course this is all highly personal.

@John Cohen yea, it's a hard market, nothing stays on long, too many people

I check the foreclosures at the courthouse weekly, the auctions for them usually have minimal people, I don't bid, I just like to practice evaluating deals

If you're interested in this market out, while remaining out of state, let me know, I'm sure we could work out something

@John Cohen almost exclusively single family homes, there's just not a market for multifamily here, most of the ones seen are previously larger houses chopped up, and occasional duplex.

As far as what I've seen on the foreclosure lists, they're traditionally decent quality properties, in decent neighborhoods, definitely some potential for ARV

Wilmington is unique because as soon as you drop the mailing address, the prices are so much better, and the location could be too. I moved from south Wilmington, to a great neighborhood in Leland, which is literally the town that the river separates from downtown Wilmington. I lost my mailing address, but I'm downtown in 12-15 min, compared to 25-30 min of people who live where I used to, and the beaches in BRunswick County are much more relaxed

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