Have $500k to start RE investing- wwyd?!

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Have $500k to start RE investing- wwyd?!

Noelle Pritchard Barkley
Rental Property Investor · Golden, CO · Member since 2019 · 6 posts · 20 votes

It’s fun to dream about situations like this, but I’m not dreaming... And I do NOT want to screw this opportunity up. Asking for real advice.

We sold our Denver home for $800k, a cash offer, we close in exactly one month. We are moving to GA or SC, as I've always wanted to live in the South, and I have family there. ("We" is my husband and I, btw.) I want to start investing in real estate immediately- we need passive income, as neither of us likes to work a typical 9-5. I am thinking that rentals (with great hired PM, of course) is the way to go. I'd like to buy several SFH's, or multi-fam/duplex/triplex etc., outright with cash, so the income is immediate and I can re-sell easily, etc. Is this a solid plan, or am I not thinking of something?! Is there another avenue I should be considering? You know how you can get in a mental rut and get tunnel vision, and overlook the extremely obvious right in front of you?? I do not want this to happen to me, and because I'm new to RE, and investing, I fear I could be missing out hugely.

If you were me, what would you do?

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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y

@Noelle Pritchard Barkley step 5 don’t post on a public forum that you have 500k. Great way to get spammed with lots of “investment opportunities”

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  • Account Closed
    Investor · United States · Member since 2018 · 565 posts · 356 votes
    7y

    If you have to ask this then I'd suggest that you do nothing. Not until you know what you're doing. Many people in this situation lose all their money. Seriously. It's not pretty. For now put it into a high APY online savings account like HSBC, CIT or Marcus (no limitations, not a money market, can withdraw). you can earn $800+/month while you wait with NO risk. 

    Good luck!

    5Reply
  • Brett StompsPro Member
    Realtor · White Salmon, WA · Member since 2019 · 6 posts · 7 votes
    7y
    Originally posted by @Corey Hill:

    @Brett Stomps if you don’t mind me asking how did you find the multifamily group and is in in person or online? Thanks

    No worries at all Corey. It was on Meetup.com, and it's in person. They're going to make a Facebook group soon. 

    0Reply
  • Adrienn Czako
    Realtor · Dallas, TX · Member since 2014 · 6 posts · 5 votes
    7y

    @Noelle Pritchard Barkley

    Oh dear lord where to begin?!

    I would recommend you take a crash course on real estate investing.

    You could take the 3 day weekend with Robert Kyosaki ($500 for 2 people so you coukd go with your husband) but that will only give you the tip of the iceberg. They have asset protection course. And they will want to sell you on advanced training for thousands.

    But you will have a chance to meet investors and learn.

    It is best if you talk to a real estate lawyer for advise or a financial advisor.

    You should probably purchase the properties in a trust fund, using self directed IRA for tax purposes and protecting your assetts.

    Research!!! Research buy and hold real estate investing topics, research books on rental properties. I use audibles by amazon prime so i can finish a book in a few hours listening to it while driving.

    Talk to an IRA company for advice.

    Good luck!! Very happy for you! Be safe!

    2Reply
  • Anthony Rosa
    Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
    7y

    Sit on your money until you feel comfortable & understand what you're getting in to. You may like syndication, REITS, rental units, commercial, etc....I'm a big fan of appreciation and little debt.  Lots of people on BP love passive income and constant borrowing on properties that are worth the same 50 years from now. To each their own.

    4Reply
  • Salvatore Lentini
    Rental Property Investor · Doylestown, PA · Member since 2008 · 1k+ posts · 1k+ votes
    7y

    @Noelle Pritchard Barkley - having a lot of knowledge but no money can make the first few real estate deals difficult.... but having a lot of money and no knowledge doesn’t make it difficult, just dangerous. There are lots and lots of deals out there you can put your money into but a much much smaller percentage that you SHOULD put your money into. I would diversify that cash into multiple deals over time.... not all at once. You’d rather make a mistake with a $100K investment than a $500K investment right?

    4Reply
  • Kyle Nelson
    Polson, MT · Member since 2017 · 115 posts · 105 votes
    7y

    I’d try to get at least half of that invested debt free. I feel like this is a good time to hedge your bets. 

    0Reply
  • Nicolas Conca
    Rental Property Investor · Denton, TX · Member since 2017 · 51 posts · 17 votes
    7y

    @Jay Hinrichs hey can you tell me more about the client your turned for a licensed AIRBNB duplex in Charleston. I don’t know anything about that market just yet. Love to connect thanks.

    0Reply
  • Jeffrey Charfauros
    Member since 2019 · 26 posts · 14 votes
    7y

    @Noelle Pritchard Barkley get to know 1. Get to know the best neighborhood title and escrow company. 2. Get recommendation for agents and pm that fit your needs, attorneys, accountants, other local players.

    This is the easiest, fastest way to know trusted team members

    1Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    First off congrats! With $500k I would instead of buying cash buy with 25% down and then pay for the rehab in cash. If done right this will create equity so you can sell at any time and achieve a higher cash on cash return then just buying an already turnkey deal. You can also refi out some of the cash now or at some point in the future if you choose. 

    3Reply
  • Ryan Proffit
    Saint Joseph, MO · Member since 2018 · 401 posts · 244 votes
    7y

    @Jay Hinrichs great advice, I absolutely love Charleston.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Nicolas Conca:

    @Jay Hinrichs hey can you tell me more about the client your turned for a licensed AIRBNB duplex in Charleston. I don’t know anything about that market just yet. Love to connect thanks. 

    not much to tell.. SF based investor selling a Portland property wanted a 1031.. I gave my opinion on Charleston she researched and chose that duplex that was a legal licensed STR. and its just gin's money..

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    1Reply
  • Junior Soares
    Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes
    7y
    @Noelle Pritchard Barkley If I was in that predicament, I would purchase 5 $100k properties in the midwest generating a fair 6-7% net ROI which equates to about $3,000/Month give or take. You'll own them free and clear and can use the cashflow to save for another one or as part of your living expenses. Or you can buy 20 $100k properties with 25% down at roughly $100-$150 each net per month for a greater return in 30 years.
    1Reply
  • Trevor Emmett
    Residential Real Estate Broker · Portland, OR · Member since 2015 · 48 posts · 38 votes
    7y

    @Noelle Pritchard Barkley patience. Learn your new market. Network with local agents, property managers and investors. Learn. Don’t lose money. Don’t over think it.

    1Reply
  • Justin Lee Taylor
    Investor · Jonesboro, AR · Member since 2018 · 118 posts · 35 votes
    7y

    @Noelle Pritchard Barkley I think the best advice is to network and learn who has a proven tract record. Diversify the money. Use a portion in a syndication deal with an experienced investor and learn from that investor before you try anything on your own. I think the biggest thing is networking and learning from other investors. Learn what you can then try a syndication deal before you try a deal on your own

    2Reply
  • Nicolas Conca
    Rental Property Investor · Denton, TX · Member since 2017 · 51 posts · 17 votes
    7y

    @Jay Hinrichs that’s great. I’m glad it worked out for here. What areas did you suggest so I can take a look. We don’t have a market here in SoCal we’re it’s legal to have Airbnb rental’s it would be nice to see a market that does.

    Well at least the markets that are open to it are barely c class areas. Not the best option.

    1Reply
  • Steve B.
    Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    @Noelle Pritchard Barkley the first thing I’d do is slow down. You seem like your in a huge hurry which is likely to lead to a poor decision. We are no longer in a hot market, you have time to do your DD.

    3Reply
  • Joel Florian
    Member since 2019 · 111 posts · 130 votes
    7y

    I assume "WWYD" is short for "What Would You Do?"   Apparently most people thought you were asking for advice about how to invest your money.   For me $500k seems like a large sum and I would be very cautious before investing it in anything but here is what I think I would do:

    1.  Make sure I was absolutely in agreement with my spouse about how to invest the money.  Disagreement over money can cause massive stress in a marriage and a bad marriage or a divorce could ruin even the best investment.    A suboptimal investment  that I agree with my wife about is better than an optimal investment with strife.   

    2.  I would research as many RE investment options as possible while still keeping my day job.

    3.  I would not spend a cent until the transaction closed and the money settled in my account.   A doctor friend of mine sold his house for a good profit and spent most of it before closing.   The day of closing, the buyer bailed and left my friend scrambling to pay for his premature expenditures.  Real Estate transactions can be painfully slow and tricky.  I have constantly remind myself to ignore the money and assume the closing may never happen until the cash shows up in my account.

    4.  I would find a good realtor I could trust who was also an investor in the area I want to be.

    5.  I would look for the worst house in a nice neighborhood with steady jobs, good housing turnover, and steady appreciation (possibly in a primary market) and spend the next 2 years living in it and improving it in my spare time (keeping my day job).   My goal would be to get at least $500k capital gain on the property to maximize the $500k Sec. 121 exclusion and essentially make $500k tax free.  

    6.  If I were successful in paying living expenses with my day job and maximizing $500k exclusion, I should have made an extra $250k/year tax free which equates to a second job earning $384k/year income at 35% income tax.  I should have close to $1M in cash after selling the second home.   I would then consider quitting my job (or scaling back to only the parts I enjoyed and paid well) and reinvest at least part of that money into another primary residence and repeat the live-in-flip.

    7.  I would invest any surplus cash in mortgage notes (because I'm familiar with them and my wife is comfortable with them).  I would also shop for bargains on tax deed sales and foreclosures on courthouse steps just for fun. 

    8.  After several iterations of this strategy, I would spend the time I used to spend on a job on networking with other RE investors and learn enough about syndication to buy into an apartment complex syndication.

    That's what I think would do *IF* I had $500k to invest in RE.  What I actually do when I have that much to invest may be different.  

    4Reply
  • Mike H.
    Rental Property Investor · Atlanta, GA · Member since 2017 · 127 posts · 75 votes
    7y

    I am in a similar situation potentially moving from nyc to atl area. However I’m a  project manager and have a lot of experience with real estate. What I’m thinking of doing is finding str near atl in the mountains. One of my buddy’s in atl bought a cabin for 125k and is grossing 2000-3500 a month. I’d like to pick up one and see how it goes and keep building. I’m like jay I like free and clear. I’d start with buying one or two in cash and see how it goes. 

    2Reply
  • Noah Mccurley
    Belfast, Northern Ireland · Member since 2018 · 128 posts · 56 votes
    7y

    @Noelle Pritchard Barkley

    I believe for your first investment with any amount of money you should partner with another investor on the deal, this way you can run things by them that your not sure of.

    I would take your money, partner with someone else and buy the most units you can afford at the best price.

    1Reply
  • Bria Mayne
    Rental Property Investor · Aurora, Ontario · Member since 2019 · 6 posts · 1 vote
    7y

    @Noelle Pritchard Barkley

    Hi Noelle! Im a newbie too, similarily positioned but without as much equity to invest. Ive been trying to educate myself and i dont want to screw up this opportunity that i have either. Frankly, thats my biggest fear... Im 4 years away from "retirement", which for me means investing FT in SFHs. Ive just started using the acuisition tools on BP, which has really opened my eyes. Have you started to use the tools to analyze. If not, start, on everything that may appear appealing. Its provided a few benefits for me including a better understanding of the need for patience, responsiveness and clarity. Although i have not made my 1st SFH purchase yet, im certainly learning faster and developing more investment muscle, in going through the reactive analysis process on potential props.

    1Reply
  • Kiran Raj
    Rental Property Investor · Southlake, TX · Member since 2014 · 2 posts · 2 votes
    7y

    If you have so much cash, step 1) go pro with bigger pockets...trust me its totally worth it. And no one is paying me to say this. You will have a $ amount to whatever you invest in. There is an actual $ amount and there is a value $ amount. You can increase the value $ amount by understanding the business, market etc. As for the learning itself its priceless. Learn to earn :) 

    1Reply
  • Joshua Gutierrez
    Rental Property Investor · Costa Mesa, CA · Member since 2017 · 39 posts · 8 votes
    7y

    Educate yourself with the many strategies used in real estate to produce income. You won’t get much more clarity here than you currently have because everyone has their own opinions. None of them are wrong, however, it’s all tailored around each persons preference. Start off with a strategy you’re attracted to and see how it works out. If you like it stick with it if you don’t, switch it up. You’ll learn a lot about yourself taking action as your strengths and weaknesses will show face quick. It’s a quicker process when you take action, make some mistakes, and learn from it all as opposed to waiting to hear that ah ha advice from any of us. Good luck!

    1Reply
  • Glidden Rivera
    Rental Property Investor · Orlando, FL · Member since 2019 · 105 posts · 71 votes
    7y

    I think the first thing you should do is educate yourself. By educate, I do not mean pay 20k to a guru. Instead, spend time equity reading and understanding. Whilst educating yourself, also figure out how much money you need to make (set a target) The goal will help you become laser-focused on the right opportunities and filter out the junk and side tangents.

    If you are interested in learning the real estate business then investing in syndication is not gonna produce the skillset needed to grow your business. Conversely, if passivity of investment is the only thing that matters, then syndication is for you. Often your money will be tied for 3 - 5 years typically! If you go by way of syndication, ensure the general partners are paid to perform, not to transact- you will need to educate yourself as not all syndications and syndicators are created equal (Buyer beware). 




    If your desire to leverage your money well and learn the business, you still need to identify what asset class suits you best. There are pros and cons to each. Commercial deals have the potential to yield high returns through forced appreciation and cash flow. Generally, they require more cash to execute. Within this sector, there are multi-family apartment communities, and also commercial complexes with triple net lease possibilities. In these scenarios, I like to think of it as buying the leases and the property comes for free. These structures are best handled most efficiently with competent teams that help to analyze and manage the assets

    If you like SFH, duplexes, triplexes, and quads; you will still need a competent team. I recommend learning and becoming familiar with the BRRRR method which is preached and made famous here on BP. It stands for buy, rehab, rent, refinance, and repeat. You specifically mentioned buying houses for cash, the problem is your money is not infinite. Additionally, when you leverage the bank's money, your rate of return increases. Let's say you bought 20 properties using the BRRRR method and cash flowed 300 per door. your monthly cash flow would be 6000.00 and you would still be in possession of seed money (500k) You could literally repeat this formula as much or as little as you wanted while pulling most or all of your equity out of the deal. Another benefit to keeping the property is that tenants will pay down your mortgages and the property will also simultaneously appreciate. The numbers could really be so ridiculous that they would be hard to believe. If you are going to do it as a business and not a job, then the crucial components are a great property manager, a great broker or agent, a great contractor, and a great lender.


    Bigger pockets BRRRR
    https://www.youtube.com/watch?v=FBci62dfqaY

    2Reply
  • Tony F.
    Investor · California, CA · Member since 2016 · 117 posts · 26 votes
    7y

    @Brett Stomps

    What is this multifamily syndicate networking group your mentioning, that seems like a good source of info.

    0Reply
  • Nick Lovrovich
    Accountant · Moses Lake, WA · Member since 2019 · 10 posts · 10 votes
    7y

    @Noelle Pritchard Barkley

    No matter what you do, just make sure that you keep the money in at least 2 separate savings accounts while you're still weighing your options. This is due to the fact that the FDIC only insures up to $250,000 per account.

    Also, you could consider using high yield savings accounts or even CD’s while you’re considering real estate investing options. Another thing I might add is that by getting into real estate slowly you can get the benefit of cost averaging. You won’t have the benefit of buying at the lowest of lows of a particular market, but also not the con of buying at the highest of highs of a market.

    2Reply
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