Los Angeles, CA · Member since 2014 · 32 posts · 5 votes
If my goal is to leverage $100,000 in investment capital, and obtaining buy and hold investments is my long term Real Estate Investment goal for the initial 100k in capital , my questions are:
1) Where is the best place to hold onto the money?
- money market fund, bank account, IRA, cash value life insurance policy?
2) Better to use the lump sum to fund a larger investment, or split it up to fund smaller flips, or rehab jobs in order to build more capital?
Real Estate Investor · Saskatoon, Saskatchewan · Member since 2010 · 357 posts · 27 votes
11y
Ryan,
If I were you this is what I will do (based on the scenario you stated above).
(1) Hold the money in IRA - Then use self directed IRA strategy to invest the money
(2) I will leverage the $100K by;
Property Type:-> Focusing on apartment or commercial property. For simplicity sake, I will just focus on apartment in this case
Location to Invest :- Path of growth to any of the top 20 fastest goring cities and/or locations with high rent and lower cost per door - where cash flow is easy per door
Leveraging the $100K :- I will setup creative marketing plan to target small apartment(20 to 30 units) to medium apartment (31 to 80 units) owners that their situation (and/or property situation) will allow me to get up to 95% seller financing or master lease option. I will look for properties that I can easily Force Appreciate (increase rent, increase occupancy rate, decrease expenses - e.g pass utility cost to tenant, etc) ... this will help increase cash flow and the value of the property very quickly (say in 90 to 120 days). Assuming you can get up to 95% financing.. you will be able to leverage the $100K into $2,000,000 investment.
Hope this helps... feeling sleepy now :) its 1:10am here
Real Estate Investor · Saskatoon, Saskatchewan · Member since 2010 · 357 posts · 27 votes
11y
Ryan,
If I were you this is what I will do (based on the scenario you stated above).
(1) Hold the money in IRA - Then use self directed IRA strategy to invest the money
(2) I will leverage the $100K by;
Property Type:-> Focusing on apartment or commercial property. For simplicity sake, I will just focus on apartment in this case
Location to Invest :- Path of growth to any of the top 20 fastest goring cities and/or locations with high rent and lower cost per door - where cash flow is easy per door
Leveraging the $100K :- I will setup creative marketing plan to target small apartment(20 to 30 units) to medium apartment (31 to 80 units) owners that their situation (and/or property situation) will allow me to get up to 95% seller financing or master lease option. I will look for properties that I can easily Force Appreciate (increase rent, increase occupancy rate, decrease expenses - e.g pass utility cost to tenant, etc) ... this will help increase cash flow and the value of the property very quickly (say in 90 to 120 days). Assuming you can get up to 95% financing.. you will be able to leverage the $100K into $2,000,000 investment.
Hope this helps... feeling sleepy now :) its 1:10am here
Los Angeles, CA · Member since 2014 · 32 posts · 5 votes
11y
Do you think fee's associated with withdrawing funds from a self-directed IRA still make it a better place to hold the money than a Money Market (completely liquid) or Cash Value Life Insurance Policy?
Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
11y
I use a solo 401k to invest my money in 50-60k distressed houses, which I then owner finance for a cap of 12-14% in the current market. I also do flips for 5-10k to build cash to buy more houses.
Investor · Riverside, CA · Member since 2015 · 185 posts · 27 votes
11y
For place to hold onto the money, I would recommend thoroughly researching the details of those various options you could take. You generally want the ones with higher rate of return on your money (ie higher interest rates). High liquidity (ease of access to the money) is also important though, because you never know when you will need the money for an impromptu deal that came out of nowhere. Money market funds are considered to be highly liquid. As for whether to invest a lump sum or split the sum, you'd want to run some calculations and make an educated guess as to which will give you a higher rate of return on your money. It is worth noting though that splitting the sum may reduce your risk because you're allocating your money to multiple sources rather than putting all your eggs in one basket (ie diversification).
Broker · Phoenix, AZ · Member since 2015 · 151 posts · 55 votes
11y
If you have 100k in your IRA, why not trust deed invest it? little to no management and if the borrower defaults, then you foreclose and do the flip yourself?
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
11y
Investing in trust deeds - great idea! Low risk, secured investment, passive income, great returns (you can get double digit returns).
Cash value life insurance - horrible idea! Life insurance is never a good investment. if you loved ones financially depending on you - buy cheap term life insurance policy, but don't give your money to the insurance company as an investment for two main reasons:
1. Poor returns
2. In some cases as much as 50% of the premiums paid are going to the salesperson who sold you the policy as commissions!