How Would You Invest $200k?

21 Replies

I know there are a multitude of answers to this question and each will have positives and negatives but I was just wondering....

What would the best real estate investment be with $200k? I'm in Los Angeles and I am pretty wary of investing here due to the eviction moratorium and problems with the State's/City's policies. I'm looking into Turn Key properties but there doesn't seem to be much return these days. 5% cash on cash return seems to be the average based on some properties I've seen. Texas properties seem to break even for turnkey properties. I do like that paying off principle and appreciation is there but cash on cash ROI would be great.

Does anyone have any other suggestions?

Hi Daniel! I would say you are finding 5% COC right now because home prices have increased so rapidly and rents have not caught up yet. Rents are typically the lagging indicator. As you and I both know, we are in a period where returns are lower than the past. Nevertheless, I do predict for rents to catch up at a rapid pace. For example, September 2020 until September 2021, rents increased nationally 9%! The past 10 years rents only increased 3-4% each year. As rents catch up, so will your COC!

@Daniel Han, if you can find a good multi-family or self-storage syndication deal, you can easily get 5-9% COC w/ potential for upside.. I've done some where the COC ended up being closer to 10% and then the total ROI upon disposition was 20%+. Those deals are getting tougher given cap rates, but they are still out there.

I have also recently been doing some hard money lending getting 7-9% COC, but they don't offer upside..  You can get 7% while still keeping the funds relatively liquid.  The 9% assumes you are keeping the money tied up for 5 years.

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If you are looking to not be "active" in the deal, investing in a syndication in a market you find attractive, is a good option.  Otherwise if you are looking to be active in the deal, you can begin searching for turn key PM companies in your target market.  Investing out of state as an active investor will require more work but will allow you to have all decision authority. 

Originally posted by @Daniel Han:

I know there are a multitude of answers to this question and each will have positives and negatives but I was just wondering....

What would the best real estate investment be with $200k? I'm in Los Angeles and I am pretty wary of investing here due to the eviction moratorium and problems with the State's/City's policies. I'm looking into Turn Key properties but there doesn't seem to be much return these days. 5% cash on cash return seems to be the average based on some properties I've seen. Texas properties seem to break even for turnkey properties. I do like that paying off principle and appreciation is there but cash on cash ROI would be great.

Does anyone have any other suggestions?

Daniel you can get north of 5% COC in apartment syndication deals. turnkey houses are definitely lower.

Hey Daniel - Unsurprisingly, I'm sure, this answer will be different investor to investor. It really depends on what your big picture goals are. Do you want to be an active investor? A passive investor? Do you want to be part of creating deals, flipping properties, building a portfolio, buying a househack? Or are you simply seeking the highest CoC return in the most passive manner possible?

I'm in LA too and invest here, as well as Ohio. I'm a big fan of both in-state and out-of-state. I never considered turn key properties because I wanted the forced appreciation I could create in value-add opportunities. But I also wanted to be an active investor. That said, I've also been a private lender which is far more passive and was simply the CoC play.

I'd encourage you to first focus on your goals/time commitment/risk tolerance and then choose your strategies from there.

Bullsh...t!!! Don't ever put your money into Turnkey properties and don't ever put your money into any type of real estate investment where ome clown has full control of your cash. 

I've been searching for properties throughout the United States, own properties in 4 states and I never found an area better than California even with California's high prices. Just last week, I posted numbers showing you can purchase properties in Ohio for $50,000 per unit, in California for $300,000 per unit and you will make far more profit in California because there is still more upside for increasing rents in California and rent increases automatically increase the re-sale value of multi-unit properties. The problem with states where rental units are cheap is the rents are too low, will remain low for many years and the when the properties need repairs it takes many more months of rental income to do those repairs.

If you have $200k to invest look for no less than a 4-plex and try to get some sort of financing with a low down payment, or wait until you have more cash.

I've been putting together some fairly neat software for doing all sorts of breakdowns and before you purchase a property feel free to post all your numbers and I will put them in my software.

Wow! Thank you for all the replies! The reason for wanting to invest out of state is because of less landlord friendly conditions in LA. Luckily, I only have one unit that hasn't been paying since the beginning of the pandemic. I love my tenants and but these mandates are really incentivizing/rewarding bad behavior in my opinion. Regardless, this isn't a political post. 

Some of you mentioned syndication. I'm so new to this. Does syndication bring in the COC ROI, Appreciation ROI, and building Equity ROI? This is the main reason why I love rental properties. Three fold wealth building strategy is truly a thing of beauty.

And does anyone have any resources on where I can get involved with syndication?

I was also looking into self storage but it seems like I need relocate to the location of the business at least when it's first set up. 

Truly thankful for the wealth of knowledge in this forum and for all of your generosity in sharing!

Blessings,
-Dan

Thanks for the post, Jack. I have been investing exclusively in LA and yeah. Hard to beat the appreciation of properties in LA and California in general. However, my current portfolio is mostly rent controlled properties and there are a lot of regulations on these properties that limit the potential. I guess there are positives and negatives to all geographic locations. Have you had any experience with turnkeys? Negative or positive? 

I guess I'm looking to diversify my portfolio and look out of state because I personally feel like LA is overinflated for the time being. 

Let's connect and I'll send you some numbers to see if these are good deals. 

Thanks!
-dan

Originally posted by @Jack Orthman:

Bullsh...t!!! Don't ever put your money into Turnkey properties and don't ever put your money into any type of real estate investment where ome clown has full control of your cash. 

I've been searching for properties throughout the United States, own properties in 4 states and I never found an area better than California even with California's high prices. Just last week, I posted numbers showing you can purchase properties in Ohio for $50,000 per unit, in California for $300,000 per unit and you will make far more profit in California because there is still more upside for increasing rents in California and rent increases automatically increase the re-sale value of multi-unit properties. The problem with states where rental units are cheap is the rents are too low, will remain low for many years and the when the properties need repairs it takes many more months of rental income to do those repairs.

If you have $200k to invest look for no less than a 4-plex and try to get some sort of financing with a low down payment, or wait until you have more cash.

I've been putting together some fairly neat software for doing all sorts of breakdowns and before you purchase a property feel free to post all your numbers and I will put them in my software.

Originally posted by @Daniel Han:
Thanks for the post, Jack. I have been investing exclusively in LA and yeah. Hard to beat the appreciation of properties in LA and California in general. However, my current portfolio is mostly rent controlled properties and there are a lot of regulations on these properties that limit the potential. I guess there are positives and negatives to all geographic locations. Have you had any experience with turnkeys? Negative or positive? 

I guess I'm looking to diversify my portfolio and look out of state because I personally feel like LA is overinflated for the time being. 

Let's connect and I'll send you some numbers to see if these are good deals. 

Thanks!
-dan

Originally posted by @Jack Orthman:

Bullsh...t!!! Don't ever put your money into Turnkey properties and don't ever put your money into any type of real estate investment where ome clown has full control of your cash. 

I've been searching for properties throughout the United States, own properties in 4 states and I never found an area better than California even with California's high prices. Just last week, I posted numbers showing you can purchase properties in Ohio for $50,000 per unit, in California for $300,000 per unit and you will make far more profit in California because there is still more upside for increasing rents in California and rent increases automatically increase the re-sale value of multi-unit properties. The problem with states where rental units are cheap is the rents are too low, will remain low for many years and the when the properties need repairs it takes many more months of rental income to do those repairs.

If you have $200k to invest look for no less than a 4-plex and try to get some sort of financing with a low down payment, or wait until you have more cash.

I've been putting together some fairly neat software for doing all sorts of breakdowns and before you purchase a property feel free to post all your numbers and I will put them in my software.

I suppose, there could always be a great property out-of-state, but I had 10 homes in Idaho for more than 15 years and 28 homes I purchased in Las Vegas between 2008 to 2010 for 30 cents on the dollar. I gave my children all buy 1 home in Idaho, 6 in Las Vegas and sold all but 2 because when doing business with real estate out of your area there are many inherent additional costs and losses you cannot avoid and these cut deep into your profits and make doing business in your own back yard look much better. You know what they say, "The grass always looks greener on the other side".

For the prices property management companies charge you can't expect them to drive to every property they manage every few months to inspect inside homes. They don't and every tenant in Las Vegas totally destroyed every home. I literally had tears in my eyes when I had to clean the damage. The property management companies don't always have honest contractors and I has several occasions where I stopped them from ripping me off. On one occasion I got a telephone call from the property management company telling me I needed a new furnace for $6500. I told the PM I was a heating contractor and would drive to Las Vegas in the morning to replace it myself. A few minutes later, I received a phone call and was told the furnace was repaired for $250 (or $350. can't remember). The PM called and told me his plumber wanted $3600 to repair a broken sewer pipe underneath the concrete floor inside the house. I went to Las Vegas to repair the pipe, myself, and the sewer was crushed outside the house 2 feet below the ground. With a helper, it took 45 minutes of labor and materials were less than $20. If I went with the PM because I did not have the ability to do the work and to drive to Las Vegas I would have lost a total of more than $10,000 for just those two repairs.

I can go on forever and am not a negative person. My point is; it is difficult to understand what bad things you run into when owning real estate out of your area and you need to do the math. I look for properties all over the country every day and will buy one anywhere if the numbers are so great I know I can both do better than in California and offset the losses for doing business out of my area.

Daniel,

As @John Kunick said- Investing in the LP side of a syndication will in general provide 5-9% preferred annually and have a 70/30 split at equity event with 70% going to LP side. This will generate almost 2X of your investment. Most syndications plan a 3-5 yr hold. Additionally, this will provide tax advantages like your existing real estate holdings. The Syndicator will depreciate the asset and may use cost segregation which will add passive losses that will reduce your taxable passive gains.

H2H

Joe 

LET ME COUNT THE WAYS...

But whatever you do make sure you invest 3% of everything into yourself...

that might mean seminars conferences business coach expensive haircuts personal trainers whatever...

there is a direct positive correlation between self-improvement and financial gains...but you know this already.

ya'll go kick some *** today!!

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@Daniel Han

Syndication after you have vetted sponsors and done your homework. You can diversify your holdings in a fund model too. You can invest in MF, self storage, mobile home parks…if you have accumulated 200k I’d pass go in the small stuff and scale with professional operators. You can always go smaller later if you so chose (not sure why you would).

@Daniel Han

Hello Daniel, in my opinion there are many options for investing in Los Angeles… I currently have no rentals quite yet, but it depends what you really want at the end of the day.

We all know that properties in Los Angeles within 5 years, will be worth a lot more money than any property in the Midwest due to our insane appreciation here in LA.

You can do several things with $200k, you can purchase a property near a university, (USC) and make it a student rental and rent by the room and have 1 year leases with students.

Another thing you can do is house hack a 2-4 unit property and live in one unit for about a year and move out so you can get the most profit out of your properties.

(If you decide to house hack, you have to be bankable, meaning banks will loan you some money, because prices are really expensive here in LA, specially for multi family.) or ( You can seller finance a property with an owner and give some down payment for their property)

I’m not a CPA or attorney but in my opinion I think just screening your tenants is the best way you can get excellent paying tenants. A lot of people have worked from home and still paid their bills without hesitation during COVID. I understand COVID gave some wings for tenants not to pay their rent, but I believe they are obligated to pay their rent now. Again I’m not an attorney so you’ll have to check that out on your own.

Again; it depends what your end goal is, to invest for the long run and build equity through time and appreciation, or to have immediate cash flow to sustain your life style.

Hope this helps. :)

There are a lot of things that you could do with $200K. I would first find the market that you want to invest in and do your due diligence in finding the right areas. Then, I would invest in STR, Land, and/or Commercial properties. If you want to partner on anything, then let me know.

Good Luck! 

@Daniel Han for under 8% cash on cash and 20% IRR invest in a syndication where 8% coc and 12-18% is common amongst well known syndicators.

If your going to invest yourself then i recommend commercial properties with value add potential where 30%+ IRR is very achievable

Originally posted by @Account Closed :

@Daniel Han

Syndication after you have vetted sponsors and done your homework. You can diversify your holdings in a fund model too. You can invest in MF, self storage, mobile home parks…if you have accumulated 200k I’d pass go in the small stuff and scale with professional operators. You can always go smaller later if you so chose (not sure why you would).

 The problem with going with a syndicator is it is very difficult to find a good one who is honest and on top of his game. In 1980, I invested exactly $1 million into to syndicated deals for two K-Mart shopping centers. The deal was recommended by my accountant. I paid an attorney for advice and to review the Placement Memorandum. I paid a financial advisor something like $300 or $400 to check the deal. I lost exactly $1 million on the deal, paid an attorney $40,000 to sue the general partner. My attorney screwed me, moved to South Africa, turned the case over to another attorney and that attorney screwed me. I sued my accountant, the general partner and then my bonding company and 2 attorneys sue me. All the partners filed a Class Action lawsuit and we won $50 million, but after the attorneys took their cut I received a check for $13,000.

Never trust someone else with your money. Never trust someone else to make your decisions. Always have 100% control of your own money and you can't do that when you are a limited partner in a syndicated deal. I can tell your horror stories all day long about bad syndicators and about the fools who lost their entire life savings by doing business with them. About the same applies for the fools investing in Turnkey investment properties where the properties are managed by the companies selling those deals.

As a wise old woman once told me, "The Devil Is In The Details" and salesmen never tell those details.

@Jack Orthman sorry to hear about your troubles with syndicators. I’ve have very positive experiences with the partners I’ve chosen to work with. It’s a team sport and syndication works well for a busy professional. To each their own…I wouldn’t say all is good or all is bad. Maybe just bad choices 🤔

Daniel

Innumerable successful So Cal investors find great properties with the right management team here in LA, OC, and IE.  

Buy your own, JV, LP in a syndicate. You can house hack, vacation rental.

Network locally

@Daniel Han. Congrats on accumulating that much extra cash.  You’re among a small % in this country these days.  

To answer your question, syndication provides benefits in at least 4 areas.  The “acronym” is CAPT (which is better than CATP - say it aloud if you’re unsure). 

C = Cash Flow 

A = Appreciation 

P = Principal Paydown

T = Tax Benefits 

Additionally, syndication investors enjoy the benefit of hands-off, passive investing. 

Happy Investing!