How would you invest 1 million in real estate?

Question

Background: I own 2 4-bedroom rental homes in Baton Rouge, LA for purely college students (upperclassman) - both profit over $500/month after property management fees.

2 partners of mine and I are looking for new real estate investment opportunities. Maybe we are thinking too small, but we are between purchasing other rentals in areas such as Nashville, Austin, Scottsdale/Phoenix, Palm Springs, Charleston, etc.

Commercial properties are also an option, but residential seems more of a fit for us. Whether we purchase 1 or 4 homes, we will need to pick between a property manager or Airbnb.

From purchasing to operating… How would you go about investing 1 million in real estate? All thoughts are much appreciated (literally anything) - looking forward to hearing from the BiggerPockets investors!

David Ginn · Answer

Hi @Reed Vial

We have many properties available for you to fix & flip. Our buyers pay 12% interest and 3.75 points to you as an investor. We are Buyers, Lenders, and Mentors, a tight-knit group and we work together to make money on our deals. On the other hand, FLIP, that's where you make your money. If you're flipping like in our system, my clients make 30-40% per property on the money that they've invested in. There's a really clear strategy on how you do that, most flippers make 10%, and we make more than that. There's a reason because based on the strategies we use. So, in your particular case that's what you want to do is buy, renovate and flip and your margins will go all the way up. Also, you can flip it in the up or down market, and look at where everybody else can see that. Good LuckIf you have questions or need answers about investing just shoot me a PM and we can chat.

Sam Silverman · Answer

I'd invest passively into multiple asset classes with the following breakdown:

50% Class B value add multifamily -- this class of asset has some of the highest stability and most institutional cash flowing into it. As home prices rise and interest rates rise (even if nominal and still below historically numbers), individuals budgets are being maxed out and they are forced apartment rents. I expect vacancy to continue to go down and cap rates to further compress.

20% Mobile home parks and self storage -- these classes of assets can typically produce higher cash flow than the above. Cap rates also have more room to compress as institutional capital will continue to flow here to chase yield. People may also look to sell off larger houses for a gain and downsize/trade into multiple homes.

10% Class A apartments with a value add component that is focused more so on smart home technology and amenities than complete unit renovations. Amenities should continue to be worth more and more to residents as work from home grows.

20% Luxury Airbnb rentals -- this would be both a lifestyle play and permanent cash flow. The goal here would be to hang on to these assets with fixed long term debt that can provide 20%+ cash on cash returns and the ability to spend a week or two in each area.

Taylor L. · Answer

Totally depends on one's goals, but for me - in as big of deals as I could, as passively as I could. Managing rentals is the pits. I'm here to buy streams of income, not a bunch of little jobs! :)

John McKee · Answer

I personally would buy 4 NNN lease properties with that money but it depends on your goals.  My goals are passive income with steady growth.  Not a fan of residential because of the turnover, wear and tear, and property management that is involved.

Mary M. · Answer

I used a commercial RE agent ad purchased commercial multi family - ie 2 small buildings - one 12 units the other 8....    I suggest conecting with a known entity CRE agent (I used Colliers) ad see if they have some ideas for you. ETA: I have a total of 20 units and I self manage. I do as much as possible myself including repairs, cleaning, leasing etc., it is NOT anywhere near a "full time job"  I am happy to chat with anyone who is interested in knowing how much time I spend etc.

Jordan Ray · Answer

@Reed Vial I was going to say self-storage while reading your post, so I agree wtih @Taylor L. and @Nathan G.

Terri Wyzkoski · Answer

I have clients that exercise various strategies that work for them based on their experience (comfort level).  That said, those that have numerous SFRs work harder and longer than any of my other clients, because their units are so far apart.  Management is difficult to say the very least.

Those clients that have a few larger MF investments, or a number of single-tenants NNN retail investments (where tenants pay all the expenses, and there is no management required), actually can enjoy having full-time jobs along with their passive income if they like.  More freedom keeps them less stressed, and more streams of income certainly provides greater diversification.

Bob S. · Answer

Simple I would buy 10 at about 80k each with each bringing in not less then 1k each per month, about 700 NET per month  so about 7k a month. Leave about 200k for other opps and go play golf ,, Hey If want more cash flow , jst refi a few cash out and buy more,

All the best

How would you invest 1 million in real estate?

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