$700k to Invest: Need Advice

Fairfax, VA · Member since 2017 · 7 posts · 5 votes

I might be selling a website and will have around $700k to invest. I'm not an active real estate investor but I've been learning about it over the past few years.

If I sell this website I will be getting a lump sum and no longer receiving monthly passive income. If you had $700k to invest in rental properties and your goal was to generate passive income while building wealth how would you go about it?

I'm thinking my best bet is to leverage financing for many rental properties but it will most likely take me years to find enough properties and that's fine. I just would like to hear some advice from people in the game for a while and what they would do know if they were in my position. Thanks in advance.

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Brian Garrett

Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes

I would be careful advertising how much cash you have to invest on a public forum.

There's lots of great posts and resources here regarding your question though.

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Brian Garrett
Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
8y
I would be careful advertising how much cash you have to invest on a public forum.
There's lots of great posts and resources here regarding your question though.
13 Reply
Steve Kontos
Investor · Great Neck, NY · Member since 2016 · 679 posts · 467 votes
8y
@Ryan M.
It all depends on what kind of real estate investing do you want to do as there are various ways to invest. I would see what excites you the most and talk to successful investors in that arena.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
you may want to consider diversification
try a few that you own and manage but then invest a few hundred grand with a fully Vetted syndicator ( there are many right here on BP worth a look).. then compare see how well you do with a fully managed investment IE passive , and how you like landlording on your own.
many folks end up loving landlordiong on their own.. many at the end of the day did not realize how involved it can be and also did not realize they are now dealing with the renting public.
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Jack P.
Columbus, GA · Member since 2017 · 88 posts · 115 votes
8y
@Ryan M.,
So I'm a small-time investor with just a handful of properties, compared to other who have already spoken here. I haven't had the luxury of that much liquid cash, but if I were in your shoes, I would probably approach this a few ways:
1. Build experience through buying a small rental property or two with traditional financing (duplex-fourplex). It's easy to get financing, and the lender doesn't care how much experience you have, as opposed to multi-family. Hire a property manager to take care of the day-to-day and pay attention to the costs and work that goes into management.
2. Syndication. One of the barriers that a lot of us can't overcome is the net worth required to get access to these deals. You may have enough to get beyond that gate and get people interested in taking your money for a substantial return.
3. If you're looking to do this full time, find a house to flip, for nothing more than just to gain the experience of buying-rehabbing-selling it, and the interaction with contractors, realtors, vendors, etc.
All of the above would be part of a 2-4 year plan, where after I get my feet wet and establish some credibility, I can put more energy and effort towards a bigger project.
I guess it really depends on how "passive" you want your investment to be.
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Karen MargraveBusiness Member
Moderator
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
8y
First off, Congratulations on being able to make that kind of money off a website, that's incredible. Once it's sold you'll have to tell me what it was. I always love hearing the stories of different things people do.
Maybe @Joel Owens can give you some guidance too. Jay mentioned syndicators, Joel knows commercial properties. Whatever you do, make sure you do your due diligence, check references, licenses, etc. It may be better to sit tight, and spend some time looking at the various niches. Figure out if you want to buy rentals (SFR or multi's) , invest money for a return (syndicators, crowdfunding, etc.) What you can do with 700k will vary greatly in the various markets. I always advise people to invest close to home where they know the markets better, others don't think that's important.
Though BP has a wealth of information, there are people that know there's investors that are inexperienced on here and will try to take advantage, beware just as you would anything else. Do your homework on the deal, and the people you're working with. Good luck!
2 Reply
Jacques Cyr
Flipper/Rehabber · Grosse Pointe, MI · Member since 2014 · 90 posts · 21 votes
8y
Ryan, I agree with the others regarding being cautious regarding sharing the amount, but overall the folks on BP are trustworthy. Syndication would be a good way to go. Or you could also look at a portfolio buy, which seems to be fairly available now (at least here in Grand Rapids area - my local market). Whereas the larger multi-family / apartment complexes seem to be more challenging to find, though some individuals on BP may have better resources to help you. Good Luck... and not a bad position for you to be in. Congrats on the forthcoming sale.
1 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
8y
The key does 700k make up total net worth or do you have other funds to live on??
I have had plenty of clients buy commercial properties. They sold their companies for millions and millions of dollars. They wanted more passive returns.
You need to figure out your monthly income number you want.
In passive commercial about 8% cash on cash is tops putting 25 to 35% down on an asset. You could get 6 to 7 depending on tenant type.
So 700,000 maybe 56,000 to 42,000 range annually before other metrics ( principal mortgage pay down,mortgage interest, tax depreciation, rental increases,etc.) to boost returns.
My clients like the passive income while they start new companies to build up and sell off again.
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Bettina F.
Investor · Post Falls, ID · Member since 2016 · 606 posts · 699 votes
8y
Talk to a commercial broker, You could buy a large, professionally managed multiplex. Passive income.
0 Reply
Ben Freiman
Investor · Columbus, OH · Member since 2017 · 36 posts · 28 votes
8y
That is great for selling a website! Lots of great suggestions in the posts, one item I haven’t seen mentioned are notes. You could have to opportunity to be the bank and not a landlord. This is a more passive activity and would officially move you to the “Investor” quadrant. Unfortunately I don’t know much about them or can offer much advice but I think podcast ~#206 or 207 (something like that) talks in detail about notes and it sounds interesting. I wish you luck!!
2 Reply
Ryan Cox
Investor · Austin, TX · Member since 2015 · 263 posts · 186 votes
8y
Congrats! @Ryan M. that's a fantastic payday! I think the best investments are ones that you passionate about or have a genuine curiosity about. Meaning - Do some research. Find an investment strategy that gets you excited and you want to learn more about how to execute the strategy. The more you understand the investment and value creation, the better chance you have to protect your downside and make money.
Good luck! RC
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Ian IppolitoBusiness Member
Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
8y
@Ryan M. I think residential rentals (if purchased in a suitable market, at a reasonable price, etc.) can be an excellent way to generate the kind of passive income you’re looking for.
At the same time, you will have a large enough nest egg where I would recommend that you strongly consider the advantages of diversifying. If all your rentals are in one town, and a huge tornado/storm/earthquake or whatever disaster rolls through, or the biggest employer in town leaves, etc. it could be catastrophic. But diversifying across the country reduces that risk. (That can be hard to do on your own, but through a fund is very easy).
Also, diversifying into other asset types will allow you to get a higher overall yield on your portfolio, while decreasing risk further.
My portfolio has both directly owned rentals, and passively owned Crowdfunding/syndication deals. If you’re interested in learning more, p.m. me and I can send you a link on the composition of all of it, and how much they are returning so you can get an idea of how much you could be earning. If you have any questions about anything, just let me know.
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Ryan M.
OP
Fairfax, VA · Member since 2017 · 7 posts · 5 votes
8y
I'm going to find a rental property first and see how that goes before getting into anything larger. Thanks for the awesome feedback. When you talk about syndication, do you mean companies like RealtyShares.com? I've been looking into them some. Can you make more money doing it one your own vs investing in projects on RealtyShares?
1 Reply
Brian BurkePro Member
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
8y
@Ryan M. "syndication" is a broad term used to describe pooled investments where an investment sponsor purchases a property or properties and funds the equity with money from a number of passive investors.
The crowdfunding websites, like the one you mentioned, are essentially middle-people that connect passive investors with investment sponsors using an online platform. You could go that route, or you could find sponsors directly and cut out the middleman. The key is to do your homework on the sponsors that you choose to work with. Just as selecting quality real estate investments is very important, so is selecting quality investment sponsors.
Good ones can orchestrate the best outcome even when the chips are down, while bad ones can totally screw up what started as a great real estate deal. Exercise careful due diligence and talk to references, and search the BP forums for key phrases such as "selecting a syndication sponsor" or "finding a syndicator", you'll find tons of threads on this topic with some great advice, like this recent one:
https://www.biggerpockets.com/forums/432/topics/503289-how-to-vet-syndicators?page=1
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Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
8y
@Ryan M., you might like to research into crypto-currencies? eg. Has Bitcoin peaked, or are there higher peaks ahead? What about the relatively new (and cheap so far) players in town?
You do want to make as much money as you can, right?
Therefore, should you (or anyone) completely ignore block-chain technology investing?
[eg. There's plenty of threads on BP about Bitcoin eg. https://www.biggerpockets.com/forums/12/topics/513...].
Kudos on your success to date. Welcome to BP...
0 Reply
Account Closed
Riverside, CA · Member since 2017 · 412 posts · 296 votes
8y
Originally posted by @Ryan M.:
I might be selling a website and will have around $700k to invest. I'm not an active real estate investor but I've been learning about it over the past few years.
If I sell this website I will be getting a lump sum and no longer receiving monthly passive income. If you had $700k to invest in rental properties and your goal was to generate passive income while building wealth how would you go about it?
I'm thinking my best bet is to leverage financing for many rental properties but it will most likely take me years to find enough properties and that's fine. I just would like to hear some advice from people in the game for a while and what they would do know if they were in my position. Thanks in advance.
I'd compare your current passive income to what you might expect with using properties for income. You might be better off keeping the website. I'd also take into the consideration that the $700k is probably taxed, leaving you with much less money, & my first sales manager taught me to never "spend" the check until it clears. That was good advice. Since you have not sold the website, you are guessing how much you will have. That being said, there are a lot of ways to make good passive income with real estate using that amount of money when done properly.
0 Reply
Tae C.
Flipper/Rehabber · Knoxville, TN · Member since 2017 · 130 posts · 72 votes
8y
@Ryan M.
I’m not sure if this is a repeat of someone else, but you could also consider being a private lender for other investors/rehabbers and make a solid return on that cash, secured by real estate.
2 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
8y
Someone mentioned multifamily. You are not going usually going to get passive with 700k.
You need usually about 80 to 100 doors or more and even if buying B or C product that might be 50k and up per door so minimum 4 million and up.
Brand new builds are generally 100k a door and up.
If you are accredited maybe you diversify and invest some and hold onto the rest.
Of course if you did things yourself you might increase yield more but that is ACTIVE return and not PASSIVE.
It seems like you really need to study whether you want to be active or passive and how you want to invest. Based on how you have responded thus far it seems very,very early in the process.
Good luck.
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Ryan M.
OP
Fairfax, VA · Member since 2017 · 7 posts · 5 votes
8y
@Joel Owens, I am accredited so I think I'm going to do a combination of RealtyShares.com and a few properties on my own to get started. Do you have any investments on crowdfunding sites like Realtyshares
0 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
@Ryan M is that 700k pre or post tax? If it’s pre tax the government will be taking about 20 percent. Regardless if I were you I’d do a mixture of rentals on your own and maybe one or two syndications. Also I know this is BP but I wouldn’t put all of it into real estate. Keep a healthy buffer for savings/cash and invest another portion in the market.
0 Reply
Marian Smith
Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
8y
I don’t know your age, etc. But my advice is to never loose sight of the fact that this payday may be a once in a lifetime event. It may feel like it is easily come by, but my husbands 401k is about that size and he has been employed as an ME from a top 10 engineering school for 30 years. There is no shame in your money not “working for you” while you figure out what is your best course...especially given the values of all assets right now (but if you are young time is your best investment partner so prices are not that important...you don’t actually lose in the broad stock market until you sell). Will Charles Schwab or some other firm allow you to use a brokerage and or ira account as collateral for a re loan? Can you set up a sep ira or some other vehicle and shield 40k or more from taxes? Are you renting now? Do you want to live in your area for 5 more years? Might want to get a tax planner & investment advisor, maybe fee only type to just advise. Buying a place to live in personally that would also be easily rented to tenants you would feel comfortable dealing with is a great start...especially a duplex, etc. As for tenant population, I prefer professionals but you might like students...I have never evicted anyone, but I would have no qualms because there are plenty of rentals cheaper than mine and I try to screen out anyone who would be better off renting a cheaper place even though they think they would rather pay up for mine. Or hire a PM. But just as stock investors should know their risk tolerance, landlords need to know what tenant population they can work with ...another risk-reward balance act, take on more than you can stomach and you get a long term tummy ache. Buy where you personally wouldn’t mind living is my second tidbit of advice.
1 Reply
Todd Dexheimer
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
8y
Originally posted by @Ryan M.:

@Joel Owens, I am accredited so I think I'm going to do a combination of RealtyShares.com and a few properties on my own to get started. Do you have any investments on crowdfunding sites like Realtyshares
Realtyshares and their competitors can have good investments, but there are also plenty of duds. I saw a recent deal advertised at some really good looking returns, but when you dig into the numbers the returns would only happen if everything continues to boom and cap rates continue to compress. Just because it's on a crowdfunding web site doesn't mean it is a good deal. A few of my investors have some money in crowdfunding portals and have been happy with some of the deals and disappointed in others. More important than the deal is vetting the sponsor of the deal. Can you call and talk with them and really vet them?
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Karen MargraveBusiness Member
Moderator
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
8y
@Brian Burke I'm glad you weighed in, I meant to mention you when Jay brought up syndicators. Are you getting in on the rebuilding of the homes lost in the fires down there? With all the fires in California this year it seems like that would be a profitable niche. Out of curiosity, are there big builders jumping on those or builders doing a few at a time, etc.?
0 Reply
Ivan BarrattBusiness Member
Investor · Indianapolis, IN · Member since 2015 · 764 posts · 953 votes
8y
@Ryan M. keep your powder dry and get more educated before jumping into anything. Without financial education any investment vehicle can become a loser. Whether you buy 1 rental or invest in syndication via direct or crowdfund platform; pause and evaluate 100 to 200 deals before pulling the trigger.
My company acquired three projects this year (we wanted to do 6 but couldn't find enough good opportunities) and it took evaluating 600 deals to get real opportunities. Capital isn't the issue right now. Money is everywhere and searching for a good home. Actuals D-E-A-L-S are much harder to come by.
Happy Hunting but get educated first. A fool (I've been one many times) and his money are soon parted.
5 Reply
Steve Babiak
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
8y
Originally posted by @Jacques Cyr:

Ryan, I agree with the others regarding being cautious regarding sharing the amount, but overall the folks on BP are trustworthy. ...
Well, the majority of people in general are somewhat trustworthy, otherwise there would be far more jail cells, and instead of being landlords we would be wardens ;)
But BP has had its share of scammers and scoundrels and swindlers, with the victims in many cases having posted of their experiences, but I am aware of at least two that did not post - I have a hunch it's a lot more than that.
2 Reply
Brian BurkePro Member
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
8y
Originally posted by @Karen Margrave:

@Brian Burke I'm glad you weighed in, I meant to mention you when Jay brought up syndicators. Are you getting in on the rebuilding of the homes lost in the fires down there? With all the fires in California this year it seems like that would be a profitable niche. Out of curiosity, are there big builders jumping on those or builders doing a few at a time, etc.?
Nah, I’m not touching it. If you are a contractor, architect, engineer or tradesperson you’ll make a great living for the foreseeable future. But if you are an investor trying to make a profit in the diminishing delta between cost and value, you’ll struggle in a climate of labor and talent shortages while those folks seek the more lucrative insurance work. There are no big builders here anymore, they all tanked or wound down at the last recession. But a number of the guys that originally built a lot of those homes are coming out of retirement and bringing their old design work back to life to reconstruct some of their old subdivisions and neighbors are banding together to try to get some economy of scale. Me, I’ll be buying apartment buildings in growth markets and avoiding this chaos for now.
Circling back to @ryan m.’s comment that he’ll just do a combination of crowdfunding and direct investing, I do think it’s wise to seek some diversification, not only in geography and types of property, but also strategy so that approach makes sense. But, if the point and click convenience of investing via website is appealing, I have an alternative that could prove just as successful but much easier and you can do multiple “investments” in a very short period of time—take a trip to Vegas and repeatedly bet on black.
Point and click investing might seem convenient, and there are some winners, but the most experienced sponsors generally have an investor base filled with loyal clients and find no reason to list their offerings on a website. Moreover, if you look at all of the suggestions on vetting investment sponsors that are found on BP and elsewhere, you’ll have a tough time implementing those suggestions in a point and click environment.
We once met with an investor who said that he has invested $25K or less in tons of crowdfunding deals and never did one shred of DD on the sponsors. His rationale was that he was putting so little at risk on each deal that the ones that went south wouldn’t cramp his lifestyle. And some would win, and if enough of them did he’d win overall. But when he was looking to invest with us he did extensive DD, not because we weren’t on a website, but because he was going to invest a lot more than $25K. Moral of the story is that if you want to place some small investments in crowdfunding and diversify amongst a lot of investments there might be some value in doing so for a portion of your funds. But keep your eye open for opportunities to invest directly with sponsors that have great track records and where you can do all of the DD that investments of that size warrant.
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