4 Million -- How to Make Most Money with It?

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4 Million -- How to Make Most Money with It?

Naomi Moore
Member since 2021 · 13 posts · 16 votes

Imagine you had 4 million to invest, and a credit score of 832.

What would you do with it to make as much money as possible?

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I don't know anything about real estate, but if you can help me with this I might really get excited! 

Someone I know owns a vacation rental that they paid 650k for, and it looks like it rents out at least 10k a month (just looking on VRBO).

So it gets me thinking -- if someone had 4 million .. could they buy 30 properties like this?

So 20% down on 650 = 130k

4 million / 130k = 30 rental properties

Could someone with 30 rental properties make 300k a month with a 4 million investment?

I realize its a bit far fetched, and would be a headache, but someone could easily be hired for six figures to manage it all. 

Thanks a lot

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5y

Naomi, my answer would depend on how you managed to get your hands on $4 million. If you were an entrepreneur that built a business and earned this wealth over time, then I would say you're ready to invest. If you the money was inherited or won in a lottery, then I would say you should sock it away, find a reliable financial advisor, and follow their advice.

The fact you are salivating over a vacation rental that earns $10,000 a month indicates you're not financially savvy and should find an advisor quickly.

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  • Michael W. McCord
    Rental Property Investor · El Paso, TX · Member since 2018 · 82 posts · 49 votes
    5y

    Naomi, Like you I made my money outside of real estate and only recently got in. I happen to be already doing what everyone on this thread has advised you. I have the lion's share in vanguard index funds that have done very well. I recently started putting a portion into crowdfunded commercial real estate equity deals on online platforms such as crowdstreet.com and realcrowd.com among others. Most of the deals on those platforms only have 25k-50k minimums to invest. I would keep most of your money with your wealth management group while you take the time to learn how to analyze deals on those sites. When you're ready take 25k as "play money" and invest in a deal and watch it perform. If it excites you and you find yourself following the sponsor updates, then you've found the right thing and can buy more deals. However, if you forget about your deal and let it languish, then you know that real estate is not right for you.

    Congrats on a great start!

    2Reply
  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    5y

    It sounds like you're more of the creative type, and have been able to manage well enough to be successful. Fortunately it also sounds like you recognize your own limitations with regards to more of the function or operational side of things. I'd suggest you find a good 'business' partner who maybe isn't as creative. They're the nuts and bolts, know how to run a business but maybe aren't as much of a visionary as you may be. 

    I've been intrigued with the even more significant leverage available within RE by building a business that utilizes RE, and obtaining SBA financing. I'd look at two avenues 1) events space and operation (this should qualify for the SBA) 2) sounds like you like the STR concept. You can likely do both with your capital. Find a partner that knows how to run things, and you create the vision. With that you should be able to hire employees that can actually execute the vision, and your partner will keep you on track.

    1Reply
  • Rick Reeder
    Member since 2019 · 124 posts · 95 votes
    5y

    To answer your question about index funds, listen to this podcast.  I'm sure the wealth managers on this thread will have a thing or two to say about it, but the data is pretty clear.  https://freakonomics.com/podca...

    I have two STRs that are cash flowing well, net of all costs, including property management. One on Lake LBJ near Austin and one in Angel Fire, New Mexico. I use them with my friends and family when they're not rented out and I still get a great return. Happy to chat about this if you like... I've had my Series 6 financial license (expired), I have my real estate license in TX (active) and I've been around the block with STR, long term rentals, private placement investments for qualified investors and the stock market / mutual funds / ETFs.

    1Reply
  • Todd Powell
    Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
    5y

    @Nathan G.My exact thoughts

    0Reply
  • Todd Powell
    Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
    5y

    @Naomi Moore congratulations on your success you’ve created. 

    0Reply
  • Logan M.
    Investor · Provo, UT · Member since 2016 · 759 posts · 626 votes
    5y

    This is totally a different answer than what you asked but...

    If you are going to go through the trouble to put a team together you might as well do it to find off-market multi-family properties that are underperforming or have problems. Work on getting seller financing deals AS MUCH AS POSSIBLE. Use funds to renovate homes on a larger scale, sell the ones that you don't want, and roll the profits into better ones.

    The hardest part is building a team and having the funds to build something bigger.

    If you want to do this in Provo, we can chat.

    Buying crap is easy, building something is harder but rewarding.

    0Reply
  • Don SpaffordPro Member
    Investor · Idaho Falls, ID · Member since 2016 · 935 posts · 629 votes
    5y

    I would invest in different asset classes. At that amount I would want to be completely passive. Purchase some multi-family, self storage, rv parks, and invest in syndications. Or, if you don't need cash flow right now, but want to increase your wealth and purchasing power, invest in some new development syndications, like one I'm in now, that will almost double your money in two years, then roll that over into the next couple phases after to compound your return. In that example with the full $4M invested in the first phase, it would become about $22M after 3 phases. BOOM! Then you 1031 that into a large multi-family, or a down payment on several large multi-families and you are set. Then take the cash flow from those to purchase the short term rentals if you really want to, I would only purchase them in the areas where I want to vacation so that I have them for my own personal use when there and rent them out the rest of the year, and then use the cash flow from those combined with the apartment buildings to buy the other asset classes like self-storage and commercial retail, etc. Then you have diversification in every asset class and enjoy living off the cash flows, never having to buy anything else again unless you just want to for the fun of it. Go buy a house in Hawaii with @Brandon Turner and have fun with your family the rest of your life. Keep reinvesting it all until you reach the goal you want and then hire an asset manager to handle everything for maintaining all of those and then at that point buy the things you want for yourself and your family.

    A non-real estate investor would probably say go buy a mansion and a bugatti. But then what? You would be out of money and not be able to afford those things. Build up the wealth first and then you can buy those things and have the funds to sustain them forever.

    2Reply
  • Adam Lendi
    Investor · CO · Member since 2017 · 60 posts · 44 votes
    5y

    @Don Spafford @Naomi Moore I completely agree with diversifying that investment and putting it into different buckets. Weather the storms and take advantage of the seasonalities of certain assets. Don mentioned investing in syndications (passive investing) and also looking at RV parks and RV Storage. I can tell you as someone who does both of these things, the RV world is booming right now and is a great place to look. It’s where I’m focusing my own investments right now.

    1Reply
  • Bob Wilson
    Rental Property Investor · Chicago, IL · Member since 2019 · 51 posts · 31 votes
    5y

    @Naomi Moore

    5 years ago, not sure what I would have said.

    Now, I live in a world where we invest 35k per home (furnishings) and generate $1,500-$1,900 monthly returns.

    So to keep it simple, I would grab 100 homes for 3.5 mil, which would bring me 150k-190k/ monthly Net.

    My world is corporate housing, which is rare.

    2Reply
  • Naomi Moore
    OP
    Member since 2021 · 13 posts · 16 votes
    5y

    @Bob Wilson wow that sounds awesome man. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Bob Wilson:

    @Naomi Moore

    5 years ago, not sure what I would have said.

    Now, I live in a world where we invest 35k per home (furnishings) and generate $1,500-$1,900 monthly returns.

    So to keep it simple, I would grab 100 homes for 3.5 mil, which would bring me 150k-190k/ monthly Net.

    My world is corporate housing, which is rare.

    I just stumbled into this  were 20k of fully furnished in Vegas got me 2k a month in exta rent.  I am sold plus caliber of renter is off the charts. compared to regular  make 100 or 200 a door C class rentals.

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  • Bob Wilson
    Rental Property Investor · Chicago, IL · Member since 2019 · 51 posts · 31 votes
    5y

    @Jay Hinrichs

    It's amazing isn't it Jay!! When I tell folks this, they never believe it. Some are so short sighted on "traditional" real estate, they can't think for a moment about other opportunities.

    I haven't found anything close with these type of 50-60% type returns.

    And yes, the renter quality is soooo much better, it's a no brainer to us. Built a business off of it.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    5y
    Originally posted by @Bob Wilson:

    @Jay Hinrichs

    It's amazing isn't it Jay!! When I tell folks this, they never believe it. Some are so short sighted on "traditional" real estate, they can't think for a moment about other opportunities.

    I haven't found anything close with these type of 50-60% type returns.

    And yes, the renter quality is soooo much better, it's a no brainer to us. Built a business off of it.

    ALE ??  

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  • Bob Wilson
    Rental Property Investor · Chicago, IL · Member since 2019 · 51 posts · 31 votes
    5y
    Originally posted by @Jay Hinrichs:
    Originally posted by @Bob Wilson:

    @Jay Hinrichs

    It's amazing isn't it Jay!! When I tell folks this, they never believe it. Some are so short sighted on "traditional" real estate, they can't think for a moment about other opportunities.

    I haven't found anything close with these type of 50-60% type returns.

    And yes, the renter quality is soooo much better, it's a no brainer to us. Built a business off of it.

    ALE ??  

    To start... of course! They are the leader nationally, only makes sense :)

    But that's 1 of 10, and that industry is only 1 of 4 we target.

    Our strategy keeps us 100% occupied, literally, across 17 units. We have folks lined up waiting on these units. Our last 5 properties, we didn't even have pictures, before we had a contract between $6,500-$7,500/monthly.

    Folks look at the website, trust the brand, and reserve - period.

    Don't get me wrong, it's WORK to advertise/market, chase contracts, and maintain these relationships, but the profits are ridiculous. We diversify though, can't have all your eggs in one basket, so even if 1 golden goose goes under, we wouldn't skip a beat.

    When we come to Oregon or East coast, we have to do business my friend!

    0Reply
  • Karina Oliveira
    Member since 2019 · 13 posts · 7 votes
    5y

    @Bob Wilson hey Bob, I was so intrigued about this comment. Is this a short term rental in what location please?

    Ty

    0Reply
  • Scott McElhaney
    Investor · Mount Pleasant, SC · Member since 2017 · 28 posts · 18 votes
    5y

    This all depends on your tolerance for risk. If you elect to NOT partner with a very experienced investor OR be involved in a syndication AND truly know nothing about real estate, as you mentioned, I would suggest:

    1) Find a stellar Commerical Real Estate Broker to help you with your search.  It almost always costs you nothing (seller pays traditionally) and will educate you on the market(s) and tenancy profiles. 

    2) Buy a property(s) with long term (10+ year lease);

    3) Look for corporate credit rated tenants (think Walgreens, Starbucks, etc) on a Triple Net (very minimal LL responsibilities- think roof & structure) OR Absolute Triple Net Lease (no landlord responsibilities).

    4) Most credit tenants are experts in location selection (which again, minimizes your downside risk).... but as a rule of thumb I always prefer locations on traffic lit, hard corners with great/easy access and high Vehicle Per Day counts.

    My 2 cents.  :-)

    0Reply
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