$100k in cash and not sure of the best way to invest

7 Replies

While I started investing in 2002, there wasn't nearly as much information available as there is today.  I purchased a few investment properties and also sold a few.  However, my knowledge is limited.  I saved up a bit of cash for the last 7 years because I knew I'd be forced to retire from my full time job.  The retirement will be official September 1.  I currently reside in a major city so I am no looking for property here.  I have been looking at property in NC and recently purchased a condo.  Being a bit of an introvert makes it hard to meet people so I haven't found a mentor.  Some direction would be greatly appreciated.  What would a seasoned investor do with $100k in cash.  

@Dawn Burdette

Happy new chapter, even if it is being forced on you. I'd start with an overall look at your retirement income situation to see how much more income you want to earn to be comfortable. Then I'd look for the safest way to get to that point, real estate or otherwise. If you are close or at your mark then keeping your leverage at a minimum makes sense. If you need to go further than that would get you, a more aggressive strategy might be most appropriate. Out of all the advice you get, make sure you choose something that fits your specific scenario and goals. How much cash flow do you want to get out of that 100K?

Well, it will also depend on what your goals are. Are you looking to flip properties and make income that way? Or do you want to buy and hold for cash flow each month? Both ways are great, but you should decide one or the other. Flipping will take roughly 6 months to get your money back. Whereas buy and hold provides cash flow quicker, usually.

I've never flipped before so I prefer buy and hold for cash flow.  I would be comfortable with 4k per month in cash flow in addition my retirement.  Ideally, I'm looking for somewhere near 2k in cash flow per month from the 100k.

@Dawn Burdette - start by looking inward and ask yourself what are your strengths and weaknesses. Which areas do you want to spend the time to improve. Are you looking to be truly passive, active or pactive?

Do you want to be more hands on and manage rehab to rent such as a buy and hold model for SFR?

Do you like to analyze deals and are more drawn to the complexity of larger multifamily?

24k per year cash flow from a 100K investment is a 24% CoCR, cash on cash return. Although this is possible it will be very challenging to find. One may be seduced by some rougher areas where on paper that looks like it can be achieved however many times one finds themselves in a situation where the term "looks good on paper" becomes more of a big disappointment.

24% annualized is achievable also albeit getting more difficult in this market but 24% annualized usually means where there is limited cash flow distributions during the hold but the sale yields a high pop at the end annualizing out to 24% over the say 2-5 year hold.  That is different than what most people are looking for with CoCR, cash on cash return, thus cash flow. 

To be able to put your head on the pillow at night from a true cash flow perspective I would set your expectations on 5-8% CoCR for nicer C+ to a A- assets.   Where one can receive 5-8% cash on cash return during the hold yearly but than on sale with any appreciation could achieve a 10-20+ % annualized return.

I know 5-8% is not the same as 24% cash on cash from a real money per month perspective but I see alot of people chasing the amount per month meaning the 2k per month that can make a difference in one's life vs the reality of achieving that return and in the end get into a situation where the return is not achievable because it looked good on paper for an investment but now the principal is at risk. Capital preservation is critical at this time in the market cycle. I'd look for nicer assets with lower return in areas that have good population and job growth story with a bit of hustle on finding a discount off retail with reason and chip away at your goal. 

@Dawn Burdette My best advise is to browse these forums in the different categories along with the blog posts. Each type of RE investing provides different pros and cons.

One of the more technical ways to get a lot of cash flow volume out of your initial capital would appear to be BRRRRing. Check out @David Greene ‘s book if you are interested in that.

Finding below market valued homes and rehabbing them, following by stabilizing with a tenant then refinancing to pull your money back out can essentially give you your initial capital back to reinvest and provide a few hundred dollars of cash flow ( in a “home run” scenario).

You are on the right track checking these forums out! Best of luck!

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