What would you do with a million dollars?
Homeowner · VISTA, CA · Member since 2015 · 726 posts · 340 votes
If you had a million dollars and it was the only million you had sitting in a money market account drawing less than 1% per year how would you invest it?
Here's a great (and real) story about dead equity;
4 very astute investors were invited to speak on a panel back in 2008 when the real estate market was in a free fall.
An extremely well connected and respected hard money lender, the California king of REO properties, a syndicator and a landlord / wholesaler.
The moderator asked each person "what are you doing now to make money?"
The hard money lender went on and on about buying properties at auctions, REOs and short sales and then dealing with low appraisal values, fighting banks trying to get their buyers loans funded and all these other problems.
The REO King had just as long of a story. He was out hustling every day looking at foreclosed homes, writing up and submitting offers, dealing with agents and banks.
The syndicator also went on and on about struggling to discover the true value of inventory he was considering buying and then fighting appraisers on the resale side.
Finally, about 30 minutes later, we get to the landlord. The moderator asks, "And what are you doing to make money in this market?" He holds the microphone close to his mouth, glances to the side at the other three panelists, sits up straight, and says, "Collecting rent."
It was my rental portfolio that got me through those lean years as well. Values were sky high, even when I bought some of those houses, but I held on. I dug my nails in and held on. Values plummeted and rents went down a bit too. I kept hanging on. Then, the market calmed. Things started picking up. Values slowly creeped up and rents went right along for the ride too. I still own every house I bought pre-2008. They are all worth more than what I paid for them back then. My rents are higher. I was able to refinanced several into better 30 year, low interest fixed rate loans and now my cash flow is much better.
The market will surely hatchet my equity again in the future. Does it make sense to cash them all out and try to rebuy back in at a lower price? Maybe. Will I be able to get the same quality in the same neighborhoods and lock up the financing I have? I doubt it.
So, in my opinion, there is nothing wrong with some "dead equity" on the side as long as that equity is producing enough income to meet your needs. Think of it as an insurance policy. You might be getting a low return, but if you can spend every day doing exactly what you want to do and not have to think about it, is a double digit return necessary? My ROE on some of my properties is horrible. But, that money shows up month after month after month. If I take that money out, I am risking it no matter what I do with it. Locked up in a well located property is a pretty safe place regardless of what the economy is doing.
Every person on the planet needs three things to survive: food, water and shelter. Well, I don't have much of a green thumb and I think people can find water if they really need it. So, I don't mind being in the shelter business even if the returns aren't all that great. I can always do other things to make bigger checks.
If you had a million dollars and it was the only million you had sitting in a money market account drawing less than 1% per year how would you invest it?
John How are you? Been a bit since we corresponded.. Now hope you find my humor.
I would disappear go live in the Asia Most likely Thailand investing a bar then sell over priced beer and food to my friends Which I would set up trips for them ( LOL ) not a bad idea after all.
Second Choice would be one of the islands Like Jamaica setting up bar / marijuana shop on the beach. Again please see my humor but both of these ideas. I am only in my 40s so still time.
Okay real answer I would speak to some one like @Jay Hinrichs seek his advice. Or look for one of the apartment syndications that are currently raising capital if I had to be in real estate.@Gino Barbaro another growing his apartment business.
I have been dealing with one group ( two brother they own 4000 units in the South east) I can pm there contact. I am dealing with them on much smaller number $200k but starting some where.
Hope all is well
Ale
Big thanks @Alex Franks. Don't think those ideas haven't crossed my mind a time or two. Only prob would be getting my wife of 40 years to go with me and leave our 5 Kids and 14 Grandkids standing on the shoreline waving goodbye and crying their eyes out. But then we manage to get a fair amount of globetrotting integrated into our lives. Not to mention all the Stateside travel. Not feeling too deprived in that department.
I am currently pretty well vested in SFR and Manufactured Homes. But I have thought about multi-family as well. However, currently I'm looking at express car washes. Pretty much a cashless biz and requires only 3 to 4 employees. They're also 95% recyclable water and 100% biodegradable.
John
I recall your family and your wife of 40 years when we spoke last. My wife and I on year 21. Congrads on the family. Again hope you see my humor in this.
I live on the Catawba Indian reservation in Rock Hill South Carolina. Literally surrounded by my wifes family. Unless I am taking every one with us. I don't see the bar thing in either place happening for me either.
Sounds pretty cool about the carwash.( Recyclable and biodegradable awesome) I've actually been looking into franchises myself. I'm calling it life after real estate .Knowing that I'd like to do some other stuff instead of just real estate.
I have a friend that owns Jimmy John's franchises.( Sandwich shop my favorite) Think is was 35 K to open new store( buying the franchise). Being so new for the area we discussed opening potentially 10 - 15 maybe in three to five-year in a 60 to 90 mile radius if not further.
Just started my self with apartment syndication. Though a small Investment Group of Partners I am with. Same time we are potentially looking at building apartments as we think the numbers would be better for us.
Hope all is well and good luck on finding that right opportunity.
Alex
@Alex Franks Opportunities abound my friend. It's just zeroing in on where your priorities are and what your overall capabilities are to manage them. At 70 I'm all about passive and hands off; Not hands on. I'll let the kids do the heavy lifting while Janis and I do the heavy living. LOL! Stay in touch!
This is such a great question that I thought I’d revive the thread with a slight twist.
I’ve often thought and asked about this along these lines but without much traction so far…
Instead of asking for million dollars with an open-ended question of where to deploy it, what if the ask/mandate was to solely in –
BUY & HOLD (20% - 25% down) and limited to Southern California ONLY and…
SELF MANAGE to save on management fees.
How would one structure the as in order to target Multi family (duplex, triplex) up to $600k per property?
(Note: 4-plexes would hard to find at that price point)
1: What would be the terms proposed to the lender for questions such as…
a: Duration of return of capital (+ negotiated fee).
b: how/when/how… installation amounts of the return of capital
c: What the pros and cons are for buy & hold with respect to returning lenders money plus interest
d: Or might buy and hold not be in the best interest nor the best vehicle for such a potential lender?
E: This isn’t a topic that one person can creatively come up with solutions to?
And on and on….
Well the proof of compounding is in the pudding and Warren Buffet, one of my idols, is the best ever compounder in the World to the tune of $87,000,000,000 net worth. His whole life was all about compounding @Steve Short
We invest primarily in buying hold and pay cash. At 71 I'm not as bold and adventurous as I once was so I no longer choose to leverage capital/equity @Francis A. That stated I'm about 10% vested in the stock market and about 20% cash. I will entertain a good REIT or two depending on the dynamics. But great answer and thanks for the contribution.
Been a long time since I received any notifications on this thread. So sorry for not having answered sooner @Francis A. I've often thought about a fast food franchise over the years. However, my good friend, in fact he's the one who owns the carwash biz that we're vested in, started Franchise Management Acceptance Corp (FMAC) in the 90's. He took it public for about 130 million.
The idea was inspired by Taco Bell's need for fixture financing which was never heard of until FMAC. It soon transcended into myriad franchise operations that were seeking that type of financing. You might say he created a very unique and timely niche.
He's discouraged me from fast food only because it's such a hands on and labor intensive biz compared to a more service oriented non hands on type. The Express Carwash biz is once again a unique niche as it only requires 3 to five employees and is cash inserted into machine, credit or debit so employees don't have any personal contact with any cash. Essentially rip off proof.