Hmmm, great question. I think I'd start by making at least 4-5 separate investments and not betting it all on one. So, let's go with 4 separate investments at $25k each.
--If a fixer costs $75k....and I could get an FHA loan(3.5% down payment) I'd do that. That's $2,625 out of pocket. Let's assume I could renovate and sell this home with the remaining 22,375 and it sells for 200k. That's a pretty decent profit. Even if you had to dip into the next 25k a little bit, still great profit.
HOWEVER, I'm not much of a flipper(I know, that's sacrilege around here) so what I'd be looking for is a multi-family opportunity. Let's say you split the $100k up into two separate investments of $50k. If you found a four-plex that needed some work/rents were low/run by a mom & pop operation ect....you may be able to get seller financing from the owner. This would be a great thing because depending on the needs of the seller, 25-35k could go a long way(They'll most likely want a decent down payment if they're going to carry the contract.) Then, you make the fixes as you can, raise the rents as applicable, maybe some capital improvements. This should stabilize the property, and raise the value. Once the property is stabilized, you can re-finance/re-appraise at the current cap rate/value of the property. You could then perhaps pull a line of credit(which is great because you pay no interest until you actually use the money) and go find another one.
This is what I would do(multi-family) if possible...but different markets will require slight tweaks in your strategy. I'm in Seattle so $100k doesn't go as far as it would in the midwest where I grew up.
I think ultimately, depending on your experience level, partnering with someone else would be the best way to get not only experience/learning, but less risk. That's just my two cents tho, hope this helps!
@Ryan Gettelfinger is there a interest rate with this or amortization schedule? Or is more like my pretend rich uncle gives me 100k and says go make money and Pay me back if you can?
If it’s the latter I’d invest in notes. Earn 10ish percent and set 1/2-1/3 of my annual return set aside to pay back the original amount.
I would grab a ton of lottery tickets.....okay I wouldn't but what I would do is... Find a 10 or more door apartment complex and get it financed with an equity partner where the equity partner pays all closing costs say 15% equity to them. Then I would manage and repair all the work it needed while it is bringing in the cash. I would then at 3-5 years refi it pay off the person at 15%. and give back the 100k.
Or, I would do all the above and wait till 7-10 year balloon to do the paying off.
I hope I win the weirdest idea.
Keep it simple.
1 - Use the $100k as a 20% DP on a NNN with a 10CAP (w/bumps)
2 - 10CAP NNN NOI = $50k/year (10% of $500k)
3 - $400k loan payment = $34k/year
4 - Cash Flow = $16k/year
5 - Take on 2 Cash Partners at $50k/ea.
6 - CP get 10% return/ea = $5k/yr each or $10k/yr total
7 - You retain $6k/year.
8 - Cost to CP's $50k/ea with a 10% guaranteed return/year
9 - Cost to you = $0 with an infinite return, but guaranteed return, of $6k/year.
10 - Repeat.........
Updated almost 3 years ago
Notice the last step...#10. This means you are able to use that same $100k...over and over again, never spending it.
Invest in my nest deals in my fund that are proven & still accepting money. Make 15% & enjoy the $15k per year in extra income!