You just net $1 Million dollars game

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You just net $1 Million dollars game

Kelly Foydl
Sacramento, CA · Member since 2015 · 34 posts · 10 votes

Hi all,

I know it's been played before, but there are tons of us new to the site, so thought I would play it again.

You just won something that gave you an after tax, free and clear $1 MILLION dollars to do as you please.

If you are younger then 40..please indicate...if older than 40...admit it, over 55 admit it, think about your end game or when you might stop or do you plan to be actively investing till the last breathe?

How would you invest your money or would you? Would you differ than your current methods? If you are a sub$30 buy and hold, do you go up in values or maintain? Would you invest all 1 million in real estate or only a portion? Would you leverage or not (especially with your over 40 or 55). How many would suddenly start participating in private money lending of some sort?

For those of you that would just leverage and buy $4 million dollars worth of buy and holds, why would you NOT do other things?

Okay, let's here what you would do.

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Steve Olafson
Scottsdale, AZ · Member since 2014 · 659 posts · 536 votes
11y

What about those of us that already have it.  I have had more than a million for most of the past 16 years.  I am 56 now.  I am happy to tell you what I did do if you are interested.  It is a fairly long story.

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  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    11y

    Roy, I partnered with a Canadian on a deal. He put in @$250K in mid 2013 and got his money back late last year. He made 18% on the "currency trade" alone. 

    0Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    11y
    Originally posted by @Rod Coleman:

    I would leverage the million then buy a enough rentals so that i can net profit of 270,000 monthly. with that money pay off the debts then go commercial with shopping centers strip malls, etc. Then retire and be a private lender. travel the world, focus on my family

     How would you net that much monthly, Rod?

    0Reply
  • Nick Versetto
    Investor · Frankfort, IL · Member since 2015 · 206 posts · 55 votes
    11y

    Under 40 but over 30

    I'd invest the 750k in corporate bonds that would pay 8-10%

    I'd then take that income and use it purchase buy and hold properties on a yearly basis.

    I'd take the 250k and purchase 1mm in real estate throughout the A areas of the sw burbs of chicago

    60-75k income off the bonds will allow me to purchase and additional 500k-750k in real estate a year.

    I'd also still maintain a f/t career just not stress as much if I don't receive a well deserved promotion .

    If you crunch the math in 10 years 1mm would turn into a much larger sum.  I'd estimate around 5mm with property appreciation and steady purchasing power.

    0Reply
  • Steve Olafson
    Scottsdale, AZ · Member since 2014 · 659 posts · 536 votes
    11y

    I don't want to start a new post that says "Hey, look at me!".  I thought it might fit here where it was an actual rather than hypothetical.  No big deal.

    0Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    11y

    We just need to be careful about not going too far off topic. I have a pretty strong balance sheet, but answered what I would do with another million cash in this thread, please do the same if you like. It's totally fine to talk about what you've done so far, too. 

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  • Kelly Foydl
    OP
    Sacramento, CA · Member since 2015 · 34 posts · 10 votes
    11y

    Here's what I have learned so far.

    1. Gosh, I want to start with this problem (of course)

    2. A secondary path after I hit goals/achievements should be part of the planning. If I had the million, is there another plan

    3. There are far more potential mentors than I knew.

    What would I do with $ million?

    I'm over 40 (I can admit it ;) ) and if I had the money here is what I would do. 

    I would still do some buy/holds to create an income stream (likely with a small amount like $300k)

    before I do the other parts of my previous post, I think I would ask a few potential mentor types for a sit down and discuss lending, JV ideas and see how they feel and fit into my world, then decide if my prior plan was best or some other options.

    0Reply
  • Shelly Bonham
    York Haven, PA · Member since 2015 · 2 posts · 0 votes
    11y
    Originally posted by @Steve Olafson:

    I don't want to start a new post that says "Hey, look at me!".  I thought it might fit here where it was an actual rather than hypothetical.  No big deal

    Steve, I'm a newbie to BP as well as investing and I would love to hear your story. 

    0Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    11y

    Welcome to BiggerPockets, Shelly. 

    0Reply
  • Shelly Bonham
    York Haven, PA · Member since 2015 · 2 posts · 0 votes
    11y
    Originally posted by @Jon Klaus:

    Welcome to BiggerPockets, Shelly. 

     Thank you very much. I'm enjoying the ride so far. I've learned so much just from reading everyone's posts. Everyone here is so forthcoming with their knowledge, its appreciated.

    0Reply
  • Gabriel Mabry
    Real Estate Investor · Albemarle, NC · Member since 2015 · 86 posts · 16 votes
    11y

    From the looks of it I would make a JV deal with @Steve Olafson so we could both be more successful! lol

    1Reply
  • Lumi Ispas
    Real Estate Consultant · Chicago, IL · Member since 2014 · 720 posts · 439 votes
    11y

    @Kelly Foydl 

    If I had 1 million, I will leverage the money and buy commercial property that will give me cash flow of $200,000 + per year.

    Then out of the cash flow, I will donate a part, and travel the World with the rest!

    Any idea where I can get it at a low interest rate? :)

    2Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    11y

    @Kelly Foydl Earlier this week we sat down w/ some investors we've been working w/ for a while. Their original question was how to turn an $350K inheritance, making less than 5%/year in to a portfolio that would throw off more cash than their income. They had also just been pre-approved for some HML loans & some conventional loans. Here's what we worked out on paper. You just have to triple the numbers if it was $1M. The newbies are in their late 40's. The numbers we used are typical for Single Family projects we've been involved w/ on Chicago's southside & we used them to illustrate the art of the possible.

    Step 1: A renovated brick bungalow on Chicago's south side on the right block, in the right condition, will retail between $150K to $200K. These bungalows can usually be purchased between $25 to $40K w/ gut renovations between $60 & $80K. So you're all in number is around $100K. Some will be more, some will be less. The gross margins is $50K. With their lender providing 65% of the ARV as a loan the cash reserves they need per project will be ~ $20K to $30K. Mathematically they could do 10+ projects but we settled on 8. Using a 6 month time line per project would mean 16 projects per year; with a gross before taxes of $432K.

    Step 2:  Take 1/2 of the earning & use it for down payments on cash flowing properties.   

    Step 3:  Repeat Step 1 & Step 2

    Step 4:  At the appropriate point move in to lending.

    Step 5:  Every time you finish a project reward yourself

    This is naturally a perfect world plan & stuff will happen the 1st time the plan has contact w/ the real world.  But it's a plan that's relatively safe because of the amount of the cash reserves available for stuff that's bound to happen.  

    312-681-7487
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  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    11y

    $1,000,000 ... probably pay down/off all my mortgages and buy 4 more properties. Then I'd be done buying properties.  I'd keep some of the money to have fun with and savings, then donate the rest to charities.

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  • Zaheer Jabbar
    Real Estate Investor · South Richmond Hill, NY · Member since 2014 · 44 posts · 5 votes
    11y

    I am 39 and I would like to tell you: I don't need the whole million dollar. Just give me $325,000, plus the closing cost I see for a diner in Pennsylvania which grossed about $8500 a week. It is in a very prime business spot and the owner is old and tired and wants to retire.

    The first level is used for the diner and the second could be use for as I was thinking: coffee and pastries, and bagels and all of the sorts.

    Save and use  part of the profit to fund more multiplex which have businesses contracts and take it from there.

    Remember, you still have $675,000. So if you want to be conservative, you can buy reputable city bonds like from New York city and that would bring in a portion of income. I say buy $200,000 ,in New York city water bonds.

    The remaining: if you want you can be a hard money lenders to help small guys like me....lol

    1Reply
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    11y

    @Kelly Foydl - $2 million in Chicago which is a cash flow and appreciation market would get me about 4-5 triplex buildings at about $400 - $500k each.  $2 Million in Milwaukee, which is a cash flow market would get me about 25-30 buildings and 65 units with the average cost per building being around $70k for a duplex and $95k for a triplex

    I would just let the tenants pay my mortgage from there and then use the cash flow to travel

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Mike F. 

    I would use the funds as my equity for a hard money credit facility 1 million would get me 5 million credit facility.. say at 7% all in interest rate... I would then lend the money out to fix and flippers at 15 to 20% APR IE HML and make the 15% on the 1 mil that's 150 a year... then make the delta between the 7% bank rate and 15% low side for 8% spread on 5 million which is 400k a year... there by grossing before tax a tidy 650K a year...

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  • Kelly Foydl
    OP
    Sacramento, CA · Member since 2015 · 34 posts · 10 votes
    11y

    @Jay Hinrichs I need to read a lot more, cause very little of what you just wrote do I understand. But pre tax 650k is a nice number

    1Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
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    Jay's being a bank, just with higher interest rates. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Jon Klaus 

      yes Jon figured that banking stuff out a few years ago.. but of course its not all peachs and cream  :)  but when it works its pretty nice. and an option to owning RE.

    Building as you do ( and I do ) of course can even be substantially better with leverage with 100% plus returns COC common place ... but lots of risk.

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  • Kelly Foydl
    OP
    Sacramento, CA · Member since 2015 · 34 posts · 10 votes
    11y

    @Brie Schmidt seems like Milwaukee plan would be a better bet based on fact the odds of that many units being empty all at once as a tad less likely then 4-5 buildings in Chicago...what great options those would be.

    @Jay Hinrichs being the bank seems like a great deal in many ways...backed by property, in theory loaning to a seasoned investor would be a good deal, but knowing how to screen these would take some training at that level of money. We aren't talking about a small SDIRA anymore. :)

    I see why all of you are already successful. 

    Next time, maybe I should have poised the question of how would you invest the net $1 Million and create a business hands off flow so you could also achieve Brie's idea of traveling etc.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Kelly Foydl 

      Well being the bank is one option.. Leverage is an important part of RE in any facet.

    If your question was what RE would you invest in with a million dollars and NO leverage. that's another matter all together... Buy and hold would definitely limit you returns..  At that point it would probably be fix and flip for maximum return... pretty common to make 25 to 30k or more on a all in hundred to 120k investment.. So if you lets say bought 10 of those at 100k each.. flipped in 6 months that 250k profit did it again in next 6 months that's 500k for the year... or 50% return... even if you were not that great at fix and flipping you could probably make 250k with that kind of cash.. Not going to do that in buy and hold. But and a big but is you may not be able to find enough deals  or do it the next year.

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  • Mike F.
    Investor · Denver, CO · Member since 2015 · 570 posts · 521 votes
    11y
    Originally posted by @Jay Hinrichs:

    @Mike F. 

    I would use the funds as my equity for a hard money credit facility 1 million would get me 5 million credit facility.. say at 7% all in interest rate... I would then lend the money out to fix and flippers at 15 to 20% APR IE HML and make the 15% on the 1 mil that's 150 a year... then make the delta between the 7% bank rate and 15% low side for 8% spread on 5 million which is 400k a year... there by grossing before tax a tidy 650K a year...

     Very interesting... I'd love to learn more about this, as I'm actually at a place where I'm sitting on a bunch of cash deciding what direction to go in. Considering a commercial property but owners are stingy letting anything good go on the market, thought about buying some raw land and building commercial, thought about scraping or buying some residential land and doing a million dollar spec home... wondered about just lending it out without having to get my finger nails dirty, but don't know where to even start.

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  • Kelly Foydl
    OP
    Sacramento, CA · Member since 2015 · 34 posts · 10 votes
    11y

    No I love this question. Enjoying all the answers. Makes one start asking more questions though doesn't it. Hence maybe next time if I asked a question it would be how would you scale and replicate your business...so you can duplicate your machine. 

    No, I think people are answering this question just right...this is what they would do with the million.

    Heck, reading this, along with other threads, my mind has changed several times. I'd love to have this problem. I still could I suppose. 

    I hope to hear lots of options of what to do, how to do it. And Jay, Jon, Brie, and the rest of you, you guys absolutely rock at what you do!

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  • Jason Douthitt
    Wholesaler and Landlord · Broken Arrow, OK · Member since 2012 · 41 posts · 10 votes
    11y
    I'd go spend a couple weeks at the beach away from all of my local distractions while I decide where to invest the money. I know too many people that would be coming around looking for handouts to stay put.
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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Mike F. 

     hit me off line I have done this for 30 years.. happy to explain in detail.

    When its good nothing is better ... in 08 to 2011  nothing was worse  :( 

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