Hello, i just moved to Houston from Jersey and I've 100k cash and i want to work something or invest somewhere so i can receive monthly or every three to six month income to run my house.
Real Estate Broker/Owner & Property Manager · Sugar Land, TX · Member since 2013 · 660 posts · 459 votes
6y
@Umair Alam $100k is good amount but not enough for private lending on your own unless you want to lend for small project. You can only lend for someone who is doing project less than $100k which is not a bad start. Also what's expectation on your return?
@Ethan G. what kind of returns can be achieved via private lending?
12% to 18%. Closer to the former now. Lots of competition now. If done correctly, it's a thing of beauty, very little work, decent return, very little risk. If done improperly, it's not great - one big loss or mistake can wipe out the earnings from many other deals.
Publicly traded mREITs in liquid stock market (no barrier to entry, 100% passive) give 10-15% monthly dividend, so it makes sense for the returns from private lending to exceed at least 15%. Not sure if the risk with private lending is higher compared to mREITs...
Attorney · Katy, TX · Member since 2014 · 397 posts · 215 votes
6y
mREITS have all kinds of interest rate and stock market risk. Completely different animal than a private loan with a local operator (who you can easily vet) and a local property (that you can foreclose on and own if you don't get paid back)
Publicly traded mREITs in liquid stock market (no barrier to entry, 100% passive) give 10-15% monthly dividend, so it makes sense for the returns from private lending to exceed at least 15%. Not sure if the risk with private lending is higher compared to mREITs...
Real Estate Broker/Owner & Property Manager · Sugar Land, TX · Member since 2013 · 660 posts · 459 votes
6y
@Umair Alam wow! 6% monthly I never seen it. Even private lending you can do 12% yearly with 3 points which won't even come close. Let us know if you find any way to hit your jackpot, we will all follow suit.
Attorney · Austin, TX · Member since 2014 · 888 posts · 759 votes
6y
Private lending is good. It can be a 2nd full-time job. If you want to invest and forget about having to manage the investment, work with a lender to fund their deals. Many HML will work with people who just want "mailbox money". You still need to do background checks and due diligence on whoever you work with.
If you lend capital yourself, you need to learn how to assess risk in the transaction and the operator. Then you need to monitor the transaction until complete.
Another method to get "mailbox money" is to buy a performing note and use a note servicer. Long-term and less overhead, but relatively illiquid. (Private lending to rehab/flip simulates liquidity in that the transaction life should be relatively short.)
$6K/mo = $36K/yr. At 12.00% annual yield, you would need to invest $600K. If you manage your own private lending transactions, in Houston terms are running 10.00% APR and 2.00 origination points, interest only payments with a 4 to 6 month balloon. Sure, mathematically you will be able to exceed a 12.00% yield, but IRL there will be down time between transactions, so your actual returns will be less.
This scenario also assumes you do not have to foreclose. Foreclosing isn't necessarily a bad thing, because your overall return should be much higher than full performance on the note if you did your due diligence correctly.
@Jerel Ehlert I think you missing the point. @Umair Alam wants 6k return per month for 100k investment not for 300k investment sir!!
Oh, I get the point and chose to not offer insult. I worked the equation from the other direction: given a required monthly return and yield, what is the required initial principal investment: $600K {this is a correction to my prior post}.
Conversely, given $100K principal investment and a 12.00% annual yield, the monthly (average) return would be $1K/mo.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
6y
The only way you're going to get $6k/month on a $100k investment is if you find an under priced property. Maybe a $700k property that brings in $10k/month in rent, you get it for $500k, put down $100k. You'd have a ~$2,200/month note. Be tight with expenses, maybe have them at ~$4k/month. You'd be pretty close. But you're also talking about a unicorn scenario.
The only way you're going to get $6k/month on a $100k investment is if you find an under priced property. Maybe a $700k property that brings in $10k/month in rent, you get it for $500k, put down $100k. You'd have a ~$2,200/month note. Be tight with expenses, maybe have them at ~$4k/month. You'd be pretty close. But you're also talking about a unicorn scenario.
@Cody L. I was thinking something similar - a triple net commercial property worth ~500k with ~20-25 cap and conservative 30 yr loan. Quite unrealistic compared to your suggestion. But in either case, if a so called wholesaler or investor friendly broker/realtor finds such a property, would they pass it to the investor or keep for themselves...
Real Estate Broker · Tacoma, WA · Member since 2016 · 545 posts · 252 votes
6y
@Tushar P. a Triple Net Commercial property for $500k at... a 20 CAP? Amortized over 30 years? HA! You're right, quite unrealistic. This whole string is pretty unrealistic. If anyone finds an investment vehicle out there that returns 6% monthly feel free to give me a call haha.
@Jameson Sullivan A return equivalent to 6% monthly is not uncommon in the stock market, but unlike real estate, that also comes with a higher risk of losing everything. For example, just check what your returns would be if you bought Tesla stocks in early June. And there are stocks that are doing much better.
This post is about a relatively safer investment vehicle (real estate) to get 6% monthly return and hence the suggestions, although unrealistic.
Real Estate Broker · Tacoma, WA · Member since 2016 · 545 posts · 252 votes
6y
@Tushar P. I don't consider something a return that can be wiped out in one day - or hour. Tesla is not paying a 6% monthly dividend. This post was specifically asking about a 6% return "received monthly." Returns in the market are not realized until you sell them, at which point they aren't working anymore. I owned Tesla at $200 and sold it cause I felt the underlying fundamentals weren't there to support the stock. I still feel that way today... I would have made a ton of money over the last few years, but the point remains that I never would have realized a penny in gains without selling the stock.
@Jameson Sullivan Good for you that you understand the fundamentals very well, and are not saying “I would have made a ton of money” wistfully. I guess you didn’t quite grasp the first few words “equivalent to 6% monthly” either. All the best 👍