Best way to invest 500K in cash for most ROI after 5 years?

10 Replies

Hello all,

I was hoping i could start out the right way this time. I have been reading books and posts from this awesome site and could use your experienced help to start my latest journey, and not make mistakes I have in the past working alone. You input is very welcome!

I am a somewhat experienced investor with 2 MFR and getting back to actively investing in RE again. I have 500K in cash to Invest. Also, getting consumer loans shouldn't be a problem as I excellent credit, decent income,large 401K, etc. How and maybe where would you invest this money to maximize ROI in 5 years? I mostly looking for cash flow but appreciation is how you gain wealth at the end of the day.

I am 57 and my goal is to be able to buy a beach house here in California in 5 years with the proceeds, either from cash flow or appreciation. I am currently retired so i have a lot of time to invest as well, but California is very expensive right now so looking out of state. I have done flipping before remotely, but it was very stressful not having the control of being on the job site.

Thanks!

Neil

@Neil Polehn , I would invest directly or passively in value-add apartment communities. They often have in-place cash flows and solid long-term upside as an asset class, in general. Once you complete renovations and operate the asset better, you will really put the pedal to the medal and juice the returns on equity.

What do you need the most help with? Deal Flow? Picking a market? Strategy? Please let us know and I think we can contribute more meaningfully to help you out!

Hello Enrique,

Thanks for the suggestions.  I could use the most help picking the market.  It's overwhelming with all the options, but I know some are better than others but I am not sure the best way to evaluate them.  Thanks!

Neil

There are many guides out there that get into the details for evaluating markets. For long term investing, they'll generally all tell you to look at most, if not all of the following: population, population growth, job growth, rent growth, economic diversity, wage growth, new construction rate, vacancy rate, landlord friendliness, and performance during prior recessions.

Start with 10 markets you might be interested in (just write them down by naming 10 markets you might be interested in). Then gather all of the above data for each market and pick the best 1 or 2. If the data stinks for all of them, then pick different markets and try again.

The benefit of doing this yourself is you'll have a better understanding of why you like the market you choose. Someone recommending a market on BP without knowledge of your situation won't really give you good enough reason to invest your hard earned money and precious time there. 

I would also consider your goals and strategy. You say you're retired - how much will you be able to qualify for in loans? You want to buy a beach house in 5 years - how many dollars does that mean? 

@Neil Polehn the best way and the most practical and executable way are all probably one in the same.

There are higher risk strategies that provide greater returns but, have more downside and you stand to lose more if something goes wrong.

Buying in all cash, taking on a large renovations, and then using financing can produce the best returns. It can also leave you upside down, over renovated, or worse poorly renovated if you don’t execute properly.

What strategy are you most comfortable getting involved with and what are your strengths when it comes to investing?

Hey Guys, 
Great feedback!  My strengths are my creativeness, for example, I talked my ex into giving me a 1K a month in exchange for splitting the appreciation on my condo, which is a win win for both of us. I have trouble standing up to contractors, but i've done several renovations and even a forced remote flip. I have 100K in income and great credit, so I can qualify for loans at good rates. I have TONS of tenant experience and scars to prove it.:) I can be to trusting.

I am doing this as much because I like it and need something to do with my time,.  As for the money, which I don't absolutely need, I do want to be $ rewarded for my work, and hey, who doesnt want a new car and a nice vacation? I love rehabbing property and seeing the finished product, but a bit weak on the design taste though working on it.

I would love to brrrr or flip, but honestly I would have to partner on the flip because I don't know anyone where i would do it and need someone who is more experienced. How realistic is it to find a good partner for that?  Wouldn't the good ones have enough to do their own flips?
If the flip didnt work I would structure it so I could rent it out and buy and hold and be postive, so I didnt lose my shirt.
Of course, location is everything...

What do you think?  Thanks!









Hi @Neil Polehn . Great thread. You've received some great advice here. Have you considered trading in your 401(k) for a self-directed IRA? Though there are no guarantees and regular REI risks, many of us have found that we can make more cash flow and appreciation by passively investing in real estate deals (syndications, funds, etc.) than we could in a mutual fund or wherever your 401k may be placed now.

Of course, you can invest your non-retirement account cash in a syndication as well. This will allow you to avoid the hassles of a flip, a SFR, or a MFR. One significant benefit of investing with a syndicator is their deal flow. It is very hard to find a fairly priced deal anywhere right now. Top syndicators/portfolio operators have access to unstabilized deals most of us would never see. These deals can have uncharacteristically high returns. Some provide much higher than market cash flow and appreciation.

Another option is to acquire your dream beach home now, as a rental home, in your 401k turned to self-directed IRA. Rent it out for a few years, then at some point after age 59.5, if I'm not mistaken, you could convert it to a personal residence. Check with your tax professional on that of course.

Good luck! 

Hello Paul,
Thanks so much for your advice! I was thinking the same thing about using my 401K to invest passively.


"It is very hard to find a fairly priced deal anywhere right now."  I hear what you are saying, my biggest problem now is deciding where to invest and the best stratergy for the money I have. I think it's better to  measure twice and cut once, so take my time.  It's strange to see my checking account balance, but the stock market seems much too high for conditions. So I will listen to you'll, do my research and likely try a couple different approaches.  Thanks!
Neil