$1 million to invest, what would you do? Strategies?

Canadian Real Estate
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$1 million to invest, what would you do? Strategies?

AJ Dhillon
Member since 2018 · 11 posts · 9 votes

My last thread didn't get much traction so I thought I'd try this.

With $1 million in cash to invest into real estate, what would you do?

For example:

1) One Big Multifamily with management

2) A few smaller multi families

3) Buy new maintenance free single family homes in the GTA since cash flow isn't needed (minimal work)

4) Look west of GTA and pickup a whole bunch of cash flowing properties slowly and build a portfolio (more work for me)

5) Other?

Some details about me:

  • Located in GTA
  • My Business makes about 400k a year and growing
  • I don't take much of a personal income and have limited credit history, but an excellent score (bad for mortgages)
  • Early 20's so a very long horizon.
  • If my investments don't cash flow I don't really mind, I don't need the money right away.
  • I do want to be a bit more on the passive side as I can make a lot of money from my other business. So things like BRRR or student rentals or properties that require a lot of my time don't really interest me.

Can't wait to hear from you guys.

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Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
8y

Most busy high net worth individuals who invest in real estate do it through syndications or NNN properties.

Regarding #1, $1 million will not get you a big multifamily...and it is borderline for on-site management and maintenance, which can be important.

Very few members are going to know where GTA is.

You are about to get trolled with marketing pitches and PMs.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    If your in Canada and want to invest in the US>. you should be looking at debt..  and you should google " portfolio interest"  Notes would be the way to go with a properly structured portfolio at least for a good portion of this .

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    3Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    8y

    Most busy high net worth individuals who invest in real estate do it through syndications or NNN properties.

    Regarding #1, $1 million will not get you a big multifamily...and it is borderline for on-site management and maintenance, which can be important.

    Very few members are going to know where GTA is.

    You are about to get trolled with marketing pitches and PMs.

    9Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y
    Originally posted by @Mike Dymski:

    Most busy high net worth individuals who invest in real estate do it through syndications or NNN properties.

    Regarding #1, $1 million will not get you a big multifamily...and it is borderline for on-site management and maintenance, which can be important.

    Very few members are going to know where GTA is.

    You are about to get trolled with marketing pitches and PMs.

    Mike were is GTA  airport identifier  like PDX  or ORD or JFK ? 

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    1Reply
  • Warren Currier
    Developer · Union Point, MA · Member since 2015 · 63 posts · 31 votes
    8y
    Originally posted by @AJ Dhillon:
    • I do want to be a bit more on the passive side as I can make a lot of money from my other business. 

     I'm interested to learn more about what Jay is suggesting as I've recently been asking myself the very same question you've posed, ie., what to do with $1MM cash. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    @Mike Dymski  Answered my own question :)  Toronto international.. :)   

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    0Reply
  • Warren Currier
    Developer · Union Point, MA · Member since 2015 · 63 posts · 31 votes
    8y
    Originally posted by @Jay Hinrichs:

    Mike were is GTA  airport identifier  like PDX  or ORD or JFK ? 

    Greater Toronto Area

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    also I was just in YLW this week I would certainly look at that market before I ran off out of country..

    its BOOMING ...

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    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    8y

    At your age with 1M and looking for something passive I would not be investing directly in real estate. I would have a financial advisor manage my money on my behalf. Mutual funds, income funds, REITS ...something of that sort which over the long term should be able to provide a solid 10% + return annually.

    If you are not seeking cash flow forget about real estate. There are far easier ways to invest that require a lot less knowledge and work.. 

    2Reply
  • Warren Currier
    Developer · Union Point, MA · Member since 2015 · 63 posts · 31 votes
    8y
    Originally posted by @Jay Hinrichs:

    also I was just in YLW this week I would certainly look at that market before I ran off out of country..

    its BOOMING ...

     Jay, I thought that being outside of US was a crucially important part of your entire 'debt portfolio' suggestion.  Can you suggest a link to more information and/or cite some cases as examples?

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y
    Originally posted by @Warren Currier:
    Originally posted by @Jay Hinrichs:

    also I was just in YLW this week I would certainly look at that market before I ran off out of country..

    its BOOMING ...

     Jay, I thought that being outside of US was a crucially important part of your entire 'debt portfolio' suggestion.  Can you suggest a link to more information and/or cite some cases as examples?

    Sorry if my post was confusing there is a tax treatment for foreigners that is not widely known and its called "portfolio interest" for for many foreigners investing IN the US  this tax treatment is FAR better than owning the asset..  I spent 15k in legal fee's to get an opinion letter form a top law firm for my foreign clients..  one can just google it and research it on their own.. suffice it to say it beats the Heck out of owing the asset for most foreign investors who have cash and cant or don't want to take on debt to own US real estate and all the risk involved in that end of it..  

    My personal experience of investing in Canada as a US citizen is that other than I really like it .. its not a financially prudent move.. there is no 1031 in Canada and a heavy tax burden.. I did lend money in Canada as a HML and that worked out.. as not only did I make my return I made a very nice delta on the exchange rate arbitrage IE when I made the loans the Loonie was quite low when I got paid off the loonie had jumped 10%.. but I am not an expert or a currency trader .. just a little one man HML er.. picking nice little loans in the Okanogan.

    but what I did not realize also in Canada the default process is not where as friendly as the US.. ergo being the bank in Canada you take on some risk that is not present as a US lender on US assets.

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    4Reply
  • Lalit R.
    Rental Property Investor · Toronto, ON · Member since 2017 · 61 posts · 16 votes
    8y

    AJ, what a way to get into real estate. I am Canadian and have been observing the market for a bit. This is great timing since the properties in the GTA are in discount. 

    For starters, 1m cash without a loan is a good way to start but then residential Mort will be very painful to get at decent rates. I just had a not so fun conversation with my  Mort broker.  His suggestion was to get into small multifamily aka commerical loans. 

    For my money, I would go for a solid location within toronto and make sure the property carries with a bit of surplus. Don't get bogged down with with cap rates since I don't rely on rental income but I dont want to pay my tenants to live there either. I would recommend 5-20units. 

    Pm me if you would like to meet up and bounce off some ideas. My situation is similar although I dont have as much cash for the deal. 

    3Reply
  • Doug P.
    Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes
    8y

    @AJ Dhillon In the GTA $1m is barely more than the average house price. Heading west, you've got the KWC area where it will get you 2 average single family homes or maybe a decent 4-plex. London, 3 houses, possibly a 6 or maybe 8-plex. In Windsor you could get a 12-plex.

    I tend to agree with some of the other comments here. You would probably be better off either buying debt or lending hard money. You can make the latter fairly passive by reaching out to mortgage brokers and offering to lend privately to flippers.

    2Reply
  • Mike V.
    Rental Property Investor · Campbell, CA · Member since 2017 · 419 posts · 499 votes
    8y

    Purchase 4 more rentals using 250k each down, in Hawaii, and return 20% all day (Self managing).  

    Just added 200k a year net to my income. 

    Rinse and repeat. 

    4Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    8y
    20% and being an active investor is not very good. Especially as speculative as short term rentals. Hawaii can change their pro hotel agenda whenever.
    0Reply
  • AJ Dhillon
    OP
    Member since 2018 · 11 posts · 9 votes
    8y
    Originally posted by @Jay Hinrichs:

    If your in Canada and want to invest in the US>. you should be looking at debt..  and you should google " portfolio interest"  Notes would be the way to go with a properly structured portfolio at least for a good portion of this .

     Jay Hinrichs replied to my thread, thats milestone # 1 in my real estate investing career haha.

    Thanks for the advice I will take a look into it.

    I am slightly uncomfortable investing away from home, I was looking to start with something within driving distance of the Toronto area.

    Wouldn't the returns from notes be less than the returns from actual properties?

    2Reply
  • AJ Dhillon
    OP
    Member since 2018 · 11 posts · 9 votes
    8y
    Originally posted by @Mike Dymski:

    Most busy high net worth individuals who invest in real estate do it through syndications or NNN properties.

    Regarding #1, $1 million will not get you a big multifamily...and it is borderline for on-site management and maintenance, which can be important.

    Very few members are going to know where GTA is.

    You are about to get trolled with marketing pitches and PMs.

     I was looking for syndicators in Canada and I can't find anything. When googling the term only syndicated mortgages show up in Canada.

    Perhaps a different word is used up here? I've come across a private equity company and one syndicator from the forum thats about it, I can;t find anything else.

    0Reply
  • AJ Dhillon
    OP
    Member since 2018 · 11 posts · 9 votes
    8y
    Originally posted by @Thomas S.:

    At your age with 1M and looking for something passive I would not be investing directly in real estate. I would have a financial advisor manage my money on my behalf. Mutual funds, income funds, REITS ...something of that sort which over the long term should be able to provide a solid 10% + return annually.

    If you are not seeking cash flow forget about real estate. There are far easier ways to invest that require a lot less knowledge and work.. 

     Hey Thomas, I've made my money by pretty much not listening to my financial advisor's so I'd have a hard time really trusting them with my money. I am referring to the advisors at my local bank branch, but I'm assuming there are advisors with a bit more knowledge out there?

    2Reply
  • AJ Dhillon
    OP
    Member since 2018 · 11 posts · 9 votes
    8y
    Originally posted by @Lalit R.:

    AJ, what a way to get into real estate. I am Canadian and have been observing the market for a bit. This is great timing since the properties in the GTA are in discount. 

    For starters, 1m cash without a loan is a good way to start but then residential Mort will be very painful to get at decent rates. I just had a not so fun conversation with my  Mort broker.  His suggestion was to get into small multifamily aka commerical loans. 

    For my money, I would go for a solid location within toronto and make sure the property carries with a bit of surplus. Don't get bogged down with with cap rates since I don't rely on rental income but I dont want to pay my tenants to live there either. I would recommend 5-20units. 

    Pm me if you would like to meet up and bounce off some ideas. My situation is similar although I dont have as much cash for the deal. 

    Hey Lalit, I've looked in Toronto through MLS listings and private online listings and I'm seeing a 3-3.5% cap rate on multi family and the actual expenses are probably a bit higher than stated. A lot of these investments rely on appreciation, which is fine by me as I don't need the cashflow, but it seems like members of this forum don't recommend that, they seem to all be about cash flow.

    What do you think?

    0Reply
  • Mike V.
    Rental Property Investor · Campbell, CA · Member since 2017 · 419 posts · 499 votes
    8y

    @Lane Kawaoka, I’ve yet to met anyone else who can consistently net 20%+ in Hawaii STVRs. Most barely break even. Care to share your story and/or results? I’ve got several on the smaller islands and hit 20% pretty easily with 5-10 hours a week put in... usually closer to 5.  At 250k down making 50k net per property, I don’t see how it gets much better....

    0Reply
  • Account Closed
    Downers Grove, IL · Member since 2017 · 366 posts · 165 votes
    8y

    Diversify:

    1 C+ condo in B- Area

    1 B Condo in C+-Area

    1 C Condo in B   Area

    1 2 Flat in B Area

    1 Single family in B area. 

    Market fluctuations will effect different parts of your portfolio differently. If you annually add and subtract from your portfolio with cash purchases you should be able to improve the yeild. 

    0Reply
  • Dave S.
    Investor / Wholesaler · Erie, PA · Member since 2015 · 120 posts · 18 votes
    8y

    Well, @AJ Dhillon you loan someone the funds once you get shown a deal outlining how you will get your money back and THEN how you will make a profit. At that time you can express how much of a passive investor vs active investor you want to be. The profit will be adjusted accordingly. I would definitely invest in a multifamily. Preferably one that has a value add option. Where as we would put down $750K and use ~$200K (would need to allow for overages) in rehab. Turning a partially vacant apartment into a fully occupied one. Not only pulling in more income from the lower vacancy but also due to the higher rents due to the rehab. 

    0Reply
  • AJ Dhillon
    OP
    Member since 2018 · 11 posts · 9 votes
    8y
    Originally posted by @Doug P.:

    @AJ Dhillon In the GTA $1m is barely more than the average house price. Heading west, you've got the KWC area where it will get you 2 average single family homes or maybe a decent 4-plex. London, 3 houses, possibly a 6 or maybe 8-plex. In Windsor you could get a 12-plex.

    I tend to agree with some of the other comments here. You would probably be better off either buying debt or lending hard money. You can make the latter fairly passive by reaching out to mortgage brokers and offering to lend privately to flippers.

     Hey Doug thanks for the reply. The $1m is the down payment amount I was hoping to use financing to increase my buying power by a good amount.

    KWC area is about an hour away from me, so I did have some interest there. Properties seem reasonably priced and from what I see Kitchener properties can cash flow.

    London properties are dirt cheap, it's quite interesting, they all seem to cash flow well if bought right. How is the tenant quality in the area? I would have to take time to learn about the areas.

    Hard money lending scares me a bit, I'd have to read into the risks as I see a lot of people recommending it here.

    0Reply
  • Doug P.
    Investor · Kitchener-Waterloo, Ontario · Member since 2008 · 1k+ posts · 1k+ votes
    8y

    @AJ Dhillon @Matt Geerts can give you more insight into the London market. I do rent to own on single family homes so I'm dealing with buyer-mentality rather than renter-mentality. Can't tell you much about the quality of tenants because it's been...18 years since I had a tenant!

    1Reply
  • Matt Geerts
    Investor · St. Thomas, Ontario · Member since 2015 · 692 posts · 312 votes
    8y

    Doug, you've got to come out to OREC! www.orec2018.com

    Youll get your insight and all the right contacts in one weekend.

    1Reply
  • Roy Cleeves
    Residential Real Estate Broker · Kitchener, Ontario · Member since 2014 · 687 posts · 370 votes
    8y

     @Doug P.

    @AJ Dhillon 

    I have found both London and Kitchener, Waterloo, Cambridge to be great investment markets for cash flow and appreciation on Real Estate.  My preferred investment is a brand new unit as you put little cash down and then it appreciates even before it is built.  You pay for it in Cash and then refinance on the current market value so that you have less money invested and a greater return.  

    Condo's in the Core of Kitchener and Waterloo are the new Rage and they are selling out within 25 minutes of the opening day.  These have the greatest appreciation at this time.  And once a tenant is in place for renting then you have very little to do since it is a condo and the unit is still brand new.

    1Reply
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