With 100k cash, at this cycle what would you invest in?

22 Replies

There are 2 schools of thought. Real Estate values have now moved beyond their peak in 2008 so the market is ripe for a correction. In that case, I would keep my powder dry and wait for the correction. The other school of thought is that the Federal Reserve will continue to keep interest rates low which would fuel a further increase in prices. However, there are other factors to consider as well. Taxes are increasing as government becomes more desperate for cash. This reduces disposable income and will have a negative effect on prices. I am more inclined to go with #1.

As crazy as it may sound, there is currently a flight out of debt markets into private equity which suggests that stock market prices in the USA are going to go much higher.

I don't think the fact that prices are above 2008 levels is that important.  It's 11 years later.  My local market, Phoenix is above 2008 levels right now.  But you can draw a 3% growth line from 2000 prices to today's 2019 prices.  Looking at it this way, we're exactly where we're supposed to be.

As to what to do with your $100k?  I'd buy as many cash-flowing properties, on long term, FIXED RATE, mortgages as I could.  (Remember to have reserves to cover vacancies and repairs!)

Originally posted by @Johnson Best :

OWhat would be the most current good risk and rewards or emerging trend to invest in RE related with around 100k cash Xtra finance leverage is ok too.

 Probably 3 best options: (Depending on your tax position #3 may be most beneficial if you have high W2 income)

1. Lend on short term projects 6 mos or less in 1st position at a low LTV 65% - 70% and high interest rate 10% - 11%

2. Buy into a syndication for a large apartment complex

3. Buy a couple of Turnkeys as outlined in the spreadsheet at

Average Turnkey Cash Flow Per Door In Phoenix Metro Area No Bank Needed

https://www.biggerpockets.com/forums/600/topics/584916-average-cash-flow-per-door-in-phoenix-metro-area

Real investors are not focused on market timing and cycles. They are focused on deals which make sense. Unless you are paying full retail, a deal is a deal. 

Second, what is the hold period? If you are buying for a 40 year hold, the point in this cycle is likely going to be hard to remember 40 years from now.

If you are a developer and you have a large number of units coming online at the same time and they need to be sold off, fine, think of the cycle. For many investors, there is no such things as a cycle. There is death, divorce, employment and other life factors which drive when someone buys and sells plus how big of a discount one might achieve.

@Johnson Best

You have to figure out the answer based on your personal situation. Start with deciding whether you're going to invest actively or passively. Here's a post on that: https://www.biggerpockets.com/member-blogs/10850/84064-what-type-of-investor-to-be-when-i-grow-up-active-or-passiv

Once you figure that out, decide on the type of RE niche that suits you within either active or passive investing. 

The important thing is to take one step at a time and then reflect as to weigh in pros and cons to see whether it will work for you personally. 

Originally posted by @Alina Trigub :

@Johnson Best

You have to figure out the answer based on your personal situation. Start with deciding whether you're going to invest actively or passively. Here's a post on that: https://www.biggerpockets.com/member-blogs/10850/84064-what-type-of-investor-to-be-when-i-grow-up-active-or-passiv

Once you figure that out, decide on the type of RE niche that suits you within either active or passive investing. 

The important thing is to take one step at a time and then reflect as to weigh in pros and cons to see whether it will work for you personally. 

 I am more of an active investment thanks. 

Originally posted by @Johnson Best :

@Mike M.

What's into syndication?

 Large apartment purchases are typically done by Syndication. That means someone has hired an attorney to put together paperwork to satisfy the FTC for an offering like a Stock that is then offered to accredited investors.The investment is typically fixed for 5 years when the complex is resold for presumably a profit. You cannot withdraw your funds in that time frame usually. If interest rates go up during that time or if real estate drops in that time or if expenses were greater than projected, you could presumably lose your money. The idea is that with a performing apartment complex you receive a quarterly check of your portion of the cash flow and if the syndicators did their job you get back your investment plus some level of profit. Most people search about a year before they find the right Syndication to join since there aren't many new ones being formed (compared to single family home investments) and because it takes time to learn how to decide if a project is worth investing in or not. A lot of syndicators don't understand what they are getting into and therefore can't properly explain the risks (if they intend to explain the risks) to the investors. They typically have a 5 year loan from a bank and if they can't refinance in 5 years (rates are up for instance) or they can't sell ( a declining market) they could lose theirs and everybody else's money. 

It depends. What do you want your life to look like once you are up and running with your investments? Rather than trying to time the market or find the "perfect investment", focus on finding a niche that's going to provide enough cash flow to support the kind of life you want, in a manner that supports the kind of life you want.

Buy something that cash flows, with long term debt (10-30 year term, amortized over 25-30 years) that isn't over leveraged (LTV less than 75%) and have adequate cash reserves in case something goes wrong. 

Follow the above guidelines and let time do it's work and most real estate niches will do fine. 

Want to dig deeper? Look for niches that have long term demographic tail winds behind them; rentals in general, multifamily, self storage, assisted living, mobile home parks, etc. 

Johnson,

So the next step is to look within active field and chose a niche that suits you best.

Originally posted by @Johnson Best :
Originally posted by @Alina Trigub:

@Johnson Best

You have to figure out the answer based on your personal situation. Start with deciding whether you're going to invest actively or passively. Here's a post on that: https://www.biggerpockets.com/member-blogs/10850/84064-what-type-of-investor-to-be-when-i-grow-up-active-or-passiv

Once you figure that out, decide on the type of RE niche that suits you within either active or passive investing. 

The important thing is to take one step at a time and then reflect as to weigh in pros and cons to see whether it will work for you personally. 

 I am more of an active investment thanks. 

Easy.  

Take $2k, buy a bunch of books and a month in a cabin somewhere quiet to read and absorb them.  top of the list would be anything related to negotiation.  

Then come back, use your $98k balance to get some loans, and buy for cashflow.  Understand you might have to look at a thousand "deals" before you close on one.  

Screw the cycle, buy on fundamentals. My last 2 deals were off the MLS and I got pricing right where I wanted it. Learn to negotiate like a pro. The money is just a tool.


Originally posted by @Darwin Crawford :

Easy.  

Take $2k, buy a bunch of books and a month in a cabin somewhere quiet to read and absorb them.  top of the list would be anything related to negotiation.  

Then come back, use your $98k balance to get some loans, and buy for cashflow.  Understand you might have to look at a thousand "deals" before you close on one.  

Screw the cycle, buy on fundamentals. My last 2 deals were off the MLS and I got pricing right where I wanted it. Learn to negotiate like a pro. The money is just a tool.

 Save the $2k and use the local libraries.  I typically have 3-5 books on hold at any given time but just can't read them fast enough..

I'm in the same boat as @George Pauley . I wouldn't buy for appreciation right now, but I'd buy for cash flow. I'd specifically buy in markets insulated to recession so that when property values drop, they don't drop as much. Because I'm holding, the value dropping isn't my concern, but the rent rate going with it is. In OKC the high cash flow C class inventory keeps it's rent rates even through recession, so I've got my eggs in that basket.