Qualified for 2m loan what should I buy?

Question

I recently qualified for a 2m loan with a 30y fixed rate of 2.8%. This seems like a good rate and I expect my income to go down in the future, so would like to take advantage of this now and (first time) buy real estate that might cashflow and/or appreciate.

Where/what would you recommend buying?

I’m lazy and dont want to be an active landlord. It also might be nice to live in whatever I buy and if so I prefer locations with nice weather peaceful and low crime. I live in the sf bay area and was informed 2m will be considered a starter home so seems like maybe I can get a better deal elsewhere in the country. Any ideas?

Mike Dymski · Answer

Real estate investing is not a lazy endeavor, particularly investing 2 million.

Noah Chappell · Answer

@Fakal Azeem I wasn't clear.. is the 2M like a residential jumbo loan, or commercial? I'm assuming residential.. I'd be very careful when you're starting out with a lot of money, because one misstep and you could go tumbling in the wrong direction and not be able to recover, whereas with a smaller loan you could absorb the cost of an error more easily. If I were you I'd start with just a portion of the money on 1 or 2 smaller value add projects, ideally close to home, to get your mind around the fundamentals, then scale from there. Another good option if you're hoping to be as hands off as possible would be a triple net lease commercial deal targeting strong fast food chains, etc. Even here however, you'd need to do a good amount of research first, and build up relationships with brokers in that space, etc.

Jackson Babcock · Answer

Fakal always buy for cash flow and don’t bank on appreciation.  If there is a down turn in the market and you are forced to sell because you are cash flow negative, you could get into trouble quick.  If you don’t want to be an active real estate investor there are plenty of companies out there you can passively invest with.

Landon Bleau · Answer

Fakal,

If you're looking for cashflow, I would look at partnering or finding a great property management company somewhere in the Midwest where cashflow is high.  You don't have to live where you invest as long as you're able to build a great team there.  You could house hack a duplex in a location that is desirable to you and not use the full $2M, then you would only have to manage 1 tennant and be able to keep housing expenses low, then invest the remainder of the money is a high cash flow market where someone else is managing the properties for you.  For instance in my market, there are SFH & duplexes all over that can cash flow $200+/month, and I know there are many other cities in the midwest that can easily achieve the same.

However, if you're looking for appreciation, I would stay away from the midwest and use BP's data tools to research an appreciating market that interests you.  Just have to consider what your end goal in RE is and work back from there.

Qualified for 2m loan what should I buy?

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