Hello, I hope whoever you are wherever you’re at that you’re off to a great day!
I’d like to get some advice on what to do with proceeds from a sale, I am open to any and all opinions and I do respect and understand we all have different views. I’d like to include as much detail as possible so that you know where we’re at. We expect to clear $2 million dollars from the sale of some land we purchased a while back and paid off and now a government entity has offered to buy it for fair market value. The appraisal is just over $2 million. We expect this to happen within the next few months. I do feel nervous as we are not used to this amount of purchasing power and I need advice from all on what possibilities you see and more importantly what you (as an experienced investor) would do if you were in our position.
Our financial situation is okay, I do work a full time job but would like to do real estate and renovations full-time. We have worked hard to have a house where the mortgage is covered by renters and a few other rentals that make enough for us to survive if I quit my job but not enough where I would confidentially take on larger projects (like more BRRR SFH's/STR's) instead of my job. We live off of $2,000 a month right now as far as groceries and whatnot are concerned and we feel comfortable staying there and not inflating our lifestyle at all. Vehicles are paid off and we have no debt except mortgages that are paid for by tenants.
We have flipped a handful of houses and it’s work that I very much enjoy doing myself and with others. We have kids that are coming of age to help out and I would really like to get them involved in renovations to teach them the trades. My top priority is spending time with and teaching my kids even if that means taking a lot longer on a project rather than subbing it out.
The question is super vague but basically “What would you do with $2M if you were us?” I am about 30 years old and can see going full time renovating houses. I realize a growth portfolio would make sense and it’s tempting to leverage this into something a lot larger but after some contemplation I’m thinking a good and somewhat predictable (dare I say safe?) approach could be to 1031 exchange the $2M proceeds into a small multi-family property (like an 8 plex or several duplex) and pay for them in full. The idea would be that we have it all paid off and could then pull a sizable line of credit against it to use as kind of a personal hard money loan to buy a project with cash and renovate it and then refinance that project and repay that line of credit back. I’d hunt for the right deals and then jump on them. Not the quickest or most leveraged approach at all, however it seems like the least stressful order of operation to me that our family would actually enjoy. We’d have constant cash flow to cover the line of credit payments and live on as well as save from the income of whatever we buy with the $2M 1031. Maybe we’d eventually save enough to pay cash for deals and not need that line of credit but rather have it as an emergency fund.
I hope to hear your thoughts and outlook on the situation. I value everyone’s input and perspective. I’ll follow up on this periodically to answer any questions. Thank you so much for reading this!
