Beginner with Large Capital Access ($10M)

[Scott Eadie]

Good Morning,

I  have reached out to a wonderful investors real estate agent and have read the book " The Millionaire Real Estate Investor " which has given me a good introduction including Mindset, Charts, an Understanding of Generalized Topics and so much more. However, this book talks about getting a margin of $20,000 to $30,000 off a property off rip and from what my understanding is, the current housing market wont allow for that I will lose that deal most times. Furthermore, I don't know in what direction I should go for decent liquidity as well as profit margin. For instance, an apartment complex would provide good cashflow however, it would be quite difficult to sell in a timely manner if I needed the money. Single family would be easy to sell providing its kept in good living condition but isn't nearly as lucrative as an apartment complex. Then I begin to think multifamily homes and I am unsure of  how well they sell either. Do they sell decently well enough to where if I needed the money for healthcare reasons it wouldn't be a long time of me trying to sell it? Let me know what category you think that I should take a look at! I thank you for your time!

Thanks

-Scott Eadie

[Scott Trench]

Scott, 

A couple of things here: 

1) If this is true, and you will be getting $10M, then you should be cautious - alerting people to an amount of money this large can be dangerous, and you will get advice looking to separate that money from you from very hungry people, who will come off as very polished, but who can really do damage to your wealth.

2) If you are coming into $10M all at once, then depending on the source, you will pay taxes on this. If ordinary income, in NC that will be a tax rate of about 43% between federal and state taxes. About 25% if capital gains. So, your after tax proceeds will be $5.5M to $7.5M. 

3) You must form a hypothesis about what good looks like for this portfolio, on your own. You should absolutely get advice from many directions, but at the end of the day, you need to make the decision. Many financial planners and wealth advisors are going to be super hungry to get you to hand over $5M in investments to them to manage. They have a powerful incentive - $50-$100K per year in fees on a 1-2% AUM fee is enough to make them really pressure you into making a decision immediately in working with them. 

Definitely choose "Fee-only" financial advisors (who have NO AUM incentive!!!) as part of this process. Even if they charge you a few hundred or $1-$2K for a initial financial plan. 

4) On a $5.5M portfolio, something like this would be very appealing to me personally, as a thought starter: 

- $1.25M home, car, and "toys", paid off

- 250K in cash

- $2M in stocks

- $2M in paid off or lightly levered real estate

This is just me, and I'd personally view the name of the game as wealth preservation and maximizing enjoyment of life with this level of wealth, all liquid, all at once. Portfolio should spit out $160K in tax advantaged cash flow per year, easily, and with a paid off home, that will go very far. Presuming RE is important to you, because you are on BP, but know that you will need to devote some serious time to learning the ropes.