200k, can it generate 20k yearly ?

[Mario V.]

Hi everybody.

For the last few weeks I have been trying to read up as much as possible on what I want to do, and the most encouraging and interesting google results are always from this forum.

My dilemma comes from some money coming to me within the next few months. Work sometimes pays off in interesting ways.

So until recently I never had a reason to think outside my usual comfortable box and common retirement plans.

I've spent some time reading up here but as someone who has a different lifestyle from the incredibly knowledgeable people in this forum, I never looked in this direction of life and things still don't feel very clear to me and was hoping for some insight, confirmations, reassurances, tips, warnings... anything that makes potentially throwing large (for me) amounts of money at something feel less terrible.

Here's my situation: 

-I'm in Ontario and while most of what I read here seems to be US related, I imagine general wisdom will be just as useful either way.

-I'm turning 40 next month! (not sure why I would put an exclamation mark on that).

-I'll have something over 200k (CAD) sometime within the next 1-3 months.

-Bought a small house here last year, paying mortgage.

-I do always keep enough cash around to survive for up to 6 months without changing my lifestyle, so whatever my needs are I should be fine for a while, plus I have other small investments and such that I'd rather not touch.

-I'm Spanish, been working here as an artist for a studio for years and considering going back home soon, either permanently or for a few years or splitting time between Canada and Spain, from where I could still work from home for the same Studio here.

My initial plan was to use the 200k to buy a property in Spain that I could use when I'm there, and use a Property management company to rent it out to tourists (which seems pretty popular these days) when I'm here.

I haven't completely axed that idea but the more I read on the topic, coupled with the CAD to EUR rates and the fact that if I decide to stay in Spain for a longer period of time there would be 0 cash flow, the more it sounds like a rather bad investment, for what I want anyway.

So plan B, which is currently plan A, would be to buy some property here in Canada that I just rent out, regardless of where I am and either have my savvy best friend look over it/them (hope she won't read this before I ask her if it comes to it) or have a property management company do it.

In a perfect world I would use the 200k to generate around 20k each year, which is all I would need to live comfortably in Spain if I wasn't able to work at all... which is the very worst case scenario I like to plan for. While I'm not a fan of it, there's always contract work for me I can do from home if things should ever get tight (and I'd rather not move again to yet another country to be on site) so I should be fine either way.

My concern is that I don't know at all if 20k net is realistic, until now I never thought much about passive cash flow at all. I've found a lot of very helpful reading material here but simple numbers that make sense for a layman in this area seem hard to come by.

I'd be interested in knowing if it's a realistic goal, or what it would take to get there, having some 200k as a starting point.

I realize that the type, quality and location of properties play a role, and that issues in any property would always add extra costs... and I imagine that some issues can be rather expensive, too... for which I would use an existing pool of around 30-80k that is separate from the 200k.
As long as I do some work I don't see a problem with always having the ability to maintain or even expand that emergency pool, if it seemed necessary.

I think that's all, any advice would be welcome

Thanks.

[Wendell De Guzman]

As a lender myself and a full time real estate investor, I totally agree with @Jon Holdman  that LENDING, done right provides a good return on your money and it's more passive than investing in real estate (i.e., being a landlord). 10% return on your money is very doable - I make A LOT higher return than that but I do it actively.

I agree with @Shawn Holsapple 's suggestion - start small with an experienced investor. Don't invest your entire $200K. Even better, work with someone (if you decide to work with someone here in the US) who will put some skin in the game. As a lender, I always require skin in the game - 20% in most cases and 10% for experienced investors. In this way, if the deal goes sour, both you and the principal lose money together. So the principal will do everything he can for the deal to succeed.

As far as the area, I agree with @Engelo Rumora  - I like Ohio as well. Getting 10% cash-on-cash return is easy. Property prices are CHEAP and the cashflow is GREAT. There are good and bad parts of course so do your due diligence. I like Cincinnati, Columbus, Cleveland and surrounding suburbs. But my long term wealth building is FLORIDA - that's where the retirees are moving. I am getting good cash-on-cash return AND long term appreciation as well.

Whatever you decide - do your due diligence. Don't make the mistakes I've made - I revealed them in Biggerpockets.com/show65.