Have $100k+ to Invest. REI or Buy a Business Now and REI later?

Question

Wife and I are at crossroads. Our long term plan is REI in order to provide for the family and our kid's (currently 2 yo.) future education. We are both 40, bring home about $160k and have approx. $100k liquid to invest. We own our home and the wife used to co-own a triplex in Philadelphia which we managed ourselves. We both work long hours and while she is content at her job, I am much less so and I find it very constricting in terms of available time for investing activities.

Our two options are to 1) purchase Real estate - perhaps a duplex or more and continue to work which would be a negative for me., or 2) purchase a business, more specifically a restaurant; I have a long experience in restaurants and hotels, in order to more than make up for our income. She would continue to work at her job and I would quit money and concentrate on the business. So, basically, I would buy myself a salary (income stream), albeit larger than what I make now, and we would then invest our savings in real estate with an eye to the future.

Does this sound right? The option 2, would allow me to stop wasting my time at a dead end job with no upside and a time/energy drain. Would appreciate your thoughts. I am especially looking forward to some help in figuring out if there is anyway for us to invest in multi unit properties in our area or within an acceptable range that would provide a decent cash flow stream that might make putting up with the job for a while longer  worth it.

Apologies for the long rambling but wanted to give a full picture. Thanks in advance.

Account Closed · Answer

@Ridvan Hoxha My recommendation would be to go the RE Route. The ability to leverage your 100k over multiple projects makes it more attractive for additional RE income and also long-term appreciation. While your renters pay down your mortgage you can take advance of tax benefits, appreciation and cash on cash returns.. building your net-worth. If you have a solid successful partner for the restaurant business I wouldn't count it out but I'm sure you're going to have to put in more time.

Hank Keller · Answer

@Ridvan Hoxha - Have you considered a Turnkey rental? My wife and I have used our IRA's to purchase 8 rentals from a company in Indianapolis which is a great market and have had great results over the past four years.

Joseph M. · Answer

@Ridvan Hoxha , a restaurant will be more active than owning a rental  of course, but the income should be greater.

Just wondering , have you already identified any potential restaurants for sale?

It sounds like you are leaning more towards the restaurant idea. Since you have experience in the industry that's a plus.

I guess you have to look at a worst case scenario, if things didn't work out with the restaurant for whatever reason could you still live off your wife's income at least for a while?

Another alternative , maybe it's just the company you work for , the company culture,etc  and perhaps switching jobs to a different company might make things better?

Is the $100,000 all your savings or just money you have set aside to invest? ..you don't have to answer that question of course but something to think about.

Best of luck

Drew Shirley · Answer

I don't know you so this is not a comment about you personally, but a startup restaurant is a highly risky undertaking. You're basically taking a leap of faith with all your money. Plenty of well-positioned restaurants with great food and great service have failed just because they didn't get enough traction before the promoters ran out of money.

If you buy multifamily real estate, however, you're buying an existing income stream. You should be able to make close to 10% cash on cash right out of the gate and another 8-10% in tax savings before you paint one door. Then you can add value strategically, cash out and double your money in 2-3 years. Then do it again.

John Warren · Answer

Hi @Ridvan Hoxha

I have always heard that the restaurant business can be extremely time consuming as well. In your experience, is it really possible to be "free" of a restaurant? I know the traditional advice would always be to start a business if you have a high likelihood of running it successfully.

If you go the REIA route, you may run into what a lot of folks are running into right now. You have money, and so does everyone else. This means the deals are few and far between, but the money is there. I don't know about your market, but where I invest (Berwyn, IL) the market is crazy hot for multifamily. There are still deals, but you have to be patient.

Ridvan Hoxha · Answer

Thank you all for the replies.

@John Warren, you are right about the REI market at the present time

@Marion Nicholson, that would be my first choice but but it seems the local market here in Philadelphia has "run away" from us. Buying a turn key business is simply my way of "getting" a better paying job for myself and look for REI opportunities as I would be a bit more flexible than now working for a corporation.

@Drew Shirley, I am only looking at existing turn key opportunities that I can add some value on. I totally agree with you on the new restaurant thing and I would not do it at this point in my life. It just seems so hard to find any good multi-unit deals in and around Philadelphia and I am a bit weary investing in far away places.

Account Closed, thanks for the suggestion. That would be my first choice but, correct me if I am wrong, since you know the local market here better than me, but it looks like it's pretty hard to find deals tjhat make sense with that kind of down payment. Feel free to reach out privately if you come across anything.

Account Closed · Answer

Yes you're right. Deals do some on the market that make sense but go very quickly! If you wanted to invest into C areas, it's possible but for each project you'd need most likely more than 10k down

Hank Keller · Answer

@Ridvan Hoxha -  $6k/month happy :-) Look me up when ready to discuss. I'd be happy to help and make connections.

Have $100k+ to Invest. REI or Buy a Business Now and REI later?

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