Have money & goals but no strategy - what would you do?

Question

I have recently been bit with the RE investing bug, after becoming disenchanted with stock market investing and my current career, so I am seeking passive cash flow opportunities.

I have been reading and listening to every podcast I can get my hands on to learn as much as I can about the best strategies. I feel like so many things sound interesting that I can't settle on the right strategy that applies to our specific situation, so am turning it over to the forum for some "what would you do" opinions:

Our situation:

Excluding money that we won't touch in retirement accounts and emergency savings reserves, we have access to a decent amount of capital which could potentially be utilized for RE investing, including:

$150k cash

$450k equity in primary residence ($500k balance @3.4% that will be paid off in 15 years)

$250k equity in SFH rental (our only current investment property that cash flows $300/mo) - $300k balance @3.6% that will be paid off in 25 years)

$500k in stocks/bonds in actively managed brokerage account

Also I am an accredited investor, if that opens up certain unique opportunities.

I am looking to generate passive cash flow income from RE investments of $10k/month within 5 years and $20k/mo within 10 years, and am looking for the lowest risk and most "hands off" strategies to achieve those goals, as I still work full time (for now).

I am currently living in the Seattle area which is way too overheated and I believe is approaching a peak, meaning local SFH investing is not very attractive to me due to the terrible cap rates / rent:value ratios. So other ideas I am exploring are out-of-state turnkey SFHs, participating in apartment syndicates, triplex/fourplex new constructions (also out of state), and I'm sure next week I will come up with other ideas.

Looking for your ideas - what would you do if you were in our situation? I recognize any opinion on an online forum should be taken with a grain of salt, but I view it like crowdsourced brainstorming.

Thanks in advance!

Ivan Barratt · Answer

@Henry K.150k - keep it in the bank. you need liquidity.450k - keep it in your home until you sell. HELOC is dangerous when the next recession hits.250k - sell this. 3600/year when everything goes right is a low return on equity. I would take the profit and invest in bigger deals; perhaps syndication.500k - in the market. put most of that into cash. get out of the market.not official advice. just what I would do.

James S. · Answer

Henry K. if you are interested in identifying good syndications, I would recommend not relying on an advisor. There are free resources that will help you learn how to evaluate deals and sponsors. You're already handing over control - don't allow another layer of indirection and opportunity for misalignment of interests.

Christian Wathne · Answer

To all those saying to become a HML; 150k at 12% doesn't get near 10k/moAssuming the money is actively being lent 75% of any given time at 12% you're really making closer to 9% or around $1100/moSelling the rental with 250k equity will probably net 220k (selling costs) then lending out 220k+150k 75% of any given time at 12% will come in around $2800/mo of income.... still nowhere close to the 10k/mo short term goalSo back to the original question; how to get to 10k/mo passive income in 5 years? With 370k capital to play with, 10k/mo means 33% annual return; there's no easy / hands off/ safe place to get that as far as I know. @Henry K., are you interested in selling your stocks/bonds to put that money towards real estate or can you count expected returns of your stocks/bonds towards your 10k/mo? That would make things much easier. ======================Assuming 10k / mo is the goal, and we can all probably agree that 12% CoC is doable with rentals, you need to have somewhere in the range of 1,000,000 invested into real estate rentals. Because you don't have that much capital you may want to look into the BRRRR force appreciation and to grow your portfolio with less cash outlay.

Jay Hinrichs · Answer

@Ivan Barratt laid it out for you.. careful on BP of others just trying to sell you what they have... subliminally of course. we are all here to do business.... however In my 3 plus decades of working with investors... I find many in your situation will gravitate to notes.. if you truly looking for passive.. and you can do that quite easily in your local market.. you can find a very good reputable LOCAL HML who will place your funds in Local fix and flips and other short term deals and make you probably 8 to 12% ConCash with limited risk. you get to drive by the asset you get to see if you like it.. etc.. and in WA you can legally lend your self without a license on these non owner occ commercial purpose deals.. so that could be fun for you as well.there are top flight syndicators in the US>. in my mind the syndicator is the prime driver you want experience .. the deal is almost secondary.. a great syndicator will keep you moving forward a poor operator can much up the best deal.so it looks like you have 500 to 750 to start.. don't be in a hurry.... but I like financial products for this type of cash.or I would look at buying a nice MHP or something that could have professional management.. look east side cascades for better cash flow .

Filipe Pereira · Answer

@Alex Lucille @Henry K., you guys aren't the first ones that I have seen struggle to make the numbers work...I just had a buyer reach out from Seattle, WA last week explaining s/he is looking to invest out of state because sitting on the sidelines waiting for something in their local market isn't "cutting the cheese" for them. Shoot me a message sometime, even if it's just to "talk shop" about the current market in Connecticut, or how I might be able to help you as an agent & property manager.

Alex Lucille · Answer

@Henry K. - sorry didn't see that your name didn't populate on the original one

Alex Lucille · Answer

@henry we should connect, I am in a similar situation and am working on figuring out a strategy. I live in woodinville and have a rental in northgate with quite a bit of equity, have been looking for buy and hold opportunities within a 1hr drive but have realized that that's not realistic.

Alex Shaughnessy · Answer

I agree w/ everything @Ivan Barratt has said

Larry Fried · Answer

@Henry K. As an accredited investor who wants hands off investments, I think syndication is likely your best bet. You still have to vet the syndicator and the deals like crazy. For lowering your risk, spreading out over a number of smaller investments of $25k - $50k or even less can do that. I have written an BP blog article about Three Key Routes for Passive Real Estate Investing that you might find helpful.

Diogo Marques · Answer

Henry K. I would invest with a syndicator if i were you. All the required connections and due diligence on deals is already done. Only capital is required.