Best way to invest $250,000

[Jake Fugman]

Hey BiggerPockets! 

Im new to BP and soon to be working towards my first "major" move as an investor.  After selling my logistics business and 2 rental properties Im looking to leverage $200,000 - 300,000 cash the best way possible to achieve long term financial freedom.   Although I have the luxury of a small pool of capital I would prefer to start slow by managing as much of the process myself to save time and gain experience. 

Im leaning towards applying BRRRR method on a multifamily or a few 2-3 bedroom units that are in good areas to maximize cash flow (open to furnished rentals VRBO, AirBnb, etc).  Im also considering living in the first property that I rehab to gain direct experience in the project managing and/or finding a good GC. 

I am targeting Chicago and the surrounding areas for now but eventually open to less established markets.  Would love the portfolio to net $8-10K per month after 5 yrs and a few low risks transactions (BRRRR).

Does 10-15% cap rate exist on $750,000 - 1,000,000 multi unit buildings assuming I needed to put 20% down?  Or smarter to hope for 10%+ average cap rate on several smaller units?  

Any words of wisdom based on success (or failure) taking a similar route would be greatly appreciated!!

Jake

[Scott Skinger]

@Jake Fugman Welcome aboard! Also, from the Chicago area and happy to chat if you're interested.

I Just posted something similar on another thread, but I agree with @Lane Kawaoka, the best investment you can make right now is to slow down and educate yourself. There's a lot to learn and there is a lot of inventory on the market that just doesn't make sense. 

Cap rates for the type of buildings that you are describing in the Chicago area range anywhere from 4% (prime location in the city) to 7-8% (suburbs) to 9-10% (far suburbs) to 10%+ (south side or distressed). Many of the smaller mf buildings that are advertising higher cap rates are basing them off of BS numbers. I looked at one property that was advertised as a 10 cap and even doing the math on the numbers they gave me (which were still way low) put it at a 5 cap. This is so common on the smaller buildings.

I would say your first decision point should be how active do you want to be as a RE investor? You can make great returns as a LP in an apartment syndication deal. Maybe consider starting with a duplex/triplex house hack, learn from that and invest passively while you're learning.

Good Luck!