Young, self-employed, huge cash reserves in SoCal.

[Jonathan Gordon]

Hello, I am kind of in a unique situation when it comes to investing. I already have an idea of what direction I should go and I am not sure if I will get help here at all but I just wanted to see if there is any advice that I havent even considered.

I am in my early twenties and I was previously self-employed with an online business. While I was only in business for two years I ended up hitting a jackpot and walking away from it with a considerable sum of capital (cash and assets). I am in my last semester of my undergrad in accounting and I will need to decide what the next step is pretty soon. I am very interested in real-estate because it is an income producing investment meaning I have the freedom to work or pursue personal goals and dreams. 

While it is a very fortunate situation to be in, I want to make the best of it and there are a few issues I have been considering

First is whether I should invest with the cash or get financing. While I have the cash, I have had trouble getting financing because I am young, self-employed, very little credit trying to get a million dollar mortgage. Unfortunately, it just does not look like I will be able to get a loan at this time. My current plan is to get a job in my field for a few years to establish income history while investing the cash in a diversified stock portfolio to boost my salaried income.

Second is the market I live in. I am living in Southern California which is basically the most expensive place to live in the nation other than maybe some parts of NY. Taxes are astronomical, Money is abundant here, NOI is lowest in the nation, and real estate deals here are purely made on the buy and on flip. Sometimes I wonder if I would be stunting my growth by investing locally even if I can afford it. I understand why it is so expensive and sought after but it is still difficult to swallow seeing that much cash go into on one purchase. Moving out of state is possible but I do not have another reason to move at this time other than "potential investing opportunities".

I know that there are so many other things I could go into but this is just a start. Like I mentioned before, I believe the wisest route is to get a "regular" job for a few years just so I can keep busy doing work I am comfortable and experienced with while building an income history and keeping an eye open for easy cash deals.

[Ari Bachrach]

I'll leave most of the questions to others, but I can help out with the finance aspect. How much money are you actually talking about? If it's over 1~2 million, then you have a lot of other options open to you beyond simple mortgages. First of all you should probably be looking for a financial adviser, and at the 1 million asset mark they're usually called wealth managers or private wealth managers. 

If you have assets, amongst the easiest and cheapest ways to borrow is to borrow against securities. Basically your brokerage account (which should be invested in low cost index funds - don't let them push high priced junk on you), can be pledged against a line of credit. Then if you want to buy something, you just write a check or wire money straight from your line of credit. Interest rates will vary depending on a lot of factors, but are usually comparable or better than even primary home mortgage rates. Because the credit is based on your assets and not your income, it actually won't matter if you have verifiable income or not. 

Also a final word of advice: you have assets. You worked hard to get them. Protect yourself. There's a vigorous debate on these forums about whether or not to get an LLC when you start investing. If you have assets then there's no question you need an LLC to limit your liability from lawsuits. Also it might be worth talking to a lawyer for an hour to make sure you're setting everything up in a manner that will limit your liability.