What’s Your Preferred Way To Invest $300k In RE?

Question

Hello Everyone,First and foremost, thank you in advance for taking the time to read/reply to this post. I’m very excited and extremely grateful for all responses to this question: “Lets say you have at least $300k or more to invest in RE, realistically how would you do it?” I myself tend to look at it primarily from the perspective of applying it as a down payment on a larger deal such as an apartment building with additional partner(s)/investor(s) perhaps. Conversely, I also consider focusing on multiple smaller MF deals and or SFH’s as well. I realize there are multiple avenues of approach here and everyone’s risk tolerance is different, I’m simply wondering if the most advantageous route would be to buy as big as possible (even if only on one deal) having an amount such as that ready to go or not? To date, I’ve purchased three SFH’s and sold two of them making a fairly healthy profit on each and now I can’t help but wonder about scaling up to bigger deals or stay the course.Thanks again and a great day to you all! Jason

Michael Bishop · Answer

@Jason Curtis, assuming you're talking strictly investing $300K into RE (not investing in general), I personally would explore syndicated deals. Several reasons from my perspective:1. Allows you to lean on the expertise of others2. Allows you to learn (about this space or other areas of interest) while you grow your money3. Allows you to crack in to the larger commercial space that you would likely have a hard time doing alone4. Shortens the learning curve. I.e. you don't have to know / be an expert in everything5. Is a heck of a lot more passive than buying a bunch of SFHs or managing a small multifamily yourself6. Strong returns without the headache of self management7. Would allow you to diversify greatly across asset classes, Sponsors and geographical locations. Say you invest all $300K into syndications at $50K a pop. As an example, you can have $100K in multifamily, $100K in self-storage and $100K in mobile home parks. That's 2 deals per asset class, each deal can be in a different market with a different Sponsor, spreading your risk greatly.

Jason Curtis · Answer

@Antonio Porta Thank you. I have been thinking along the same lines as I directly benefited from the last bubble by buying a foreclosed property for way under market value in the downturn. If I had been in a better financial position, I would have bought a lot more. Most if not all the markets I want to buy in are now overheated. In my opinion, it appears likely that they may very well be due for a correction at some point in the near future.

Antonio Porta · Answer

For what its worth, I heard a podcast from Morris Invest of Robert K, Rich Dad Poor Dad author and he and his team are sitting on the sidelines now as they did in 2005 as they felt a bubble was approaching and it happened it 2008. In this podcast, He mentioned he stopped investing in 2016 because he and his team believe another market correction to happen. In 2011 He bought up property for an extreme discount. While a great deal in any market trumps sitting on the sidelines any day, thats just a bit of knowledge that came from someone with over 1 billion in real estate assets.

Caleb Heimsoth · Answer

I’m going to assume 300k isn’t like all your portfolio money and you’ve got some in stocks and bonds etc elsewhere. If that’s the case I would go buy notes and skip rentals all together. Conversely if all you have is 300k I’d do 100k notes, 100k stockmarket and 100k rentals that are leveraged with 20-25 percent down

Jason Curtis · Answer

@Ian Ippolito Thank you for the insight on crowdfunding/syndication. I wouldn’t mind getting in on the bigger syndicated deals at all. Due diligence and diversification is my natural modus operandi and for good reason.

Michael Bishop · Answer

@Jason Curtis, if you type the @ sign and then start to type someones name (without a space), their name will pop up so that you can tag them and they will get an alert. Just a little forum trick that makes communication more effective.As @Ian Ippolito said, there are options out there for non-accredited individuals, just have to put in time looking and performing due diligence.

Ian Ippolito · Answer

@Jason Curtis, There are syndication/crowdfunding deals for nonaccredited investors as well. (Although they do tend to have higher fees, and there are maybe only 20 or 30 choose from versus thousands). The disadvantage versus owning directly is that you are not in control, and have to feel comfortable vetting a manager to run things for you. If you don't feel comfortable doing that it might not be for you. Also, you will pay some management fees. If you're fine with that, and you do a good job with your due diligence, you should be hiring someone that has years of experience (and probably more than you can ever hope to obtain yourself). Also, instead of putting all of your money into a single investment, you can diversify across geography, asset types, strategies and capital stack location to minimize your risk.

Alina Trigub · Answer

@Jason Curtis You've got a ton of great advise. What I'd add is you have to decide for yourself as to how active you'd like to be in the RE investing. How much time do you want to spend on it? Depending on the answer, you may either take a passive or active investor route! And let's say hypothetically you'd want to explore both to diversify, then I'd say start with the passive investor option first - decide whether you want to invest in notes, syndications or something else. Educate yourself on the topic and invest. Once that is set and done, switch to your active side and again educate yourself on the BRRR or any other strategy and then take action. As long as you do one thing at a time until it is fully automated, you should be good! If you have any other questions about either passive or active strategies, feel free to PM me directly.Best of luck!

Derek Janssen · Answer

It depends. Living in CA, I invest in other markets. $300k is 9-10 SFHs. Experts say to diversify in 3-5 markets. I would say 5 SFHs in one market and 5 in another. Make sure they cashflow and take it from there. I'm not a fan of taking on partners unless the exit strategy is clear. Any big investment takes awhile to turn the corner. If you have a partner who suddenly is going thru a divorce and needs to exit before you've turned the corner, it can be bad.

Jason Curtis · Answer

@Caleb Heimsoth Thank you sir. I didn’t consider buying notes prior to this post but will definitely explore that idea now.