What would you do with $500k?

[Christopher Dowling]

I came to BP to learn how to buy multifamily property at a discount to either fix and flip (a la Nickerson) or hold for cash flow.
Obviously, BP is a vast, deep resource of knowledge and I have since been introduced to quite a few ways to allocate my capital. I would like to choose one avenue, learn as much as I can, and specialize in it over the mid- to long-term. Which leads me to my question: if you had $500k that you wanted to grow into, say, $2m as quickly as possible what would you do with it?
Some opportunities I am exploring:
Standard residential, self-managed
Commercial multifamily
Mobile home parks
Commercial (retail, etc)
Land and farm
SFR notes, NPN or otherwise
Commercial notes
Tax lein
Other?
My wife and I have excellent credit and look to use leverage to maximize our returns.

Thanks for your help.

[Vikram C.]

Jeffrey, I actually consider a rental much riskier than funding people who do short-term deals. Here's how I look at it:

1. If someone is an expert on both, then neither is risky because the expert will account for the various factors that make his business a good investment. And short-term deals are not exposed to macro-economic risks, which are one of the big risks facing the country right now.

2. The problem comes when you are not an expert and are learning the ropes. I think it is much easier for someone who is new to identify an expert and fund him, than for the new person himself to become an expert at something. For example, if you wish to fund someone who flips houses, all you need to do is look at their track record. Pretty much all the data that you need should be easily available through public records and you can determine if the investee is a good risk or not.

3. When you are funding someone else, you are typically funding less than 100% of the investment in the property, and you will typically have priority in repayment. So if the rehabber is buying something for 70% of ARV, and you fund only 70% of that, you need the property value to decline by 50% or be wrong by 50% in your estimate in order to lose money.

Of course it is possible for the new investor to make a mistake in his choice of investee. But if you cannot figure out something easy like that, then you are unlikely to be much better at figuring out how to be a good buy-and-hold investor.

Finally, we also need to consider the investor's goals. If your goal is to convert $500K into $2MM, you can do that through a JV with an expert rehabber within a couple of years. It will take a lot longer than that to build that much wealth through a buy-and-hold strategy unless you have exceptional skills. And if you make a mistake with your initial investments, you will not have time to extricate yourself from it and move on to the next opportunity.