How would you invest $500k cash if you had it?
Member since 2019 Ā· 27 posts Ā· 4 votes
How would you invest $500k, or how would you tell a newbie to invest $500k?
@Lauren Cooper first I would tell the newbie not to let it be known she is sitting on $500k if she is, so she does not become a target. Next, I would tell her to think long and hard about her goals since that is highly personal. Third I would tell her to get educated on the different options in RE so she can invest with knowledge and a clear conscience. Finally, based on her goals I would encourage her to research specific types of investing strategies that best align with her goals. I know what I would do but you need enough education and reflection about where you are and where you want to go to be able to answer this question for yourself š The best fishermen teach others how to fish for themselves. You can start by reading the book that @Brandon Turner and @Joshua D. co-wrote about getting started to help people in the beginning stages of their RE investing research. What I would do with $500k would more than likely be very different than what you would/should do.
@Lauren Cooper first I would tell the newbie not to let it be known she is sitting on $500k if she is, so she does not become a target. Next, I would tell her to think long and hard about her goals since that is highly personal. Third I would tell her to get educated on the different options in RE so she can invest with knowledge and a clear conscience. Finally, based on her goals I would encourage her to research specific types of investing strategies that best align with her goals. I know what I would do but you need enough education and reflection about where you are and where you want to go to be able to answer this question for yourself š The best fishermen teach others how to fish for themselves. You can start by reading the book that @Brandon Turner and @Joshua D. co-wrote about getting started to help people in the beginning stages of their RE investing research. What I would do with $500k would more than likely be very different than what you would/should do.
@Brian G. Gave a great answer. Start there.
Since you asked what we would do, and given that I've already done Brian's steps myself, I would:
Continue investing in cash flowing apartments and self storage properties. I invest in both asset classes now, both as a passive investor and a deal sponsor. Those funds would be dedicated to sponsoring more properties and passively investing. I prefer diversification in my passive investments, so my passive positions would be $50k-$100k.
This is only after I've:
The value of your network and education in real estate cannot be understated!
I'd tell them to take of their investor hat and spend a good long while thinking about what they want their life to look like...on a day to day basis. Do they enjoy what they do for a living? Do they want to continue doing that day in and day out? If so, find the best passive return possible and create some supplemental income. Are they looking to make more dramatic changes. Can they combine sweat equity with their investment to transform what their life looks like right away? Too often we assume the goal of investing is to "make money" forgetting that the money is just a vehicle to get us what we really want. Every investment decision should be made based on these larger objectives. We'd need much more insight into the OP's life, life goals, skills, strengths and weaknesses, investment objectives and risk tolerances before providing a real good answer to this questions. Just my two cents. All that said, I love self storage for how it fits into my life and achieves my investment objectives.
@Michael Wagner
In my case, I was a low wage worker, never went to college because my family was poor, so I went straight to work. I had problems getting promotions in my jobs. About a year ago I started working on reading books and listening to podcasts about self development. I started a side business and built a shopify store. It is not doing great. 6 months ago, I got an offer to sell my house to a developer (which I purposely bought in a developing area). In 1 month we will close on this deal and I will have $500k after paying off the mortgage. I hated my job so extremely that I quit as soon as I could, and am now living off my savings. I've always been really interested in real estate but never had the extra funds or credit score to pursue it. I will have both soon. I have been reading books about rral estate and investing for several months now, but theres so many options that I can't figure out what is the best first step for me.
@Lauren Cooper I would put 150k into a stock called CGC. I would then buy a 15 - 20 unit apartment complex using leverage with a community bank. Just me
How do you create the relationship where the community bank will trust you?
I'm reading the books now, and they say to ask questions in the forums and build relationships.
How would someone target me?
How am I going to get advice without asking?
I'm reading the books now, and they say to ask questions in the forums and build relationships.
How would someone target me?
How am I going to get advice without asking?
Iāve found in this business that you have to assume everyone will throw you under the bus if they can make a buck off you. Realtors, contractors, wholesalers, gurus, you name it. Iām not saying they all WILL. But some will. And if you just trust everyone it will happenāsooner rather than later.
So youāve got to get educated and make the smartest decisions you can based off that knowledge.
It sounds like you already made a smart decision buying your house. Congrats!
@Michael Wagner
In my case, I was a low wage worker, never went to college because my family was poor, so I went straight to work. I had problems getting promotions in my jobs. About a year ago I started working on reading books and listening to podcasts about self development. I started a side business and built a shopify store. It is not doing great. 6 months ago, I got an offer to sell my house to a developer (which I purposely bought in a developing area). In 1 month we will close on this deal and I will have $500k after paying off the mortgage. I hated my job so extremely that I quit as soon as I could, and am now living off my savings. I've always been really interested in real estate but never had the extra funds or credit score to pursue it. I will have both soon. I have been reading books about rral estate and investing for several months now, but theres so many options that I can't figure out what is the best first step for me.
By making this information public on a forum with over 1,320,000+ members:
1. You will start getting direct messages from people asking you to invest in their "AWESOME DEAL!"
2. You basically told everyone you're sitting on $500k. Hopefully you didn't use your real name or pic.
In my humble opinion, based on the information above, I would spend at LEAST 1 year networking, learning how to underwrite deals, and understanding EXACTLY what it's like to be a real estate investor.
Thanks!
It would be difficult to scam me, as I do my research before investing in anything.
A lot of the advice in the books is showing you how to go from nothing, to something. I think my situation is a bit different because I have something, but no experience using that something. They talk about starting with single family homes or duplexes and working your way up. Should I still start there or jump to apartments or storage units?
@Michael Wagner
In my case, I was a low wage worker, never went to college because my family was poor, so I went straight to work. I had problems getting promotions in my jobs. About a year ago I started working on reading books and listening to podcasts about self development. I started a side business and built a shopify store. It is not doing great. 6 months ago, I got an offer to sell my house to a developer (which I purposely bought in a developing area). In 1 month we will close on this deal and I will have $500k after paying off the mortgage. I hated my job so extremely that I quit as soon as I could, and am now living off my savings. I've always been really interested in real estate but never had the extra funds or credit score to pursue it. I will have both soon. I have been reading books about rral estate and investing for several months now, but theres so many options that I can't figure out what is the best first step for me.
By making this information public on a forum with over 1,320,000+ members:
1. You will start getting direct messages from people asking you to invest in their "AWESOME DEAL!"
2. You basically told everyone you're sitting on $500k. Hopefully you didn't use your real name or pic.
In my humble opinion, based on the information above, I would spend at LEAST 1 year networking, learning how to underwrite deals, and understanding EXACTLY what it's like to be a real estate investor.
How do you learn to underwrite deals? Would you make small deals? Where would you network?
@Lauren Cooper after reading your story, I would be patient. Lock that money up in a CD. They are actually paying quite well now. In the mean time build out your network and educate yourself on investing in general, not just real estate investment. One of my favorite books ever is the biography of Warren Buffett called āThe Snow Ball.ā Do not live off your savings. Find some type of flexible income through Uber or Upwork. Then when you are ready, invest a small chunk of that $500k into a small Multifamily deal to get your feet wet. That is IF you want to do real estate! Hope this helps!
@Lauren Cooper after reading your story, I would be patient. Lock that money up in a CD. They are actually paying quite well now. In the mean time build out your network and educate yourself on investing in general, not just real estate investment. One of my favorite books ever is the biography of Warren Buffett called āThe Snow Ball.ā Do not live off your savings. Find some type of flexible income through Uber or Upwork. Then when you are ready, invest a small chunk of that $500k into a small Multifamily deal to get your feet wet. That is IF you want to do real estate! Hope this helps!
It does help. How would you know you are ready? I've already made one "good deal". What if I got my real estate agent license? Would that be a good source of income on the side?
I'd tell them to take of their investor hat and spend a good long while thinking about what they want their life to look like...on a day to day basis. Do they enjoy what they do for a living? Do they want to continue doing that day in and day out? If so, find the best passive return possible and create some supplemental income. Are they looking to make more dramatic changes. Can they combine sweat equity with their investment to transform what their life looks like right away? Too often we assume the goal of investing is to "make money" forgetting that the money is just a vehicle to get us what we really want. Every investment decision should be made based on these larger objectives. We'd need much more insight into the OP's life, life goals, skills, strengths and weaknesses, investment objectives and risk tolerances before providing a real good answer to this questions. Just my two cents. All that said, I love self storage for how it fits into my life and achieves my investment objectives.
To go along with the excellent advice from Michael, you need to figure out your WHY and then build whatever you need to build to accomplish your goals and accommodate your WHY. With 500K and no experience I would definitely be more interested in partnering with someone with experience first or possibly being a private money lender and then follow the deal closely to not only watch your money but to learn what exactly they are doing with your loan to get closer to their goal.
I'd tell them to take of their investor hat and spend a good long while thinking about what they want their life to look like...on a day to day basis. Do they enjoy what they do for a living? Do they want to continue doing that day in and day out? If so, find the best passive return possible and create some supplemental income. Are they looking to make more dramatic changes. Can they combine sweat equity with their investment to transform what their life looks like right away? Too often we assume the goal of investing is to "make money" forgetting that the money is just a vehicle to get us what we really want. Every investment decision should be made based on these larger objectives. We'd need much more insight into the OP's life, life goals, skills, strengths and weaknesses, investment objectives and risk tolerances before providing a real good answer to this questions. Just my two cents. All that said, I love self storage for how it fits into my life and achieves my investment objectives.
To go along with the excellent advice from Michael, you need to figure out your WHY and then build whatever you need to build to accomplish your goals and accommodate your WHY. With 500K and no experience I would definitely be more interested in partnering with someone with experience first or possibly being a private money lender and then follow the deal closely to not only watch your money but to learn what exactly they are doing with your loan to get closer to their goal.
Are there any tax benefits to becoming a private money lender?
@Lauren Cooper good to hear you are actively researching. Anyone who has lots of cash can be a target of those who would seek to separate you from that cash for their own gain and without concern for what is best for you. My post was not at all intended to discourage networking, asking questions, etc. The challenge with your question is you are likely to get 10 different answers which could confuse you even more. However, if your question is more specific and tailored to your goals or what you are trying to accomplish then the answers will be more helpful to you. See you around the forums and welcome to BP š
Hi Lauren back to your question how would I would tell a newbie to invest $500K. I would tell them not to invest the money at this time. I going to assume that you still need to work and you know that $500K is not enough money to retire as of yet at your young age. I am going to also assume you like the real estate idea/business. So knowing how great real estate can be and how having capital can be a DISADVANTAGE at times I would get a job at a family run real estate company and learn the business of passive investing. (and by the way you get paid for it!) If I could not find a family owned estate company I would get a job at a property management company. When you are applying for the job just tell them you want to learn the business and you will work there for free for a month while you are in training. If someone come to our family owned real estate business and said that and I had a opening i would darn sure give that person some serious thought. After that learn the business at work, read the books, tapes, network, and ect. Over time ask the family if you can be a jr partner on one of there deals. (if one of my employees asked to be a jr partner I would do it no matter if they only had 5k to invest it is just the right thing to do!) Or if you are at a property management company you will end up seeing opportunity at some point being it a deal you can do yourself or partnering with someone.
Feel free to comment I usually try reply in the mornings.
Josh
@Lauren Cooper I will share with you MY personal goal and current strategy as an illustration which is not intended to tell you what you should do but in the spirit of trying to be helpful. My end goal is to invest in apartment syndications because Iām a believer in the asset class, you have arguably the most capable and experienced operators putting deals together and itās one of the most passive types of investing. I love what I do for work and have no intention of ever quitting, etc. su RE investing is simply my retirement vehicle. My challenge is I need a LOT of capital to do that, so my current strategy revolves around building capital. Therefore, Iām seeking to find/buy/rehab value add deals 1-4 units so I can create equity (ie capital that I can later use) out of thin air š I want to use some of that created equity down the road and sell some property (5-10 years) and roll that equity into larger deals possibly using a 1031 exchange. just like Monopoly, 4 green houses then 1 giant hotel š
Hi Lauren back to your question how would I would tell a newbie to invest $500K. I would tell them not to invest the money at this time. I going to assume that you still need to work and you know that $500K is not enough money to retire as of yet at your young age. I am going to also assume you like the real estate idea/business. So knowing how great real estate can be and how having capital can be a DISADVANTAGE at times I would get a job at a family run real estate company and learn the business of passive investing. (and by the way you get paid for it!) If I could not find a family owned estate company I would get a job at a property management company. When you are applying for the job just tell them you want to learn the business and you will work there for free for a month while you are in training. If someone come to our family owned real estate business and said that and I had a opening i would darn sure give that person some serious thought. After that learn the business at work, read the books, tapes, network, and ect. Over time ask the family if you can be a jr partner on one of there deals. (if one of my employees asked to be a jr partner I would do it no matter if they only had 5k to invest it is just the right thing to do!) Or if you are at a property management company you will end up seeing opportunity at some point being it a deal you can do yourself or partnering with someone.
Feel free to comment I usually try reply in the mornings.
Josh
One of my best friends is a real estate broker. I just asked her if she would consider me working with her, and (to my surprise) she said "OMG definitely yes!". So I now have a possible job thanks to you!
Lauren Cooper
Done correctly, you should be able to conservatively generate $50k - $75k per year in passive income with $500k invested in other peopleās real estate deals.
As others have said, educate and network.
Only invest with people you know, like and trust.
Diversify the $500k into several deals to generate separate income streams.
If this $500k will allow you to reach accredited investor status, you will be able to participate in larger multi-family syndication deals as a limited partner with solid operators. I would suggest finding an operator that executes the āinfinite returnsā model, meaning you have your original invested capital back (say $50k) in about 4 years and still remain as a limited equity partner in the deal. Read up on the āvelocity of moneyā concept. You can essentially be in (2) syndication deals at once with that same $50k, if done correctly.
You may also look into something like AHP Servicing (Google it). This might be a good home for earning 10% on $50k - $100k right away, while you educate and network further.
Excellent! I will look into these concepts. :-)
@Lauren Cooper I will share with you MY personal goal and current strategy as an illustration which is not intended to tell you what you should do but in the spirit of trying to be helpful. My end goal is to invest in apartment syndications because Iām a believer in the asset class, you have arguably the most capable and experienced operators putting deals together and itās one of the most passive types of investing. I love what I do for work and have no intention of ever quitting, etc. su RE investing is simply my retirement vehicle. My challenge is I need a LOT of capital to do that, so my current strategy revolves around building capital. Therefore, Iām seeking to find/buy/rehab value add deals 1-4 units so I can create equity (ie capital that I can later use) out of thin air š I want to use some of that created equity down the road and sell some property (5-10 years) and roll that equity into larger deals possibly using a 1031 exchange. just like Monopoly, 4 green houses then 1 giant hotel š
I have been looking at the BRRRR strategy. Can you use that concept then sell when the market is up to do the same thing? Are there any big downfalls to the BRRRR?
Good to hear! Just keep in mind that being a real estate broker is not investing. A person can be good at selling housing to people but still really have no idea about passive investing. While that being said you have to start somewhere just know there is a difference in the two and there is nothing wrong with being either one. Good luck to you and keep us posted on you journey.
I'd tell them to take of their investor hat and spend a good long while thinking about what they want their life to look like...on a day to day basis. Do they enjoy what they do for a living? Do they want to continue doing that day in and day out? If so, find the best passive return possible and create some supplemental income. Are they looking to make more dramatic changes. Can they combine sweat equity with their investment to transform what their life looks like right away? Too often we assume the goal of investing is to "make money" forgetting that the money is just a vehicle to get us what we really want. Every investment decision should be made based on these larger objectives. We'd need much more insight into the OP's life, life goals, skills, strengths and weaknesses, investment objectives and risk tolerances before providing a real good answer to this questions. Just my two cents. All that said, I love self storage for how it fits into my life and achieves my investment objectives.
To go along with the excellent advice from Michael, you need to figure out your WHY and then build whatever you need to build to accomplish your goals and accommodate your WHY. With 500K and no experience I would definitely be more interested in partnering with someone with experience first or possibly being a private money lender and then follow the deal closely to not only watch your money but to learn what exactly they are doing with your loan to get closer to their goal.
Are there any tax benefits to becoming a private money lender?
no
I'm reading the books now, and they say to ask questions in the forums and build relationships.
How would someone target me?
How am I going to get advice without asking?
Eric please share some in-site?
Thanks