what is your strategy if you had $1M cash with good credit score?

Question

With limited capital, the recommendation is to put a lot of time and energy to find a good deal.

How about the opposite case where you have $1M cash, steady income, and high credit score?

Would you do things differently?  What would do you?

Ian Ippolito · Answer

Daniel,Like a lot of things in life, a person with more money tends to have more and higher quality options than someone who is cash poor.Once an investor has at least $1 million in investments or enough income (at least $200K for the last two years ifsingle/$300K for the last two years married) then they are considered an accredited investor. Accredited investors have access to much higher quality passive investing opportunities (syndication/crowdfunding deals) then non-accredited investors (much more experienced sponsors, much more skin in the game, lower fees, etc.).The advantage of these types of deals over direct investing, is that they require no effort on the part of the investor. (I.e. your money is working for you rather than you working for your money). If the investor chooses wisely, they can also access sponsors that have years more experience than they could ever obtain on their own. It also allows diversifying into a much wider range of asset classes, strategies and geography than a direct investor can.On the other hand, these investments require the investor to be able to vet a sponsor and hand over control to them (which isn't something everyone can do). Also, the appeal to many of direct investing is that a cash poor investor can put in sweat equity to increase the return. That isn't going to happen on these passive investments.To answer your question: in my opinion there is no one single best investment strategy for everyone. If you're an aggressive investor, the best choices for you are going to be very different than if you're a conservative investor. So it's important to first understand your own risk tolerance (which is based on your financial situation and your goals). Part of that is probably acknowledging that $1 million may be a lot of money or a little bit of money depending on where someone lives.Then it's important to understand the different real estate strategies (core, core plus, value-added, opportunistic) and their different risk return profiles, to come up with a balanced portfolio plan. Then it's a matter of vetting the operators and deals that meet those strategies.

Steven Foster Wilson · Answer

Become a LP in 5 syndication deals paying an average of 20% a year.

Retire with 200k/year and watch dancing with the stars.

Alina Trigub · Answer

@Daniel Han

As many people here pointed out, it all depends on 1) your experience and 2) your desire/bandwidth so that you could determine whether you will be active or passive RE investor.

Here's my response to a similar post recently:

1) Congrats on the success with your current business!

2) I'd refrain from advertising on social media (like BP) how much funds I have to invest!

3) Decide whether you want to be active or passive.https://www.biggerpockets.com/member-blogs/10850/84064-what-type-of-investor-to-be-when-i-grow-up-active-or-passiv4) Research various niches available within the option you pick in #3 above. Weigh in all the pros and cons for your personal case

5) Educate yourself on the niche you select.

6) Only after you complete step #5 above and fully understand what you're investing in, take action.

Remember, if you're good in making decent money in your food business, then consider sticking to it! Maybe it means that passive RE options are better for you, but you make that determination for yourself.

Need more help, feel free to reach out.

Ian Ippolito · Answer

Being a "sophisticated investor" can get an investor into a few 506b accredited offerings that they would normally not have access to because they are nonaccredited. But generally, most sponsors are not willing to take on the increased regulatory risk and cost of accepting "sophisticated investors". And generally the ones that do are not the ones that have top track records over multiple real estate cycles, the most skin in the game, etc. https://www.varnumlaw.com/news...If the OP wants the most passive investing options, they do need to be accredited. And even being accredited is not enough to access everything. It's even better to be a qualified client ($2.1 million in investments) and a qualified purchaser ($5 million in investments) which given an investor access to even more.

Caleb Heimsoth · Answer

@Daniel Han

Step 1:  use the BP search function to find the million other threads that ask this exact same question

Step 2:  Realize the BP search function isn’t the best and switch to google and repeat step 1.

Step 3:  realize this question is highly personal and depending on your personal goals, risk tolerances etc

Step 4:  don’t advertise on a public forum how much money you have

Step 5:  Profit.

Taylor L. · Answer

@Steven Wilson yes, I have. Most sponsors are targeting 15-17% IRRs right now in the syndication space. Some are beating those numbers in terms of performance, but they'll typically project and target 15-17%. If I were in @Daniel Han's position, I would definitely make LP investments in syndications, keep working, and let that investment grow until I had at least $2MM in equity, before leaving the day job.

Steven Foster Wilson · Answer

@Taylor L. to be honest I have 0 experience when it comes to being an LP and what to expect. Have you ever dabbled in being an LP on a deal? What do you expect when you are an LP?

Taylor L. · Answer

@Steven Wilson I like your plan but I wouldn't bank on 20% a year. I'd plan to earn less than that, to be conservative. I'd rather watch Penn & Teller's Fool Us than DWTS, but that's just me. To each their own!

Daniel Han · Answer

It seems like the theme is when you don't have capital, you put your time and do the work. But if you have capital, then let the money do the work.

Is there a place somewhere in the middle?

Say you identify a city that's growing, find a good school district, and buy 10 properties ($250k each) with $100k down payment for each property. With the cash flow, pay off outstanding mortage.  Is that a bad strategy?

John Fortes · Answer

Congrats on achieving that status, that's really something to be proud of. Hope it didn't come at the expense of a loss and received through inheritance.

As some have stated, connect with some seasoned investors and either invest as an LP (limited partner) in many deals to make that capital work for you.

You can also consider (if given the opportunity and your network) to be on the GP (general partner) side and sign on as a debt partner as a key principal. This option would allow you to get into many deals but you would have to consider leaving your capital as a liquid to show liquidity and net worth. Pending on your position in the GP, you want to make sure your not eating into that capital along the way when you could've easily invested it and started turning it over multiple times over. Now, some or most experienced GP's will consider you throwing some capital in on the LP side to invest it alongside the LP. So this may be something worth considering if you have the network to be able to achieve this process.

Otherwise, I know many want the goal to be on the active (GP) side of things. Just remember, many GP's started out as a limited partner and progressed on over to that GP side.

Nothing wrong with being a LP and letting that be your full time job (which would be great if you really think about it) while you go do things that you truly want to pursue.

Happy investing!

what is your strategy if you had $1M cash with good credit score?

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