If you had a million in cash how would you invest it?

Question

Hi everyone, I’m 26 and I’ve been investing in commercial real estate and retail businesses for the last 5-6 years. I got into my field through my family, specifically my dad. Over the last 30 years my dad has accumulated a net worth of somewhere around 20-40 million by investing in gas station properties, operating the business, adding value by building cash flow, and refinancing / sell to pull equity out, and repeat

he helped me get started in the business by helping buy my first gas station property and businesses in 2018. It was a brilliant deal and turned out better than either of us expected. He purchased the property in cash for $700k. I began to operated the business after a further investment of $200k for inventory and equipment updates.. My dad was able to refinance the property within a few months of purchasing the property and pulled out $600k, then negotiated a deal with fuel brand to brand the site which was unbranded at the time. They gave him $350k cash to brand the site. He got all his money out within a year and was able to get me my first business and property.

Fast forward 5 - 6 years and now this property will sell for $2.5-3 million on the open market.

I have also accumulated $1 million + in cash thanks the cash flow from this business and have built up equity of about $3 million in my various properties. I have an income of about $50k/month.

The reason I provided all this detail is so I can ask how you would invest moving forward if you were in my position? I am looking for advice because I want to move away from the gas station industry as I do not believe in its longevity because times have changed with electric vehicle sales rapidly increasing with no signs of slowing. I would love to hear others’ experiences in hopes of inspiration and ideas for my next venture.

If you took the time to read this and reply I really appreciate your time and help!

Zachary Ware · Answer

Why are you looking to put the money into properties instead of scaling the business you are currently running? To me, it sounds like you are making a great return in your current space.

Scott E. · Answer

What an incredible story. Thanks for sharing all of that detail. Exciting and inspirational. Congrats on your success.

You've come to BP because I'm guessing you want to park some of that money in real estate, which I think is a good plan. The only downside is you are not going to turn $700k into $3mm in 5 years by investing in real estate (unless you do a TON of value add, and have a little bit of luck)

If I were in your shoes I'd probably put that $1mm to work in a small value add multifamily deal to get your feet wet, then I'd use the remaining cash to repeat the process that you just went though.

Your dad has passed on some very valuable wisdom to you. If your heart is in it, it's a good plan to stay in the gas station business.

Ryan Robbins · Answer

If you're looking to get out of the business I would allocate ~10% into public market equities with 10x potential (think Marijuana companies, Sports-betting, AI, and bitcoin miners). I'd buy a cold storage wallet and accumulate 2 BTC, for sub $100k. Not shilling crypto, but highly recommend reading as much RELIABLE and informative information on BTC specifically.

-I'd dump 1/4 of the remaining $800k into dividend paying growth stocks to continually generate passive income.

-1/4 into huge "growth" companies/funds (think Apple, Amazon, Google, QQQ, etc). They won't be going anywhere anytime soon.

- I would have the remaining $400k on hand for multi-family deal(s).

Essentially you'll end up with $200k that can turn into $1M+, $200k that will be protected and pay you for life, $200k that will grow and provide stability & some income, and $400k that will give you time to wait for the "perfect" deal and pay you for life. I do NOT have investment properties, but have achieved 100%+ returns in the public markets for the last few years following a similar (yet smaller) strategy.

Bonnie Griffin Kaake · Answer

@Harris Khan I forgot to mention that you may want to do some research on how you might be able to take advantage of replacing some gas stations with electric charging stations. Just a thought that would need research and planning.

Allan C. · Answer

@Harris Khan you’re smart for thinking about exiting your current business, especially with all the regs coming down in PNW.

While it’s not your accountability yet, the bigger question you should ask yourself/dad is what he plans to do with his large portfolio. Looks like 30x more exposure in a declining business… which one day may be part of your inheritance. Remediation obligations are a significant, and not the bag you want to be left holding.

I suggest figuring out the overall family portfolio picture first and then that will let you know how much capital you’re working with. Your decisions will be very different if you’re deploying 7 figures vs 8 figures.

Harris Khan · Answer

Hi Zachary,

I would love to keep scaling the current business model as the one I described in that deal. The only problem is that I worry about the longevity of the gas station business. I believe these properties are being valued at their peaks right now, and will only go down in value as electric vehicles become more prominent. Over the next 5-10 years I believe the sales of electric vehicles will negatively impact the cash flows of these gas station properties, resulting in loss of value.

I think it is smart to sell or refinance when the property is at its peak, and reinvest into larger projects where the equity being built is on a larger amount. Problem in this case is refinancing feels risky due to rates and my expectation that cash flows with go down in the coming years. This leads me to think I should cash out of these properties and invest elsewhere.

Thoughts on this?

Harris Khan · Answer

Thanks for the response Scott. I appreciate the insight. I agree that making a return like the one I experienced with the deal I talked about is very rare and unlikely. Need excellent timing and luck to do something like that. I have begun to invest commercial properties locally. I am working on leasing out a vacant retail property, first time doing so, so we will see how it goes.

I have been interested in multifamily deals, but have never done value add work for multifamily and residential. I have been having a hard time analyzing what actually could be a good value add when it comes to residential as opposed to commercial.

Ideally, I would like to invest in value add commercial properties. Primarily retail, office, specialty uses. I was hoping to find inspiration on reliable owner operator businesses besides gas stations or c stores. My heart is definitely in it, I understand the gas station business well so it is easy for me to operate, but I worry about the longevity when it comes to gas stations. I believe gas station properties are being valued at their peak right now, and with the rise of electric vehicles surpassing 5% of all vehicles sold in the united states, the values will drop significantly over the next 5-10 years.

Which is why I am looking for inspiration and ideas to operate a different type of business. A type of business I can expand the way my family has done with gas stations. A business which I can operate in one of my vacant commercial spaces to build up cash flow, pay rent to my own property, and add value on the real estate end while making cash flow from the business end....

Harris Khan · Answer

Yeah I was interested in flipping residential properties, but in my market they are just to expensive. Portland market needs a correction to make flipping houses worth it from what I have seen. I have been interested in getting into cheaper markets but get nervous when it comes to investing in an area I have never been nor do I know very well...

Kerry Noble Jr · Answer

yeap if I had a million right now.....

I would find a vetted flipper/GC and wholesaler in a smaller market like mine where the purchase price is under 150K and they have the cheaper first time starter homes that are still consistently selling. I would dedicate like 200K to that.

I would dedicate another 200K to acquiring creative deals....subtos and getting preforeclosures etc....again in a cheaper market that you can stretch it like mine.....so id dedicate 400 or 500K to that.....and secure the other 500...600K as reserves....

Kerry Noble Jr · Answer

Understood.....Let me know if I can add any value on my end

If you had a million in cash how would you invest it?

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