Best use of $3M in starting capital

[Lucas Bonasio]

A family member has decided to sell his business overseas and invest all his capital in real estate in the US. He is bringing $3M with him.

He would like to buy properties cash and rent them out. Each property he wants to buy would cost about $140K and will give him $850 NET cash flow per month.

In an effort to get the most "bang for the buck" I would suggest him to, instead of paying cash for, let's say, 20 houses, put a 25% down payment and finance the remaining, allowing those same $3M to get him about 85 of those $140K properties, which would now generate a $350 positive cash flow (after servicing the mortgages).

The only question here is........

Is getting 85 mortgages something even remotely possible to achieve? How would you guys go about using those $3M in 70% LTV real estate deals?

[Jon Holdman]

So, rents are $1700 a month?  Or is that net number based only on taxes and insurance?  If he seriously wants to own 85 properties he will:

1) be using a PM.  I'm in favor of self management, but one person cannot manage 85 properties without working 80-100 hours a week.

2) be doing one or more evictions at all times.

3) be dealing with at least one psycho tenant that is wrecking the place at all times.

4) be replacing a roof at all times. Roofs last, what, 20 years?  85 properties means four roofs a year.  And appliances, sewer lines, furnaces, etc.

Assuming those numbers are correct he's making 7% on his money.  With kind of cash and that fairly modest return expectation, triple net properties would be an option.  

Personally I like hard money lending.  Lower effort and should be able to get double digit returns.  But you fore go the potential of appreciation.