400k to invest in the next 4 years. What would you do?

[Ryan P.]

I'm a new member here. I'm a 35 year old litigation attorney in Miami with a high stress career. It seems as though I am fortunate enough to be in the position to invest about 100k per year for the next 4 years or so into RE. At that point, due to changes in the regulations of my state, I will not be able to make as much money, and my inventory of cases may dry up.

Outside of our primary residence (and a house I'm building in the Keys for retirement), I've done zero real estate deals. So please tell me what you all think of my plan.

It seems to me that rents are going to increase as I am reading that houses, while prices are leveling off, are still increasing in value much more than your average person's income. Additionally interest rates are allegedly about to increase, which will cause fewer people to be able to afford to buy housing. I think flipping might be on its way out at this time due to market cycle. Investors seem to be leaving the market.

So I'm thinking of acquiring income generating real estate though a buy and hold strategy in the South Florida (read, Tampa, Orlando, Miami, West Cost of FL) area.  I'd like to make a decent cap rate without being a slum lord if that is possible. I'd like to put 20-30% down and use financing to do the rest. I can buy like 6-7 $300,000 houses, 15-20 $100,000 houses, or somewhere in between. I can buy commercial residential properties like the 5-10 unit types, duplexes, triplexes, etc. Maybe it will be a schmattering.  I don't think flipping will last much longer so unless you all say otherwise so that is not really in play.

If my inventory stays where it is great, I'll keep hustling and making the big bucks. However It might not, so the plan is to in 4 years move down to the keys, give up the high stress life, start some low stress, low volume law practice (that I can practice from my boat while fishing a sailing), and use the modest income to live off of while using the extra passive income from the houses to buy more and more and more real estate, and eventually retire off of it.

So Florida, what type of units would you focus on? What location? Should I try conventional financing, portfolio financing, or should I pay cash for distressed properties or tax deed/foreclosure, fix them, rent then, and take out a HELOC to buy the next one to take advantage of leveraging? Should I go with stock instead?

[Jay Hinrichs]

@Ryan P.

  you want to amass doors if its real property you want to generate the cash flow.

You may want to look at investing in PERFORMING 1st position Notes in your area.. Hook up with a very long standing reputable HML in your market for each 100k you have you should be able to generate 12k a year in income without going into debt. And if you don't need the cash flow to live off of you just keep reinvesting in new notes.. I had many clients in my day that I brokered loans to that built up monster cash flow by simply reinvesting all their note income into new notes.. And they never had to borrow any money and were basically always within 12 months of being totally liquid.

That's one route.

Other route is to buy multi family with PROFESSIONAL management.. If your going the rental Land lording route you want as many doors as you can get... since its a cash flow long term.. SFR's are the hardest to run and manage as they are spread all over.

Commercial could be a good option as well, smaller well placed strip centers or even NNN type investments. Don't get tunnel vision on SFR's... Look at all your options.

AS well as picking a very good rehab contractor that you can do deals with.. This will in many instances bring you the greatest cash flow COC ... But has it risks as well.