What would you do with the money?

Buying & Selling Real Estate
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What would you do with the money?

Mike Lynch
Shallotte, NC · Member since 2013 · 130 posts · 16 votes

If tomorrow you suddenly had around $300,000 cash, would you:

Try to purchase several $50,000 homes and rent them out?

Purchase a couple $100,000 homes and rent them?

Buy fix and flips and rentals using the banks money?

I have even thought about trying to create a huge website like VRBO or Homeaway, with a great web designer but have no idea if that would be a disaster, and I like to play it safe.

I have thought about starting some sort of Elder Care company? A friend of mine started a small Pawn Shop with $150,000 nine years ago and now has 5 of them in Virginia, worth millions, but that's a ton of work, and being robbed or shot is very possible. My friend always has two loaded pistols on him 24/7 and was robbed at gunpoint several years ago.

I know more about homes than anything else, since I have worked on them for 30 years.

At present, I have read around 15 real estate books, some purchased from Authors on this site, and have watched dozens of real estate videos online. Everyone claims to have the best idea, and the more you learn, the more confusing it gets.......Information Overload.

My goal is to stop being a plumber, as it is killing my back and bones, as soon as possible. I feel like a 48 year old Pro Wrestler that has been beaten to a pulp when I wake up in the mornings, from too many years or jack hammering slab homes to repair water leaks, hauling water heaters, toilets, and bathtubs up stairs, and digging ditches. I really need to slow down on the heavy duty 40 to 50 hours a week labor, and get out of this mess as fast as possible.

I know, I know, more information overload with my questions, but I would still like to hear more and try to make a decision and take my first step soon.

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Charlie Fitzgerald
Lender · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
9y

I would donate 10% to my favorite charity/church.

I would pay off any personal debt that I had

I would add to my emergency fund to have a minimum of 8-10 months reserves 

The remainder would then give me my foundation for determining which direction to invest and I would prepare a shortlist of my Top 3 prospective investments and then research each of them and their attributes and pick the one (s) that meet my defined goals the best.

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  • Charlie Fitzgerald
    Lender · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
    9y

    I would donate 10% to my favorite charity/church.

    I would pay off any personal debt that I had

    I would add to my emergency fund to have a minimum of 8-10 months reserves 

    The remainder would then give me my foundation for determining which direction to invest and I would prepare a shortlist of my Top 3 prospective investments and then research each of them and their attributes and pick the one (s) that meet my defined goals the best.

    12Reply
  • Account Closed
    Developer · Austin, TX · Member since 2016 · 108 posts · 23 votes
    9y

    @Mike Lynch Hey Mike, if you want to look at investment opportunities besides real estate (Like your buddy's pawn shop) check out https://www.thefastlaneforum.com/community/

    It's a forum full of people like this one, but dedicated to investment, business, or hustle opportunities.

    For instance, have you considered hiring a plumber to work for you? You could build a plumbing business and soon phase out of the physical work. That way you can leverage what you know.

    I just read this article about how a guy helped a plumber do that https://www.thefastlaneforum.com/community/threads...

    Of course, if I had 300,000 I'd put it in real estate. 

    Keep us updated on what you decide!

    0Reply
  • Mike Lynch
    OP
    Shallotte, NC · Member since 2013 · 130 posts · 16 votes
    9y

    Thanks Guys!

    I have hired plumbers and plumbers helpers over the years, but most didn't work out or tried to steal customers and equipment. They are always trying to get away with something. 

    0Reply
  • Nicole Graves
    Real Estate Investor · Richmond, VA · Member since 2016 · 133 posts · 31 votes
    9y

    @Mike Lynch  I wish you well in making your decision. I would definitely invest and purchase probably a buy and hold with a good amount for reserve, and then use the rest of the money for fix and flips.  

    1Reply
  • Kevin Siedlecki
    Investor · Madison, CT · Member since 2014 · 710 posts · 458 votes
    9y

    @Mike Lynch

    First of all, listen to @Charlie Fitzgerald. 

    Once you've done that, consider a couple options you did not in your initial post:

    Buy several $200,000-$300,000 properties to hold as rentals using conventional residential financing. That allows you to get some passive cash flow and build long-term wealth.

    Partner with someone with experience, and buy one large commercial building, like an apartment complex, again to hold, using commercial financing. Same benefits as the previous strategy, but having a partner with experience and all your units under one roof can simplify the process a little.

    I would definitely go in one of those directions. Good luck!

    @Mike Lynch

    4Reply
  • David Thompson
    Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes
    9y

    Hi Mike,

    Do what you are passionate about....period....end of story !!! You've read a ton of REI books so going to assume you have or have a growing passion here. Don't do pawn shops or any business IMO for money only, as you will soon be working again when the best do what they do because they love it and it's not work. Case in point, in the corporate world I left, unless I "needed" to do something, I was not willing to work nights and weekends towards the end of my career to be the best because at the end of the day, it was a job and not a passion anymore. Now, I'm on BP and thinking about my REI business a ton. My wife tells me I never saw you work so hard and I told her, you know, that's the difference....I don't feel I'm working when I'm on BP contributing to others and learning from others. When I spend time reading or preparing for my coach's session, or meeting others or driving to MF meetups groups or meeting w/investors, its all fun for me. The passion fuels energy I didn't think I had, suddenly I'm achieving success and thinking about bigger goals w/my coach that I never thought was even possible and results don't have to be 5-10 yrs out, it can happen in less than 12 mos.

    So, what resonates w/you ?  I get information overload but seriously, step back and look at some of those niches that you've read about and think what are the pros and cons of each strategy.  Also, assess your skills, temperament, time and money that you can contribute to the one that you think matches what that niche calls for.  Ex.  have no time, ok, probably wholesaling and flipping is out unless that is what resonates and you are willing to really go after it, you'd have to get creative w/your time.  Hence, more passive buy n hold strategies may work better if you are willing to work at your job a bit longer.  If you are looking to leave your job which sounds like (yes), then if the end game is cash flow, it should be a business endeavor that creates enough cash flow and that cash flow ultimately should be in or go towards passive ownership. I'd take a hard look at some of these niches because of concepts around scale and higher cash flow per unit concepts that can me managed / outsourced to experts and you can generate solid cash flow:  large MF apartments, mobile home parks, storage facilities, and student housing. 

    5Reply
  • Mike Lynch
    OP
    Shallotte, NC · Member since 2013 · 130 posts · 16 votes
    9y

    Thanks!

    I really appreciate all of your great info.

    Yep, I am looking for fast cash flow or as fast as possible, in order to get out of the job that I have now. I do not mind fix and flips. As I get tired during the day, I can take breaks, and stop working when I am worn out....Right now, when the phone rings people have emergency calls that need to be done "right now" around the clock and it is very hard to say no to people. Once you tell them no, you've lost that customer for good.

    0Reply
  • Rocky V.
    Rental Property Investor · Arlington, TX · Member since 2012 · 788 posts · 640 votes
    9y

    @Mike Lynch

    You are sitting on a Gold Mine. Plumbing is what you know so restructure your business so your are working on it and not in it. If for some reason you just want out then I would focus on SFH rentals and lower end flips. This has worked for me and I'm sure would work for you.

    FYI - My father has owned a plumbing company for over 37 years and this is what got me started in the rehab field. 

    0Reply
  • Brian Mathews
    Contractor · Round Rock, TX · Member since 2013 · 767 posts · 389 votes
    9y

    I'm an hvac contractor, we are about the same age, so I feel your pain -- literally.   First thing I'd do is put $100K into a money market fund .  I personally use Ally.   The interest it pays is better than a bank but nothing to brag about    It keeps me liquid in case of emergencies.   I'd then think about re-structuring your business to something more specialized, such as leak detection as an example   I'm not really sure what specialties there are in plumbing   Find yourself a good guy to work for you.  I might look at doing a flip, but use cash rather than borrow.   See if it's something you want to do, then go from there.  My goals for next year are to go after higher $$$ work.   Leave the lower margin, headache stuff behind gradually    I'm hiring a business coach to help me get over the hurdle of growth so I don't have to run so many calls   I actually enjoy them, but would rather pick and choose when I go vs employees go.    A company I've looked at do plumbing coaching as well    If you're interested in their contact info, PM me.   

    0Reply
  • Mike Lynch
    OP
    Shallotte, NC · Member since 2013 · 130 posts · 16 votes
    9y

    Thanks,

    I do leak detection pretty much every day, but it requires a lot of probing, digging, tearing out walls, and I know way too much about how to operate a jackhammer. More than I ever wanted to know........It's rough!

    The main problem today with plumbing as opposed to 10 years ago is the need to have it right now, problem. People used to be willing to wait for a few days or week to have their new hot tub, dishwasher, disposal, washing machine, new sink, etc. installed.............Now, since you can send an email in one second, people do not want to wait more than 4 hours to get a plumber to their home, and I'm not even joking...........When people call now, they expect you to ask "What time do you want me there TODAY".

    A dentist can't repair every person's teeth in town on the same day. They have them backed up for days or weeks. Same with roofer, car mechanic, carpet installer, painter, etc. This is what has really burned me out completely. Everyone has the "I must have it today" mentality. It causes a ton of stress on me and loss of customers. "If you can't install my hot tub today, forget it"........ Like I said, 10 years ago this did not happen. People waited for you to get to them. High speed internet, ebay, Amazon, and easy overnight shipping has changed the way that people think about home services now. They expect you to act like an ambulance driver and race to install a dishwasher, so they will call 27 plumbers in a row until one can come before noon that same day. On most days I want to run over and crunch my cell phone with my work van and head towards Alaska without looking back. :) I have been at this game since 1987. I should left plumbing years ago when it started getting really irritating, but it was a safe career field and I knew that people will always call.......When you have a job that nobody wants to do for a living, you will get plenty of calls. I have not yet met a person that wants to play in someone's septic tank all day then play in someone else's toilets and drains for hours the following day and don't think that I ever will. For this reason, it is very hard to hire and keep people showing up to work every day. I've had people to quit working for me 2 hours after they started due to getting sick and not being able to handle the work conditions of plumbing and sewer work.......It is not for a person with a weak stomach or weak muscles. Sometimes hiring new people is not worth the hassle because they just don't want to do nasty service work, only new construction, but that's part of the game.

    I am really looking forward to trying my hand at home flipping and rentals. I am sure that I will be much more satisfied with it.

    0Reply
  • John Ford
    Rental Property Investor · Atlanta, GA · Member since 2016 · 85 posts · 49 votes
    9y

    As a software developer who's worked at nothing but startups for the last 10 years...don't try to start a website unless you know a very motivated co-founder who can write code, and another very motivated co-founder who knows how to raise money. $300k isn't going to cut it. (It actually should be enough to get the thing built. But you're going to need 5 to 10 times that in sales and marketing budget to get people using it.)

    As for what I'd do...I would turn that 300k into a relative fortune. But it would take about 10 years and it sounds like you're looking for something faster than that.

    0Reply
  • Brian Mathews
    Contractor · Round Rock, TX · Member since 2013 · 767 posts · 389 votes
    9y

    @Mike Lynch    Its the same issue I have with people wanting it now.   Finding people to work is a difficult task as well.    I had some guy come out that does leak detection and he didn't do anything except get out some test equipment and tell me where the slab leaks were.   I paid him $500 for an hours worth of work.   He was semi retired and gave up chasing turds long ago he said.  Its a matter of targeting to a certain group of people through referrals   I have people who will wait for me for a reasonable amount of time.   I'm not saying don't pursue real estate, but reevaluate your business as you know that it is a profitable venture.    I think the best investment that can be made is an investment in ones self.  

    0Reply
  • Igor Avratiner
    Investor · Philadelphia, PA · Member since 2015 · 69 posts · 28 votes
    9y

    Hey Mike,

    I think it also kind of depends on the availability of deals that come your way. For example if you want to do flips but can't find any deals where your purchase+holding+renovation cost is low enough to turn a profit when you sell, you probably will stay away from flips in that case. The same is true for rentals. My advice would be to start networking with investors locally. Maybe even find a mentor or a partner to do a deal with (someone with a proven track record). Talk to realtors, customers you work for, friends, family, etc. Starting looking at potential deals and try to run the numbers to see if any make sense and to get practice. Don't be quick to jump the first deal that comes your way, there will always be other deals. You'd be surprised, but it doesn't always take a ton of money to by your first flip/rental if you are creative. Save some dry powder for when you have already done a deal or 2 maybe with a partner or on a smaller scale and you are confident you know what your doing, at that point you will be ready to go all in. In real estate leverage is a powerful thing if done correctly so don't be scared to use the bank's money. For example at 70% loan to value $300k turns in to a $1MM rental portfolio.    

    0Reply
  • James MaraditsPro Member
    Real Estate Broker · Cleveland, OH · Member since 2015 · 239 posts · 224 votes
    9y

    If I were in your situation I would:

    -First pay off any personal debts if you have them.

    -Buy as many leveraged properties as your credit would allow. I don't know your market, but in mine I could get great cash flowing SFR's or Doubles in the 80k range all day. Say you were able to do 5 at $20k down per property, that would be a great way to invest the first 100k.

    -Keep the rest liquid to use towards flip deals as they come up.  Maybe find good flips and turn them into rentals and refinance. 

    0Reply
  • Alice K.
    Investor · San Francisco, CA · Member since 2015 · 306 posts · 211 votes
    9y

    Oh man-- Sounds like a hard life-- So sorry! But congrats on the savings?!
    I'm assuming you paid off your "bad" debts. 

    EVERY single week I think about what I would / should do with my paltry savings. 
    Here are my thoughts:

    1. Invest in one 100k cash-flow positive property for a rental first in a B/C+ location (using bank money). 

    2. Then, find and complete a cheap flip-worthy property since you know homes. 

    3. Then take the results and analyze how much stress you had to endure for each and the cash return. Select the method that was the "best" for you and repeat.

    4. SAVE 6 - 8 months of that 300k money for yourself! Just in case! 

    5. During this time, with any excess money, stick it into a self-directed IRA/401(k) (401k is a better deal for self directed as far as fees). Just in case you accidentally bankrupt yourself.

    Startup thoughts: If you are fine flushing money away but think you have a good grasp on something missing online, you could use a tiny portion to try your startup idea if it's really killing you with the expectation you will fail (because most just fail). The designer and developer are key. You could buy a defunct site as well. 

    I have several tech friends who quit their cush jobs with dreams that they'd be bought out or become millionaires and I ponder they should stop and go get jobs again (it's been many years now and I don't think they're making enough to really live on). Who knows though, maybe someday they will be millionaires in a posh 1.5M condo next door to me. :) 

    0Reply
  • Gary Harris
    Rehabber · Westwood, NJ · Member since 2015 · 388 posts · 136 votes
    9y

    I would take the 300k and invest it with experienced rehabbers at a guaranteed return of 10℅ for 6 months with an additional 2℅ per month over 6 months (20-22% per year).

    Gary

    0Reply
  • Gary Harris
    Rehabber · Westwood, NJ · Member since 2015 · 388 posts · 136 votes
    9y

    I would take the 300k and invest it with experienced rehabbers at a guaranteed return of 10℅ for 6 months with an additional 2℅ per month over 6 months (20-22% per year).

    Gary

    0Reply
  • Buck Joffrey
    WINNETKA, IL · Member since 2016 · 10 posts · 5 votes
    9y
    Don't put more then 50-100k in any one project. PM me and I can tell you about some funds that will generate double digit cash flows. Also consider investing in multifamily syndications or buying an apartment building...my own favorite asset class. If you're trying to get out if the rat race, don't do something out of your wheelhouse like starting an internet business. Save that for when you have more cash flow than you need.
    0Reply
  • Amy A.
    Portland, ME · Member since 2012 · 616 posts · 550 votes
    9y

    Definitely do both multiunit rentals for long term income and flips for cash to buy more multiunits with the profit. Keep a big cushion in savings for an emergency. Study and know your numbers before doing anything. Get your real estate license so you have MLS access and can keep up with changing markets. This is what has worked for me. The hardest part is finding a decent plumber, so you should be all set!

    0Reply
  • Levi T.Pro Member
    Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
    9y
    Originally posted by @Mike Lynch:

    If tomorrow you suddenly had around $300,000 cash, would you:

    Try to purchase several $50,000 homes and rent them out?

    Purchase a couple $100,000 homes and rent them?

    Buy fix and flips and rentals using the banks money?

    I have even thought about trying to create a huge website like VRBO or Homeaway, with a great web designer but have no idea if that would be a disaster, and I like to play it safe.

    I have thought about starting some sort of Elder Care company? A friend of mine started a small Pawn Shop with $150,000 nine years ago and now has 5 of them in Virginia, worth millions, but that's a ton of work, and being robbed or shot is very possible. My friend always has two loaded pistols on him 24/7 and was robbed at gunpoint several years ago.

    I know more about homes than anything else, since I have worked on them for 30 years.

    At present, I have read around 15 real estate books, some purchased from Authors on this site, and have watched dozens of real estate videos online. Everyone claims to have the best idea, and the more you learn, the more confusing it gets.......Information Overload.

    My goal is to stop being a plumber, as it is killing my back and bones, as soon as possible. I feel like a 48 year old Pro Wrestler that has been beaten to a pulp when I wake up in the mornings, from too many years or jack hammering slab homes to repair water leaks, hauling water heaters, toilets, and bathtubs up stairs, and digging ditches. I really need to slow down on the heavy duty 40 to 50 hours a week labor, and get out of this mess as fast as possible.

    I know, I know, more information overload with my questions, but I would still like to hear more and try to make a decision and take my first step soon.

     Split it into 3 parts. Take 100k and try and buy as many rental units you can, please get them way below market value, way. Take the other 100k and buy a property to flip, grow your money quickly by flipping, then buy more rentals with the extra earnings for the long hall as flipping always drys up. The last 100k you save for a very rainy day.

    0Reply
  • Andy Smith
    Mount Vernon, NY · Member since 2015 · 5 posts · 3 votes
    9y

    Mike, I think @Charlie Fitzgerald's post is great advice. I tithe, so the first thing I would do is to donate 10% to my church (30k).

    Next, I would put 20% into my emergency fund (60k).

    I would then allocate 10% (30K) and 15% (45K), respectively, into my short term savings account and investment account (index fund).

    With the remaining balance (~135K), I would look into purchasing at least one flip and one b&h property.

    These allocations assume 0 debt, of course.

    1Reply
  • Mike Lynch
    OP
    Shallotte, NC · Member since 2013 · 130 posts · 16 votes
    9y

    Thank you so much!

    You all have some really great ideas. I will definitely keep around $100,000 as "do not touch" money, as I like to play things safe. For years, I didn't even have any credit cards. If I didn't have cash, I didn't buy it............My parents taught me to live below my means. That was all well and good until I was around 30 and tried to buy a new work van. The car dealer asked if I had good credit, I said yes of course....He ran a credit check and said, "You have 0 credit, like you do not even exist".....My wife had to sign to get the van. At that point I started getting a few credit cards and paying off the full balance each and every month. Now, we both have excellent credit............As a plumber, I see many people who live on the edge of their seat every month, way above their means. If they lose their job for a month, they are up the creek without a paddle. I wouldn't be able to sleep at night living that way. Keeping up with the Joneses is of no interest to me at all. Having money for retirement is my most critical interest.

    0Reply
  • Ben McMahonPro Member
    Investor · San Diego CA · Member since 2014 · 341 posts · 139 votes
    9y

    @Mike Lynch

    I didnt read all the posts, so forgive me if I repeat.  In case nobody mentioned this, fix and flip is a JOB just like plumbing.  You still have to keep going out and finding the next deal.  The income is almost never as good as it seems like on paper, and you will probably get tired of it before long.

    With 300k I would buy the best cashflow properties you can find with minimal downpayments.  This will get you STARTED on your road to passivity.  Save and make as much money as you can over the next couple years with the plumbing business and do more investing.  As you probably already know, real estate isn't exactly a get rich quick business like some people make it out to be.  Your biggest partner is time.  Sucks though, really sucks.

    Option 2 is to look for someone that is already 2 or 3 years into the business and needs some cash.  You can buy equity pretty cheaply if you find someone that has cashflow challenges, but basically a good business model.  Thats a bit more risky and tough to find, but if they have assets already, you can skip a step.  It takes time to find good deals.

    0Reply
  • Deanna McCormick
    Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    @Mike Lynch

    One idea is to hire a phone receptionist.. she has your schedule and will let people know when you can make it. I just got a new plumber he's awesome and his scheduler is good. If it's truly a emergency of course she'll forward the call but she sets his schedule and if he wants a day off well he's not available until tomorrow then..or a few days wait..

    Your business is very valuable. but so are your skills as a plumber . is their a way to join a rehab construction group doing estimates.. and inspections...or  hire a assistant with partnership possibilities for your plumbing business so you can ease off but still maintain the business.

    Retirement.. is something I'm personally trying to figure out. I don't want the responsibility of managing rental properties anymore, I find it's hard to depend on people if you want time off or go on vacation, and don't want the cost of hiring a PM to do it for me either.  I tried the fix & flip on one house and learned a bunch..bought it with cash, thought I had enough cash left to do the rehab and had to take out a loan to finish it up.. in the end made good $$ but it was stressful..  it's just it's hard to find a property that to me is worth the effort and investment... I don't like the risk of holding costs and contractors I can't depend on, and realtor fee's. 

    Keep asking the question you'll figure it out.. 

    I might join a investment group so I've got skin in the game but not elbow grease. 

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    9y

    @Mike Lynch,

    If it was me, I'd look for the best multi-family investment I could make with my available funds. Do your homework, verify all the numbers and if it meets your personal income goals, go for it.

    ... but, that's just me. Your mileage may vary considerably.

    0Reply
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