What to do with $450,000

[Ben Singh]

I am investing $450,000 for my father. He wants income & is happy with a 6%-8% return.
He only wants newer real estate (-7 years) be it a SFR or condo's. They have to be in our general area.
He is open to financing the purchases which will allow us to buy more units. There in lies my question.
Should I buy one SFR or multiple condos?? or a combo? They all seem to have returns in the 6% range.

[Jon Holdman]

#1 suggestion. DO NOT post on the internet saying you have half a million bucks to invest. I'm sure you're going to get bombarded with suggestions.

Rental real estate is a business. Learn the business first. A 6% return is not hard to get. But its also easy to slap some lipstick on a bad investments and make them look like much better and in fact earn much worse returns or lose money. I would think you could do much better than that in the Sacramento area.

I would advise you to not get hung up on the newer requirement. I suspect that's to avoid maintenance issues. That may help, and does avoid some issues like asbestos and lead based paint. But a lot of maintenance is caused by tenants and it doesn't matter if its 6 months old or 60 years.

I'd avoid condos like the plague. HOAs will be an ongoing and troublesome partner. If you want to be in the multi-family business (not a good starting point, IMHO), buy apartment buildings. SFRs are much easier to resell if you decide this business is not for you.

Sure as he** don't buy one $450K SFR if you want rental cash flow. You won't get it. You might, or might not, get appreciation. Depends on what your goal is. You're much more likely to be profitable sticking with lower priced properties.

Spend the next few months reading on this subject. BiggerPockets is a great source and you'll hear the reality of this business from people with nothing to sell. Well, there are plenty of folks here with properties to sell, and I'm sure you'll hear from some of them with a post like that. It's a violation of our terms of service for someone to solicit you, so please let me know if that happens. (That's a hint for anyone thinking they might drop Ben a e-mail or PM offering him deals.) But you'll also read a lot of real life landlord stories from folks doing this on a daily basis. Learn the true ins and outs of this business before you spend a dime.