Fortunate to be starting out with $, seeking advice

[Josh Klauber]

First time posting, appreciate everyone’s time

I will soon be selling my warehouse (and likely my company) for a substantial amount of money. I am fully convinced that real estate is where I want to put my money but am seeking recommendations on where to start. For the warehouse I want to 1031 and it has been appraised for 5 million. As a newbie does it make sense to start with a NNN while I learn? Should I try to partner and purchase a larger building? MHP is also very interesting to me. Unfortunately being in Brooklyn it seems that the best bang for my buck is out of town and it's a scary thought investing that type of money long distance. I find most of what I come across on BP is about single family, duplex, etc but it seems to be consensus that it is best to scale to larger buildings once you have the capital. Very appreciative of any advice you all might have and very happy to have stumbled onto BP.

[Dave Foster]

@Josh Klauber, Anyone who has built a company into something worth what you have and is not 10 years past retirement already will not be satisfied being a lazy boy landlord. NNN is a great way to place real estate dollars for the long term and enjoy a nice passive retirement. If that's what you're looking for then you could certainly start there absolutely. Evaluation of a NNN or DST or TIC is really more about due diligence on the company leasing the property and lease structure and terms than it is the property itself.

But if your entrepreneurial side is giving you twitches then you may not be satisfied with the set it and forget it mentality of a NNN. But you've got an issue - You're going to have the $ of an experienced investor but the experience of a newbie. A lot of people cut their teeth on house hacks and single families etc and grow till they have a war chest to make bold moves. You'll have the war chest but not the scars. And that's a dangerous recipe.

Am I correct that your company and building will be sold to the same purchaser?  If so then you have what might be a golden opportunity to give yourself some runway to develop your strategy for real estate  before having to jump into the tight time lines of the 1031.  Since you're obviously still negotiating terms I'd look at packaging the business and real estate as you are.  But separating the two transactions on the calendar.  

Execute the business portion sale now (you can't 1031 any of it so whatever is taxable is gonna be taxable).  Use that cash to clean up whatever needs to be cleaned up and educate however you want.  Join a couple of limited partnerships or find a strong active investor and bring some of the money to some JVs.  When you start doing this you'll find very quickly where your passions for real estate lie.  And you'll also know more about the micro markets and cyclical nature and trending of real estate you're interested in.   

Then have part 2 of the contract kick in and execute the sale of the building. This will be eligible for a 1031 exchange so you can defer tax on the gain. But it has the tight timelines to complete - no problem because you've had the time to explore and educate yourself and can start to really let that REI freak flag fly.

If you can't negotiate something like that I'd say you're better off going totally passive and treating this as a retirement account for the near term.