Have 500K, Advise as to how to use it?

Question

Hi, I have 500K and need to find a low risk, low attention situation, with the most passive income? Can anyone give me some advise? I was thinking of a established multiunit opportunity with equity, and provides at least 1.25% of the purchase price.....

Thank you for your help in advance. I understand your time is very valuable and greatly appreciate your input/help in this circumstance.

Account Closed · Answer

Jaime,

That is a great amount to invest in real estate, however it is vital to ask yourself a few questions before you start.

Questions I would ask myself...

1. How much passive income do I want monthly from my investments?
2. How long do I want to tie the money up in those investments?
3. Do I want short term, medium or long term investments or all three?
4. Do I want to be a landlord or do I just want to get a check in the mail?
5. Were is the best place to invest?
6. What is the best type of investment? Residential or Commercial?
7. What time frame do I have to build my investment portfolio?

Once you have those answers you can move to the next stage of creating your real estate investing business model.

There are a lot of other investors who will tell you how to spend your money and how they can help you invest it but don't look at that until you review your own answers first.

This is a great time to start investing...

Marv Rousselow

Brandon Turner · Answer

Hey Jaime Nichols - I'd be careful about advertising how much you have to spend.

That said, I'd look into private lending. There are guys who can offer a pretty stable 8-12% return, secured by real estate, for that money. You have to be very careful with who, though.

Either that, or if it were me, I'd use it to put a 50% down payment on a $1,000,000 apartment complex (and it would have to be a great deal for that apartment.) At that price, you should be able to have a property manager take care of 99.9% of the complex and it would be mostly passive and produce a pretty good return if done correctly.

Marco Santarelli · Answer

Hi Jaime Nichols,

1.  Don't rush into anything... Take your time and research your options.  Real estate is my favorite choice (SFD, mult-units), but you can invest in performing notes, syndications, private placements, etc.

2. With real estate, be sure to choose your markets carefully.  Consider the health of the housing market and the local economics.  Then look a the neighborhood(s), and finally consider the property's condition and cash flow.

P.S. Don't post your investment capital on BP.  Keep it private. :-)

Marco Santarelli

Brian H. · Answer

Hi Jamie - I'm local to your area and also found myself in a similar situation last year with a desire to invest some money into real estate.  So far, I've looked into private lending, local SFR investing, out of state SFR investing, local multi-unit, and REIT's. Below is a quick summary of my thoughts and experience with each.

Local single family is currently very difficult due to the low inventory & high demand for homes below 200k. Also, the returns are not as good as you could get investing in other areas. That said, I have purchased a few SFR. Renting them out is not an issue as demand for homes in stable neighborhoods is currently very high.

When looking into out of state investing, I couldn't get comfortable with the fact that my assets would be a plane ride away, I'd have to rely wholly on an out of state team and I also didn't have the time to spend researching the sub-markets of the area's I was interested. (looked at Phoenix, Dallas, Houston, Kansas City)

REIT's/PEG's was personally an easy one for me to turn down simply because, although I do desire passive income, I didn't like someone else controlling my money for me.

Private Lending. This is the only other area I've currently invested in. I was introduced, through a lawyer friend, to a local salt lake rehaber who I have done one deal with so far. Returns are good and time needed to manage is minimal. PM me if you are interested in this rehaber's info. I also think there are many out of state private lending opportunities that are good. Will Barnard would be a good person so speak to regarding this.

Brian-

James Hiddle · Answer

There are ways to do it without saying you have 500K like "if you had $500K how would you use it?"

David Beard · Answer

There is also concern about plaintiff lawyers or their investigators finding clues into your net worth on the internet.  Many investors go to great length to mask their property ownership, primarily as a lawsuit deterrent.

Steven Hamilton II · Answer

Do not forget that in some cases a C-corp may be a better option than an S-corp.  Sometimes you do not want the income to pass to your 1040.

-Steven

Jeff S. · Answer

Hard to go wrong with the suggestions offered and the questions asked, Jaime Nichols.  A few missing points are your desired involvement, available time, and taxes.

Lending on flips takes very little time per deal and your return should be closer to roughly double that stated above (16%-20% annualized in Los Angeles, Utah could be more).  From the first phone-call to loan payoff, your involvement per deal will be measured in hours.  Returns get taxed as ordinary income but done properly (like only loaning locally), should be very low risk.  You could get involved with other forms of paper such as seconds, non-performing notes, and tax liens.  Here the sky could be the limit in terms of returns, but so might be your time investment.

Buying property comes with all the tax benefits, equity growth, and appreciation.  It’s not likely your annualized returns will be as great as lending but they could be close to tax free.  Of course you’ll want to use a property manager, but these must still be managed which takes time and effort.  If this is an out of town property, you’ll likely want to or have to travel periodically.  That is, owning property is not as time efficient as lending or dealing with paper.  Depending upon the property class and effort you want to put into rehabbing or turning a building around if applicable, your leverage and risk tolerance, the returns could also be great.

Jeff

Have 500K, Advise as to how to use it?

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