Strategies for a kitty of 2M

[Sanjay Raj]

We have around $2million kitty (little less than that).

We have done investments before but they were around 60-70k, so this amount is way more than what have handled before.

We still hold the previous investments but were wondering if :

1) we should split that amount into 70k each and continue doing what we were doing (SFR)

2) or should we step up our game split it into 3 tranche of 600k each.

3) or just do 1 investment - no diversification.

We have been investing for around 2 yrs now - learnt a lot from BP - returning to it after almost an year after applying my lessons from here.

Looking for ideas/criticisms.

I have other questions but i guess they will spring from responses below.

[Noam Adler]

Each aspect of real estate is different.  That said I would say multi family is the place to be. You only need to worry about one roof one boiler instead of one for each sfh. I would learn more about the multi family real estate world and then buy one  building (but not worth 2m) and learn from your mistakes and then scale to bigger ones. 

Hope this was helpful. 

Good luck 

[Greg Dickerson]

@Sanjay Raj a lot depends on how active and involved you want to be. You could easily double that in a year with doing flips and small infill development projects.

If you are looking for maximum cash flow a single commercial or multifamily property would be the best use of the capital.

If you are interested in a completely passive approach you could invest as an equity partner in a deal or two.  

[Alina Trigub]

@Sanjay Raj

I second @Greg Dickerson. 

1) Determine whether you want AND can devote enough time to real estate to be active or rather stay passive. Here's a blog post to guide you in the right direction: https://www.biggerpockets.com/member-blogs/10850/84064-what-type-of-investor-to-be-when-i-grow-up-active-or-passiv

2) Depending on the outcome to #1, find a niche within your selection: active or passive. Caveat: passive returns will be a lower (as someone else is doing the work for you). 

[Sanjay Raj]

Noam, Greg, Alina,

my bad for not mentioning - that i am most passive, not 100%, but something like a handful of SFR's whose responsibilities are shared among two partners.

So i cannot be super-active - but i can devote a few hours [4-6] a week - have a full time job on the side.

We are realistic about with lower returns with a passive investment.

[Jeff S.]

I can only imagine the anonymous solicitation you’ve received by now, @Sanjay Raj. If you’re wise enough to amass $2M, you’re wise enough to keep it. Be careful (and, have you lost your mind? Why are you publicly disclosing your assets?).

No one here can tell you how to allocate your money, but everyone will have their preferences based on their personal experience. You did not give the amount of time you’re willing to spend with your portfolio, or you other priorities, which makes it even more difficult to give a good answer.

Personally, and for what it’s worth, we prefer lending to local flippers. The returns are great, especially if you loan thru a retirement plan, and the time spent per loan is very small (time is important to us). It’s also relatively safe if you know what you are doing and can also be quite social. Beyond that, taxes will kill you and should always be a strong consideration.

I suggest you make an ordered list of what’s important to you (return, taxes, time, available resources, deal availability, your interests, your expertise, stress level, fun, etc.) No matter what you chose, decide what’s important and make sure you have a great CPA and knowledgeable lawyer in that field.

Above all, it’s important you enjoy what you do. There’s nothing worse than making money but being bored, miserable, or stressed out over it.

Best of luck, Sanjay.

[Jim Froehlich]

@Sanjay Raj, I would recommend talking over options with someone in the know on laws/taxes in your area. Kirtan Patel from KPPB in Atlanta is very experienced (not sure how far Milton is from there) - and no, I don't have any affiliation, but my best friend from college is a Criminal Defense Attorney in Atlanta and recently pointed me towards Kirtan as he knows ongoing developments, multi-units, etc. It seems to me that MOST of the RE folks who've reached your level are in some type of commercial RE and generally passive investing in large multi-units seems to do well, even during the last real estate bust. Research over the past 40+ years shows that the only RE investment that did better was self-storage units. If I was sitting on $2M, I would lean towards breaking it up between 2-3 PROVEN private equity placement/management firms that focus on: a) commercial development (develop/sell), and b) mult-unit buy/hold. I was surprised to see @Greg Dickerson, state: "You could easily double that in a year with doing flips and small infill development projects." He is a very experienced guy, so I think he means actively doing that, otherwise, I've not heard any experienced developers saying that PASSIVE investors can easily double anything in a year without significant risk (like paying for entitlements that don't work out).  If so, go find those guys that can offer you 50-100% preferred return and can show you a proven track record!!

[Greg Dickerson]

Originally posted by @Jim Froehlich:

@Sanjay Raj, I would recommend talking over options with someone in the know on laws/taxes in your area. Kirtan Patel from KPPB in Atlanta is very experienced (not sure how far Milton is from there) - and no, I don't have any affiliation, but my best friend from college is a Criminal Defense Attorney in Atlanta and recently pointed me towards Kirtan as he knows ongoing developments, multi-units, etc. It seems to me that MOST of the RE folks who've reached your level are in some type of commercial RE and generally passive investing in large multi-units seems to do well, even during the last real estate bust. Research over the past 40+ years shows that the only RE investment that did better was self-storage units. If I was sitting on $2M, I would lean towards breaking it up between 2-3 PROVEN private equity placement/management firms that focus on: a) commercial development (develop/sell), and b) mult-unit buy/hold. I was surprised to see @Greg Dickerson, state: "You could easily double that in a year with doing flips and small infill development projects." He is a very experienced guy, so I think he means actively doing that, otherwise, I've not heard any experienced developers saying that PASSIVE investors can easily double anything in a year without significant risk (like paying for entitlements that don't work out).  If so, go find those guys that can offer you 50-100% preferred return and can show you a proven track record!!

Yes I did say you could double the money as an active investor/ developer not passively.  

I mentioned that investing passively is just one of the options for investing the money but not as a strategy to double your money.

[Ronald Rohde]

Originally posted by @Greg Dickerson:

Originally posted by @Jim Froehlich:

@Sanjay Raj, I would recommend talking over options with someone in the know on laws/taxes in your area. Kirtan Patel from KPPB in Atlanta is very experienced (not sure how far Milton is from there) - and no, I don't have any affiliation, but my best friend from college is a Criminal Defense Attorney in Atlanta and recently pointed me towards Kirtan as he knows ongoing developments, multi-units, etc. It seems to me that MOST of the RE folks who've reached your level are in some type of commercial RE and generally passive investing in large multi-units seems to do well, even during the last real estate bust. Research over the past 40+ years shows that the only RE investment that did better was self-storage units. If I was sitting on $2M, I would lean towards breaking it up between 2-3 PROVEN private equity placement/management firms that focus on: a) commercial development (develop/sell), and b) mult-unit buy/hold. I was surprised to see @Greg Dickerson, state: "You could easily double that in a year with doing flips and small infill development projects." He is a very experienced guy, so I think he means actively doing that, otherwise, I've not heard any experienced developers saying that PASSIVE investors can easily double anything in a year without significant risk (like paying for entitlements that don't work out).  If so, go find those guys that can offer you 50-100% preferred return and can show you a proven track record!!

Yes I did say you could double the money as an active investor/ developer not passively.  

I mentioned that investing passively is just one of the options for investing the money but not as a strategy to double your money.

 In that timeframe, seems plenty of new construction deals double passive LP funds with a 3-7 year exit.

[Greg Dickerson]

Originally posted by @Ronald Rohde:

Originally posted by @Greg Dickerson:

Originally posted by @Jim Froehlich:

@Sanjay Raj, I would recommend talking over options with someone in the know on laws/taxes in your area. Kirtan Patel from KPPB in Atlanta is very experienced (not sure how far Milton is from there) - and no, I don't have any affiliation, but my best friend from college is a Criminal Defense Attorney in Atlanta and recently pointed me towards Kirtan as he knows ongoing developments, multi-units, etc. It seems to me that MOST of the RE folks who've reached your level are in some type of commercial RE and generally passive investing in large multi-units seems to do well, even during the last real estate bust. Research over the past 40+ years shows that the only RE investment that did better was self-storage units. If I was sitting on $2M, I would lean towards breaking it up between 2-3 PROVEN private equity placement/management firms that focus on: a) commercial development (develop/sell), and b) mult-unit buy/hold. I was surprised to see @Greg Dickerson, state: "You could easily double that in a year with doing flips and small infill development projects." He is a very experienced guy, so I think he means actively doing that, otherwise, I've not heard any experienced developers saying that PASSIVE investors can easily double anything in a year without significant risk (like paying for entitlements that don't work out).  If so, go find those guys that can offer you 50-100% preferred return and can show you a proven track record!!

Yes I did say you could double the money as an active investor/ developer not passively.  

I mentioned that investing passively is just one of the options for investing the money but not as a strategy to double your money.

 In that timeframe, seems plenty of new construction deals double passive LP funds with a 3-7 year exit.

Yes maybe even faster with the right project and sponsor/ developer. Also with larger commercial renovations as well.

[Alina Trigub]

Sanjay,

4-6 hours is enough when you have stabilized properties, but if you're looking to buy and re-position properties and have at least 30% returns, you need a lot more than 6 hours a week! Stick to what you know and what allowed you to make this much money so far, let the money work for you by allowing the professionals in the field take the pilot seats. You can look into notes, private lending, syndications, being a money partners, and so forth. The opportunities are endless, so it's on you to do the due diligence and select the choice that's right for you!

I'd also echo on what someone else mentioned about being more cautious about sharing how much funds you have to invest on any social media! 



Originally posted by @Sanjay Raj:

Noam, Greg, Alina,

my bad for not mentioning - that i am most passive, not 100%, but something like a handful of SFR's whose responsibilities are shared among two partners.

So i cannot be super-active - but i can devote a few hours [4-6] a week - have a full time job on the side.

We are realistic about with lower returns with a passive investment.

[Dave Foster]

@Sanjay Raj, It's a subtle distinction, but don't let the amount of money dictate your strategy.  Let your strengths and strategy dictate how you spend the money.  If you've got a model that works for you incorporate that war chest into it.

[John Fortes]

Sounds like you found your niche. If you thought about exploring other possibilities, perhaps consider splitting it up into third or fourths and exploring those other options while continuing what you are primarily good at. Just a thought. 

Hope your private messages aren't getting banged up per @Jeff S.! God bless!