What would you do with $1,000,000 cash?

Question

I currently own several MF homes that were purchased between 5 and 12 years ago.  Low mortgage rates, low entry price and very high cap rates.  It has been harder and harder to find scenarios like that in this economic climate.  If you had $1,000,000 cash, what would you do?  Pay down mortgages, hunt for new properties, leverage all $1,000,000?  Interested to hear everyone's thoughts.  I am young enough that I don't need the $ to live off of now, but would like a nice return that I could pull from in the future.  I've also done a decent amount of house hacking.  If BRRR is the way to go, I'm happy to hear about it.  Thanks in advance.

Jaron Walling · Answer

Give it to me. I'm a nice guy.

Scott E. · Answer

First thing I'd do is nothing. I'd just sit back for another ~6 months and let the market find a bottom or at least pick a direction. Things are too uncertain right now to deploy that much capital, in my opinion.

But when I was ready to buy I think I'd buy 3 NNN commercials deals for $1,000,000 a piece. 70% leverage on each of them. All in A+ locations. Then the remaining $100k I'd hang onto for reserves.

(Finding these deals would be MUCH easier said than done. There's a lot of demand for deals like this.)

Greg Scott · Answer

Pay down a mortgage?  Never.  Particularly if you have a low interest mortgage your return is your interest rate.  These days you would be locking in a negative rate of return.

Hunt for new properties?  Yes.  There are still good deals out there.  We are buying one now.  We also just invested in one other recently, and missed out on a great opportunity that went fast just last week.

Leverage $1,000,000?  Yes.  If you are buying right, you make a lot more money when leveraged than when you are not.  The key is buying right.  We only buy properties that cashflow so are never worried about taking the maximum leverage we can get.

Matt Moreland · Answer

Set aside 10% for reserves, lever up with the other 90% and take down some more cash flowing properties to add to the portfolio.

Justin Moy · Answer

If your rates are low, I wouldn't recommend paying those down. The low rate is a bonus to those loans and you want to get the most out of those.

I'm seeing more and more talk of high-yield savings accounts performing well for some of my peers, up to 3-4% for totally liquid cash, so the first step is I'd likely look for something like that while you look for more deals either on your own or with partners.

With $1M you can leverage some pretty great returns in things like syndications, REITs, or funds if you're looking for a passive position. There are also build to rent (BTR) communities that a lot of people are liking now that are more turnkey (so not 100% passive, but close enough for someone who doesn't want to do a REIT, syndication or fund).

Hard money funds have also been good to me lately, high single digit returns monthly and again 100% passive.

If you're looking for more of the high double digit growth you'll want to look at more value add properties

Taylor Dasch · Answer

Honestly the correct answer is to buy larger deals using leverage, increase the income on them and decide to sell or hold.

But what I would do (which is not the correct way to use 1 mil lol) is buy an apartment complex cash, in a decent location that I understand, add value, then hold onto it and retire from my W2.

V.G Jason · Answer

It completely depends on your personal lifestyle and risk tolerance. I'm a fan of not carrying (much) debt.

The whole don't paydown low IRs thing make mathematical sense, but the behavioral aspect is completely void. The peace of mind is worth it, infact, beyond worth it.

I've said this before, and I'll say this again--- I don't know anyone truly wealthy, and I mean significantly wealthy, that leverages against cash aside it. The math component is just what people who don't have cash will always tell you. The behavior speaks volumes-- people leverage and struggle to service debt and others pay cash and don't worry about servicing debt, but rather are able to operate a lot more freely.

I'm the only person I know that is actually doing this, and seeing how it goes to a small degree. I can cut a check at anytime to wipe out any of my (new) mortgages. A million dollars is really not that much cash when you're talking investing-- I would pay down some of the mortgages personally.

Victoria Casanova · Answer

I am new here and have some cash and am looking to buy my first MF with a great COC return, but as we know the hunt is real.  You said you can still find some great deals?  How ?  Where should i be looking?  Please help!  :)

Craig Fillion · Answer

This is a pretty personal question. I'm not familiar with where you are at in your journey but spend some time to think about what and where you want to be 2, 5 and 10 years from now. Plan accordingly and talk to other investors that have already taken different strategies whether that be how risky you want to leverage that money to holding your assets and paying down.

I imagine you will receive some comments from people who have taken opposing strategies, shoot them a call and get an understanding of where they want to be in x number of years and reflect about yourself. I don't believe there is a wrong answer, it's what you need.

Keep killing it brother!

What would you do with $1,000,000 cash?

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