Seeking Advice - Purchasing with a Large Amount of Cash

Multi-Family and Apartment Investing
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Seeking Advice - Purchasing with a Large Amount of Cash

Karina SeidelPro Member
Investor · Austin, TX · Member since 2020 · 11 posts · 5 votes

Hi everyone, I am new to real estate and I am seeking some advice from more experienced investors. 

A little bit of my background: Since February 2021, I've bought 5 small multifamily properties in Texas (Killeen and Copperas Cove) and Florida (Tampa and Saint Pete) using cash. I have been buying older distressed properties under market value, fixing them up, and renting them out. Good monthly cash flow has been my main goal (8%+ CoC on average per deal all cash), we have also seen good appreciation thus far.
Although it might not be the best strategy to sink all cash in these properties, working with an investor who doesn't want to utilize any debt financing. With that being said, I'm looking for advice on how I can maximize my returns with the amount of cash we have ($1 million+) given they don't want to take a loan. Should I keep buying multifamily properties or shift to something bigger (smaller commercial properties, maybe 10-15 units) or do something else (mobile home parks etc)? In case we shift to bigger properties, I might be able to invest with them by taking a loan. For example, they would put $300,000-400,000 as a down payment and I'll be the guarantor on the loan.
So, if you were in my shoes, what would you do? I would really appreciate any feedback. Would also love to connect with more people here!

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Shafi Noss
Lender · Nationwide · Member since 2018 · 571 posts · 310 votes
5y

Hi Karina, here is a strategy you may consider: Usually the highest return investments will have little cashflow, and the highest cashflow investments will have lower overall returns. You could start off by investing in high appreciation assets like developments to scale your wealth quickly, and then fold your portfolio into cash flowing investments as you're approaching the net worth you want for yourself. I think that is the most effective strategy to reach a particular level of wealth and passive income both. And don't forget to stay diversified. 

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  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    5y

    Are they more interested in cash flow or appreciation, or do they like what you've been doing to get both? I think for straight cash buyers right now you can do better in the 5-unit and up space because there aren't as many people up in that zone with cash. It helps leverage better deals, but also will turn immediate cash flow since they need to park the cash. I wouldn't be the lender on their cash, I would just work this portfolio of cash for them that balances solid cash flow and some high appreciation potential in at least half of the assets.

    [email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
    Zen and the Art of Real Estate Investing59 Reviews
    WebsiteView Page
    1Reply
  • Steven HassettBusiness Member
    Realtor · Odessa, FL · Member since 2020 · 69 posts · 21 votes
    5y

    I would either go 5 unit like Johnathan said or I would go single family and ride the massive appreciation wave in Tampa bay!  

    1Reply
  • Emma Powell
    Investor · Orlando FL · Member since 2018 · 64 posts · 69 votes
    5y

    Depends on why you can't get the loan. Commercial loans are typically easier to get even for foreign nationals, self employed, or retired people.

    One option is to go bigger and bring in a partner to sign on loans: this is called a Key Partner (KP), or sometimes a deal/loan sponsor. You can both sign on the loan to get more experience and credibility with lenders. We did this  on our first commercial property by bringing in a KP and signing together for the resume builder.

    You'll be able to scale faster with leverage, and enjoy the benefits of commercial real estate while spreading out the workload to the team. As the capital partner, it's usually a lot less work.

    You can also just come in as a joint venture partner or general partner in a syndication for a deal that already has everything it needs except the cash. You'll have voting and control, but may not have to do much or any work other than making major decisions. It's like a "pay to play" model. I have several deals like this for high and mid net worth individuals, and it's my preferred way to buy large properties.

    Look into refinancing your residential property portfolio with a commercial lender who lends directly to your LLC w/o looking at personal finances. One we've used for this is RCN Capital. This will free up capital and get commercial lender experience.

    2Reply
  • Shafi Noss
    Lender · Nationwide · Member since 2018 · 571 posts · 310 votes
    5y

    Hi Karina, here is a strategy you may consider: Usually the highest return investments will have little cashflow, and the highest cashflow investments will have lower overall returns. You could start off by investing in high appreciation assets like developments to scale your wealth quickly, and then fold your portfolio into cash flowing investments as you're approaching the net worth you want for yourself. I think that is the most effective strategy to reach a particular level of wealth and passive income both. And don't forget to stay diversified. 

    3Reply
  • Cameron Davis
    Investor · Austin, TX · Member since 2017 · 126 posts · 45 votes
    5y

    @Karina Seidel Without knowing your goals, I'd just give this advice: It would probably be easiest to sink that money into 1 or 2 bigger deals, instead of finding and maintaining a bunch of smaller properties scattered around. The idea of partnering seems like a good one, too, if you're okay being on the loan. You would both be on title, but you'd be responsible for the loan in case something happened.

    1Reply
  • Evan Shiels
    Investor · Central Texas · Member since 2019 · 8 posts · 8 votes
    5y

    Good job with the properties under your belt so far. As far as large properties vs SF and small 1-4 multifamily, the growth of property returns can scale well once you get into larger units. That being said, your overhead can increase dramatically. I take it that these units you own are under local property management, but larger units usually require more/ different oversite. I have investments in Central Texas and often the biggest struggle is the management of those properties rather than finding them. Being in an all cash position is not bad, as you will beat out a similar offer using financing 90% of the time, but I would advise studying the expected CAP of those properties from the seller vs what you get with an independent appraiser. There are a lot of fantasies sold to buyers at the end of the day. If your family is willing to spend a little bit of money up front, there is a wealth of money to be made in small multi-family complexes.

    1Reply
  • Karina SeidelPro Member
    OP
    Investor · Austin, TX · Member since 2020 · 11 posts · 5 votes
    5y

    Hi @Jonathan Greene, thank you for your advice. They're mostly interested in cashflows but the goal is to maximize the overall returns, so I'm not set on this strategy if there're better ways to use this cash. I will be looking into bigger properties. Do you have any recommendations on finding these deals? 

    0Reply
  • Karina SeidelPro Member
    OP
    Investor · Austin, TX · Member since 2020 · 11 posts · 5 votes
    5y

    Thank you @Steven Hassett, I appreciate the advice. What are your thoughts on Saint Pete?

    0Reply
  • Karina SeidelPro Member
    OP
    Investor · Austin, TX · Member since 2020 · 11 posts · 5 votes
    5y

    Hi @Emma Powell, thank you, I really appreciate your advice. I will definitely look into the loan option more. Currently trying to get prequalified for an SBA loan in Florida!

    0Reply
  • Karina SeidelPro Member
    OP
    Investor · Austin, TX · Member since 2020 · 11 posts · 5 votes
    5y

    Hi @Evan Shiels, thank you for your advice. I'll try to get into bigger properties if I can. How do you normally approach your deal search for the bigger units? They seem to be a little more rare than the smaller units. 

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    5y

    Tampa is a great area as is SW Florida. If you would like you can set up a search on my site and get MLS access. My site is wealthrealtyandpropertymanagement.com
    Let me know if I can help in any way,
    John

    0Reply
  • Steven HassettBusiness Member
    Realtor · Odessa, FL · Member since 2020 · 69 posts · 21 votes
    5y

    @Karina Seidel I love St. Petersburg but I am a little biased because I live here. Most homes here were built in the 50s and 60s, so older. Many still need renovations, leaving lots of room for the BRRRR process.

    Many "Experts" are warning of a crash, but with the amount of cash/out-of-state buyers/regular people that need homes, I think housing here will be in high demand forcing 10% to 15% appreciation for at least two to three more years. 

    0Reply
  • Jeffrey Donis
    Investor · Durham, NC · Member since 2020 · 1k+ posts · 691 votes
    5y

    I agree with @Shafi Noss. Investing in development assets will allow you to generate wealth quickly, which you can then reinvest to continue to build your portfolio. However, keep in mind that while development deals have higher returns, there's also more risk involved than other types of real estate. 

    0Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    5y

    @Karina Seidel it depends where they can look and it seems like anywhere where it will make sense to park and earn. In the 5 and up space, I think the best just apartment deals are coming from the best wholesalers in any area. I am seeing a lot of them over time and the metrics for 5 and up usually work via wholesale because there's enough money in the deal for all to come out with a win-win, especially if the rents are close to FMV.

    [email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
    Zen and the Art of Real Estate Investing59 Reviews
    WebsiteView Page
    0Reply
  • Paul MoorePro Member
    Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes
    5y

    Hi @Karina Seidel. You asked what would we do and I’ll just tell you what I actually do and have been doing for a while. Though I have been in real estate investing for about 21 years, I found that leveraging top level experts with great track records and great teams makes for more money with far less risk and hassle. That’s why I invest in syndications. By doing this you will also get some of the benefit of debt leverage, without having any debt whatsoever in your name. Sharing the profits with a great syndicator can provide returns significantly higher and after picking the right syndicator, your effort will consist of walking to your mailbox every month to get a check. Good luck!

    Podcast Guest on Show #533
    3Reply
  • Paul MoorePro Member
    Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes
    5y

    @Karina Seidel I should also have mentioned that if you’re going to go down this road you should get @Brian Burke’s book “The Hands-Off Investor.”  And check out “The Real Estate Crowdfunding Review.” Also @Whitney Sewell’s podcast “The Real Estate Syndication Show.” 

    Podcast Guest on Show #533
    1Reply
  • Frank Iudica
    Member since 2019 · 5 posts · 3 votes
    5y

    @Karina Seidel Looks like your 2021 is off to an amazing start! I sent you a message. I am in Austin and looking to team up. 

    0Reply
  • Rachael Wick
    Member since 2021 · 17 posts · 14 votes
    5y

    @Karina Tarasova

    With something of that size you have many options:

    1. You could form an LLC partnership with your relative so now your a business and when you invest in something utilize the business to establish a track record.

    2. Then find a variety of investments to invest into to mitigate risk.

    3. Large commercial multifamily syndications as either a passive investor which is totyhands off and you just collect mailbox money or your LLC could be a Key Principle and get not only LP returns but also GP or general partner returns which is like earning returns you didn't have to do too much work for. This equals extra returns for the same amount of funds in!

    4. You could be a lender. You could invest in notes, flippers, become a private money lender.

    If you have any questions feel free to DM me and I can go more in depth on things I have learned and done over the years.

    Take care!

    0Reply
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