What would you do with a $890K cash downpayment?

Question

Hello,

We have $890K of cash waiting in our 1031 exchange and we can't decide if we should buy properties for short-term or long-term rental. We live in Los Angeles. We are currently looking into multi unit properties in the $1.5 M range in L.A. or 2 vacation homes ( 1 will be paid in cash) for STR somewhere in the Big Bear Lake/ Lake arrowhead area. We just want positive cashflow monthly and dont want to make a bad move. any advise?

Mike Dymski · Answer

the sharks are circling...

Joshua Janus · Answer

Columbus, Ohio is a great market to invest in. The population has been growing here year over year over the last decade, it is home to The Ohio State University which has over 50,000 students that live here along with those that visit, and it also holds a diverse range of young professionals and traveling nurses to fill the demand of the multiple business corporations and hospitals stationed here. The appreciation rate in Columbus has been 8% higher than the national average over the last year. Tech companies are continuously moving here and establishing a footprint in Columbus as well. Intel is a great example, who is building the largest chip manufacturing plant in the US right here, and it will be a $20 billion dollar investment that brings a few new thousand jobs.

https://www.dispatch.com/story/business/2022/01/21/intel-ohio-building-computer-chip-factories-licking-county-jersey-township/9173472002/

Another example of economic growth is the upcoming Ohio State University Wexner Medical Center Inpatient Hospital which is a 1.9million square foot hospital that will bring over 800 new beds and a thousand new jobs.

https://abc6onyourside.com/news/local/new-osu-hospital-expected-to-transform-health-care

Here are a few more recent investments

https://www.10tv.com/article/money/business/hydrogen-power-company-hyperion-bringing-700-jobs-to-columbus/530-25907aab-5517-4661-a9f3-d2ed2d5be6b0

https://news.wosu.org/news/2022-02-08/rumpke-to-build-50-million-recycling-facility-in-columbus

Seth Young · Answer

Have you thought about doing a 1031 into other markets outside of the California area? There are numerous cash flowing, landlord friendly markets with lower price points and greater room for appreciation outside of California. However, the team you work with when investing out of state is equally as important as the market you select. I would suggest researching "turnkey real estate investment". Don't hesitate to reach out to me if you want to discuss. @Nancy Lim Best of luck with all your investing!

AJ Singh · Answer

@Nancy Lim

check out riverside or san bernadino county for multi family investing, you can buy a couple of 4 unit buildings and cash flow easily.

The rental yields are better than LA or OC.

Jon Schwartz · Answer

Your best move in LA is to put a large down payment on a multifamily with ADU potential.

The large down payment will ensure cash flow out of the gate. Then, add 2 ADUs to produce additional cashflow and drastically increase the value of the building.

For example: https://www.redfin.com/CA/Ingl...

Each 2-car garage can be converted to a studio apartment, producing about $3000/month in additional cashflow and, more importantly, increasing the value of the property by about $600,000.

Good luck!

Jon

Jay Hinrichs · Answer

I would stick as close to home as possible  big bear if those work.. with gas prices its the closest place to 20 million residenses how can you go wrong.. or Mamoth for ski property or even palm springs La quinta.

Or buy up a bunch of newer sfrs in Vegas.  all of these an easy day drive for you.

Robert Reynolds · Answer

@Nancy Lim

With that much money and wanting to cash flow, I would look into buying 2 short term rentals. That will give you the highest cash flow but will also be the most work if you are ok with that. Buying in SoCal will also give you great appreciation, so you will also get that benefit.

Charlie Jacques · Answer

Hi Nancy,

It sounds like you may be more interested in active ownership, if that's not true I'd recommend looking at a passive fund. Cash flow, diversification, hands off, lower risk and you still get the amazing benefits of long term appreciation! Plus some funds can make for great 1031 alternatives providing substantial taxable losses which can offset the gains you realize when you sell.  Happy to talk more if you're interested!

Nancy Lim · Answer

Hi Jay,

Thank you!! Would Reno Nevada be a good place to look into? We heard it's very landlord-friendly ( no rent control, no eviction moratorium), low prices, low taxes, etc. When I looked into it closely, we were not able to positive cash flow on LTR due to low rents. STR are about 25-45K in Mid Town, close to the University. We almost offered to pay cash on a $525K house in Midtown but the house is old and only 2bed, 1bath. We would rather spend the same amount in Big Bear. What are your thoughts on Reno Navada, should we reconsider?

Steven Foster Wilson · Answer

You should consider investing OOS here in Columbus or Cincinatti. The price to rent ratio makes for great investments. Not to mention our appreciation has been 8% higher then the US national average, because of the high demand for affordable housing. With big corporations being here in Columbus such as Intel, Amazon, Chipotle, the Limited, and more. We have seen people flooding here. I think now is a perfect time to invest here and I help multiple clients every week find great cash flow deals. It would be a great way to get more passive income coming your way!

What would you do with a $890K cash downpayment?

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