My mom sold a property that was her retirement... now what?

[Grant Nelson]

Hi BiggerPockets! My mom is in her 60s and just sold a home in San Francisco that's essentially her retirement. The next step is to reinvest the income into something that'll cash flow to pay for monthly living expenses. From what I can see, California isn't really the best cash flow state. Curious to see what routes Bigger Pockets members have taken in this scenario, and how they got started...

- Invest in an out-of-state apartment complex and have a property manager run it?

- Invest in an Air Bnb in California?

- Drop an ADU in the backyard?

I'm sure the answer to this post could be along the lines of "depends on what you want", but would love to hear feedback from members who've been in a similar scenario! Appreciate all your insights! - Grant

[Chris Mason]

Trigger warning: bigger pockets heresy incoming. 

The heresy: 

She's 60. Let her retire. 

If you are her son and want to play with $2m, go earn $2m.

For mom, go look at things that are actually passive income, which direct ownership of real estate is not. If she wants it to be real estate related (which isn't crazy, rents hit an upwards inflection point a few months ago due to rising consumer-facing mortgage rates and how "substitute goods" work, and all the real estate builders switching from SFR to multifamily tells you where they think the football is going to be in 2-3 years+), look at shares of some of the Wall Street megacorporation landlords that everyone loves to hate. Blackrock pays a 3% dividend (to pick one that everyone loves to hate, that I have no personal vested interest, or shares, of). If we're talking $2m (I made that number up), that's $5k/mo, more if the builders are right. There are also some ETFs which aggregate/pool the risk of one company making bad choices. 

If she wants to increase the risk and return, without giving up it being passive, while still in the real estate realm, lots of mortgage stocks are completely in the dumps right now. It's a "too big to fail" industry that's indifferent to anti-landlord and anti-investor legislation ("ok, so we do more loans for primary residence owners, and less for investors, whatever"), adding a layer of safety. Some of the mortgage stocks have gotten so cheap they are paying a >10% dividend (share price is the denominator in the ROI division, so as that goes down without the dividend decreasing proportionately, it forces ROI up, because math).