$110k to invest in real estate

[Mike Boss]

I currently own a duplex in the Midwest and have $110k ready to invest. My goal is to use this capital to achieve financial freedom in no more than 8 years. Financial freedom for me means $10k a month in income from real estate (passive or non passive). 

I have connections in the Midwest and Florida. I’ve learned that most investors become successful through appreciation first and cash flow second. I originally was investing for cash flow but now I’ve realized I need to put money towards equities. 

I have 3 strategies to choose from: 

#1: I have a contact who is a real estate developer and has asked me if I would like to invest in his project in Florida, as he is currently obtaining capital from his investors. He estimates a minimum 50% return or more given to the investors within 16-18 months. It is a large project in a well to do area. Investing $110k could mean $55k or more in profit. This deal would be fully passive. 

#2: I have a contact in Florida who does flips. Most returns range from 30%-60% and generally don’t take longer than 2 months. This would not be passive and I would be in full control of the project. I have never done a flip before but would have the guidance of this individual. The goal would be to buy a house for $250k in a neighborhood where homes are $450k, do cosmetics, and sell for $450k. $50k down payment and $50k renovations. I would put about $60k of my own cash and the other person would put the rest as a 50/50 deal.

this would leave me with $50k left over to invest with the real estate developer in strategy #1. So I would essentially be dividing my money between working with the developer and working with the flipper. 

#3: the third option I had in mind was to invest $60k with the developer talked about in #1 and $50k used to buy a turnkey duplex in the Midwest that will cash flow $450-$500/mo. 

I want to see how I can use this $110k to scale to $500k cash and then $1M cash. I want to be able use my capital to build an income so that I am not forced to go back to a normal job. I want to build up capital, roll it over into new equity based deals, and eventually buy 20 houses in the Midwest cash flowing $500/m each ($10k/mo). I need to turn $110k into around $800k in 8 years. 

I lean towards strategy #1 and maybe #2. With any investment there is always risk but without risk what can you accomplish. The dilemma I have is whether I should use all my capital with this developer. I trust him and I know he has a track record of success.  If I do strategy #2 it would split the risk into two different deals. Anyway, what do you guys think of my situation? Any suggestions or ideas. 

[Ran Iarovich]

I would go to option #3. You'll be able to diversify your risk between the 2 options if for some reason the numbers on either one don't play out like they're supposed to. 

If I may, I would also include option #4. Go the solo route by yourself in the beginning and invest $110k into something that YOU can control and know rather than entrusting a contact.

One of the big pluses of real estate is being able to control and know exactly what you are doing with your money. The former 2 options take that out of the equation since you will just be putting your performance into someone else's experience. To achieve financial freedom with a clear consciousness you'll need to build your empire on your own, not someone else's back. 

Best of luck,

Ran