Hey folks, looking for some ideas and inspiration here. How would you invest in real estate if you had a few extra dollars in a trust, say $1.5 Million, and your goals were to: • Maximize income for yourself in retirement (70's and in good health) • Maximize inheritance for your children when the time comes • Minimize taxes for yourself and your children Thank you

Nobody has yet mentioned to avoid posting publicly on the Internet how much money you have; all sorts of predators will be attracted, trying to separate you from that money. And it seems many of the replies already posted have an element of "steering" to them - the user who posted is suggesting you pursue something like what they are doing ...

@Jason White There is no such a thing a truly passive investment in Real Estate. People who want's your money to support their investment goals, will tell you that they have a passive investment ready for you in hope that you just let them do what ever with your money! Not a good idea! How ever with some basic research you could choose some property types that you might be comfortable to invest your money in. Once you know what kind of property you would like to deal with as an investment objective, then you could get some references from your local banker/real estate broker to help you to meet REPUTABLE Real Estate Investors CLOSE BY where you are located. By the way If i was in your situation I would never consider investing out of State, as if something goes wrong and you need a "divorce" from your business partner situation gone bad, and try to recover you investment money, (checking land records/real estate deeds etc) the last thing you would want to do is start flying across the country to show up to court. This is the book I would recommend to help you identify on what type of real estate you might feel comfortable with as an investment "niche" http://www.amazon.com/Make-Money-Commercial-Real-E... Personally if it was me I would try to keep it simple and just get 8-10 Single Family Homes in the best school district I can afford near me. I would make sure they all are younger than 10 years old to avoid frequent maintenance issues but get them at a little be of discount price, in one may be two neighborhoods. I would hire a Property Manager (not a realtor who is hoping that you will sell soon) This way if it doesn't work out you just change the property manager, and you don't have to deal with a Partnership that is gone bad (ie law suit) . Managing the property manager is a bit of work but with less than a dozen properties in great condition it should not be major headache. Let us know how it is working out for you! You can further educate yourself partnerships and Property Manager issues, just by looking around here on the Bigger Pockets website! Good Luck to you!

Hi Jason, As mentioned there are many ways to do this. Most of my clients ( I only do commercial ) focus on larger properties instead of small. You mention you want to be passive. Owning 24 houses is not passive. You will have 24 different years of construction and design. Different roofs, A/C systems, furnaces, water heaters, electrical, roofs, eviction processes can vary, likely the same management company does not cover the whole area you will buy the houses in, etc. Have you ever tried to coordinate 3 or more PM companies?? Nothing passive there. So imagine you select an area and want to buy 24 houses. You set a target of a certain price. You land a few houses but now the market is getting overheated. You have to accept a much less return or now travel outside of that city or county to keep buying. Here comes a new PM company again. You will also have various repair people to deal with as they do not cover all of the areas. If you buy SFR in multiple states you will be dealing with varying eviction processes and tenant- landlord laws. The positive is you have diversification but the negative is you have scaling issues, you are an active versus passive investor, and you will work harder for yield. I think you should talk to a few people and weigh the different avenues. If you buy 24 houses you will have 24 closings and expenses and 24 loans to keep track of. When you start going above a certain amount of loans sometimes 5 - 10 or more they will want more down then the standard 25%. The more you put down will affect your cash on cash returns. I am bullish on retail but that's the space I work in. In the cycle right now there is some great value but in a low risk way. You have more predictable income yield. Usually I look at my clients liquidity and net worth before I give ideas on what is possible. You have only given one piece out of the puzzle for your life and circumstances. To properly assess the whole picture is needed. Generally people do not like to share all of that info on a forum but contact offline on a phone or e-mail to discuss. Hope it helps. I am not saying anything negative about SFR investing you just mentioned passive. My high net worth clients tend to buy large multifamily complexes where infrastructure makes it passive but you need a certain volume of door about 80 or higher in a complex. If not multifamily they are buying retail strip centers with national tenants guaranteeing the lease and covering all of the expenses including taxes, insurance, etc. so you are passive.

I scanned most of the posts here and didn't see this suggestion: What if you found a trusted person to lend your money on your behalf. Someone who knows the real estate game, perhaps an agent/investor who has a lot of experience and can spot a deal. He/she doesn't lend the money unless they know for certain your interests are protected. You become a private money lender at say 10 to 12%. The "lender" charges a couple points, that's how he gets paid, and you're paid a 10 to 12% rate and hold a first mortgage secured asset in the property. In the Metro Atlanta area, hard money loans are anywhere from 13 to 16%. There's definitely a value play and people like me that hate paying rates that high. There is a market here for California rates on money. That's a pretty passive strategy with low risk.

@Jason White At your age and experience I would take maybe 30-40% of it and do hard money loans in your area only lend 50-60% of the value of the property charge 3-5 points upfront and 15% interest. Take your remaining balance into something safe. You could possibly use your lending profits just to live and let the rest grow. Just do not lend money on something that is not complete only pay when it is done. If it takes you longer than 30 min to drive there don't lend on it. Good luck

@Jason White considering you are 70 years old, with little experience.....perhaps you might consider just a strong dividend paying portfolio. $1.5 million could give you a pretty safe income stream of about $60k per year, with the opportunity for price appreciation as well. Yes investing in real estate will give you a considerably better yield than say a 4% dividend, but it is also more work and more headache. Your dividends are only going to be taxed at 15%, and if you are in a state with no estate tax, you would certainly be well below the federal estate tax threshold.

@Jason White if you are retired then getting typical financing is a PITA. Have gone through it and while possible they (banks) will want a history on these properties. IMO the best bet is to buy some (whatever type you decide after research) with cash and see how you like the business. How about 2 or 3 higher end duplexes? Maybe add a vacation house for you and family.

I would be careful about passive investments with large apartments in groups. Unlike retail with guaranteed leases where the tenants cover all expenses the apartments success of a large complex is tied to the management of the buildings. I am not saying it has not worked out great for some but given your age and retirement I would think it has too much risk potential as you have no control. I have a similar client who bought into multiple multifamily and is in the same age group as you. They bought 4 years ago but I did not know them then as they contacted me this year for help. They have lost about 35% of their initial investment so far due to mismanagement of the large complexes. They are having to look at refi and getting rid of current management and it's a mess. I truly feel for this person getting into bad investments. Remember some people will talk you into doing things whether it is in your best interest or not. Surround yourself with people that put you first above all else and your success.

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Updated over 9 years ago on 09/01/2015. Most recent reply

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Jason WhitePoster

Texas

General Real Estate Investing

Retiring with $1.5 Million to invest. What would you do?

Jason WhitePoster

Texas

Posted January 01, 2015 12:00

Hey folks, looking for some ideas and inspiration here. How would you invest in real estate if you had a few extra dollars in a trust, say $1.5 Million, and your goals were to:

Maximize income for yourself in retirement (70's and in good health)
Maximize inheritance for your children when the time comes
Minimize taxes for yourself and your children

Thank you

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Brian Mathews

Contractor
Round Rock, TX

Brian Mathews

Contractor
Round Rock, TX

Replied January 01, 2015 13:40

Go find a small builder and ask him how many homes he would build you for that amount. Then you have new homes, lessening maintenance issues, easier to rent and attract a higher caliber tenant. And if you don't want to mess with tenants, hire a PM to take care of it for you.

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