Best use of funds from business sale

[Aaron Law]

Hello wise investors.

Hoping to get your opinions.

I may have an opportunity to invest a very sizeable amount of money from the sale of a business and want your thoughts on how I should invest it. I will still continue my regular 9-5 at least until I'm cash flowing enough to replace my salary. Here are a few possibilities I'm considering:

1. Dividing the $800k into 20% down on a bunch of single family homes, duplexes, quadplexes.

2. Putting the full $800k down as a down payment on a large apartment complex.

3. Investing in 2 'high end' short term vacation rentals properties (places that I would visit and travel to frequently) that would be in a highly rentable location. What location? And then dumping the remaining money into as many sfh rentals as possible. How much cash reserve do I need to hold back that lenders will want to see?

4. We have remaining student loans. $150k for my wife and $100k for myself. Do I need to pay those off to improve DTI, or is it better to invent in RE to get the tax benefits, appreciation, debt pay down from rent, etc?

5. Or another combination of the above?

6. Any investments not mentioned here that I should consider?

7. What else should I be thinking about?

Initially, until I can stop my regular occupation I would most likely use a property management company.

Thank you so much for your time and thoughts.

[David Thompson]

Hi Aaron,

A lot to consider.  First, are you a DIY investor, wanting to manage your real estate investments or do you want to be more of a passive investor, preferring to invest alongside experts in say syndication deals?  You could of course be a hybrid investor, say, splitting up your funds and invest in some DIY opportunities in areas you know well or like to learn more, while leaving other areas that you research and are promising, but don't have the capital, time or expertise, nor care to develop the operational understanding of owning something more actively.  Read my BP blog on active vs passive investing.

I personally do both, have SFR rentals in a town I live and know best, Austin, TX. I have total control and can decide to sell on my terms. That said, I don't want too many of them as it turns more and more into a job. I also invest in more recession resistant real estate syndication deals all across the country in markets I don't have the local expertise but the operator does. I'm invested in MF apartments, self storage and mobile home parks as a core passive investing strategy because I like hands off nature of it, get regular income, great tax benefits and upside appreciation potential. Read this BP Blog on these 3 niches.