What Would You Do? Homeless and Sitting on Cash

Question

Hey all! What what would you do in my situation?

I'm 31 years old, unmarried, unattached to any geographic location (have lived in 10 countries in the past 5 years,) and run an Internet business. The business produces good income and I am sitting on an accumulation of cash... Let's imagine $500k in liquid deployable cash...

Now I want to establish some stability in my life by setting up two home bases in my two favorite places. Mexico City and somewhere in USA (thinking Austin - I'm going there in a couple of weeks to see if it feels like home - second and third choices would be CO and NC).

From an investment perspective, I'd like to invest my cash into semi-passive RE projects to create generational wealth (I understand the multi-family model best). I don't want to spend more than a few hours per week on RE as I'm busy enough running my business.

What's holding me back is:

1. If I purchase nice a 2-3 BR house in both Mexico City and Austin (and I don't want to live in B-C class properties), the income opportunity of renting them out while I'm not there doesn't look great. Maybe I'll break even on the two properties if I'm lucky.

2) Considering my situation and current market conditions, how much should I leverage vs pay in cash?

3. Maybe I should consider another strategy? Maybe rent in these places and buy elsewhere? I could probably afford to purchase two homes to live in and leverage a third as an investment in another market, but it seems like a risky move to deploy so much cash when many people are predicting a cool-down in the US RE markets.

Any tips appreciated!

Salud

Will Fraser · Answer

hI @Neil G. this is an exciting situation to be in!

If you are truly location agnostic then you have what some would consider a "superpower" right now.  As you've already noted the US real estate market is loco and en fuego and we're not even certain if it is in a good way or a bad way yet.  BUT what is always true is that it is often best to rent in high value markets and deploy capital to better cashflowing markets.

If you keen on Mexico, you could look out of Mexico DF to some of the other noteworthy cities with a better Rent/Value ratio.  Further, you can look at other places beyond the borders of the US with less efficient real estate markets (and therefore more opportune for investing)

So, live where it is best to live, invest where it is best to invest, and leverage as much as you can with long-term fixed-rate debt.  A mortgage loan that is locked for 20-30 years provides a nice hedge against inflation, and that's a friend to us during times like these.

Thomas Willingham · Answer

House hack in some way.  Buy a multi unit and live in one.  Buy a house with a garage apartment and rent it out, etc.

Andrew Freed · Answer

@Neil G. Never wait to be in real estate, get into real estate and wait. In my opinion, I think you should house hack in a nice market that you want to call you home (buy a 2-4 unit building) and deploy the remaining cash in large multi-families in better cash flowing markets such as Memphis or Colombus OH. You will be able to expand quicker if you use this strategy by keeping your expenses as low as possible while deploying your capital into quicker ROI properties.

Mike Lambert · Answer

@Lynn Wise

I've replied to many posts about investing in Mexico so feel free to check them out through my profile and contact me if you need additional information.

Victor Steffen · Answer

Don’t try to fit a square peg into a round hole. Take what each market gives you. Austin/ Denver/ Charlotte are on fire. Use as much leverage as possible while still breaking even and earn your returns from the appreciation in these areas. From there look towards other markets to earn your cash flow. Purchase these properties in cash and earn your returns from the heavy cash flow the property throws off. Plenty of areas in the U.S where you can purchase a 4 family home for under 100k that generates 4k per month (gross). No debt service payment means your net free cash flow will be very close to that 4k number.

One note- generational wealth is built via appreciation. Cash Flow is essential but unless done at a large scale does nothing for your net worth. Use cash flowing properties as a tool to carry your higher value, generational-wealth-creating assets.

ps: here are 3 units for 42k. found in about 2 minutes surfing zillow. find another 3-4 units at a similar price and your cash flow will cover expenses for the high value properties.

good luck!

Joe Norman · Answer

This is basically how was going to reply, but Will beat me to the punch! I think you need to separate your personal needs from your investments. My advice is to find a market that works for your investment goals (it sounds like you're focused on cash flow)  and setup shop there for a few months while you build your portfolio. Get to know the market, build your team, and buy some property using fixed rate, long term mortgages.

Once your REI operation is up and running you can then pivot to finding a market that fits your personal needs and buy a primary residence. House hacking is great for those who are getting started with limited resources, but I wouldn't worry too much about it in your situation (solid income from your business and rentals).

Neil G. · Answer

Thanks everyone! Househacking and/or purchasing additional income properties in better cashflowing markets would likely be the best way to live "for-free" while allowing me to live in the places I want. Makes sense.

The challenge is finding househacking opportunities in high priced markets that cover expenses. Time to get creative!

Shiloh Lundahl · Answer

@Neil G. I agree with what @thomas Willingham stated about house hacking. I would encourage you to house hack in both locations. It keeps your properties safer because you have tenants that know you and can would know if anyone was messing with your property and the rent from your tenants would like pay for the properties. So you should either be able to live for free or for a really reduced rate as your tenants pay down your mortgage.

I used this technique for 4 years as I both lived in California and Arizona. I rented out the main house in my Arizona house and I lived in the guest house until I sold that property. Then I bought a large home with 7 bedrooms and I rented out the house by the room and it covered most of the cost of the home. My home in California had an ADU (auxiliary dwelling unit or guest house) which we rented and it cover about a third the expenses of the California house.

So I would say to house hack both locations.

Beth Golden · Answer

I would pick one place and buy a home there and live in it.  Whatever size works for you.  It's hard to buy two places at the same time.  And you could put some of your cash in the S&P 500.

Jason Norton · Answer

@Neil G.

I’m working with a client right now kind of in the same predicament as a foreign national from Canada they’re finding it hard to get leverage. We were able to find them exactly what they needed and they are extremely happy. As a matter of fact they’re buying a six pack in Austin Texas.

My recommendation is always leverage your money always. If you have your cash in the correct account and you’re able to return get a return on your money that’s more than what your interest rate is on your 30 year amortization schedule you’re letting your properties pay for your house. A true investor should never have to pay their own bills.￼￼

What Would You Do? Homeless and Sitting on Cash

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