What should I do with this 100k sitting in my savings?

Question

Hey Biggerpockets family!

My name is Austin, and I’m super excited to be here! I’ve been passionate about real estate, stocks, investing, and business for as long as I can remember, and I’ve been self-educating in real estate for a while now. To be honest, it’s a bit funny—I've spent so much time learning, I should have already done a deal by now! But there's a reason I haven’t pulled the trigger yet: I’m currently incarcerated, with about six years left to go before my release.

Despite that, I’ve been following Biggerpockets for years, Youtubing, reading books etc. I truly believe that the knowledge I’ve gained here will play a huge part in turning my life around when I get out. The goal is real estate, and I’m determined to use my time to prepare for that future.

One of the things I’ve been struggling with is what to do with my finances in the meantime. I inherited roughly $160K from my beloved mother in January 2023, and I’ve put about $56K of that into the stock market that same year—mostly in index funds like VOO and QQQ, along with a few individual stocks like NVDA before the split. Since I got in during the bear market, I'm happy with my stock portfolio's 37% gain, despite market uncertainty. However, I still have $100K in a savings account earning just 2.25% APY.

Recently, I’ve been thinking a lot about inflation, opportunity cost, and time value of money (TVM). I’m not sure if I should move the savings into a CD, put it into an index fund, or explore something like private lending or gator lending. My ultimate goal is to use this money as seed capital for my real estate ventures when I get home, so it’s important that this capital stays safe as possible until then. That’s why I’ve kept it in the savings account, but I’m open to suggestions.

I’ve been wrestling with this dilemma for a while, and finally, I’ve found the courage to reach out to you all—the best forum on the planet! I can’t wait to network and learn from everyone here.

Thank you for your time, and I look forward to connecting with you all soon!

Ps. I’ll be looking to invest in the Philadelphia metro area, Wilmington, DE, and Tulsa Ok.

Best,

Austin

Jeremy H. · Answer

Let me first say - good job on your research while incarcerated. Sounds like you've used your time wisely in a way that will benefit you when you are released.

Let me ask a question - what have you done to prepare for retirement? I like RE and think there can be successful investments, but you need time (a long time) and money when it comes to RE. Do not let yourself get sold the dream that you will retire on cashflow (this is highly unlikely). 160k is great - but at the same time it's not going to get you THAT far (You've invested ~60k, so you have about 100k left). This is a few down payments and some reserve capital.

Do you have any sort of IRA? Roth? HSA? Do you have kids? What's your age?

I think you need recurring income - what I would honestly do, if I was you, is start a trades business. Use your cash to start the business - plumbing, electrician, lawn/landscaping - something in the blue collar trades that is specialized, that you can grow, and even better if it has a recurring revenue. From here you can hire others relatively easily and grow your business. Eventually you may sell it or become a sort of contractor w/ laborers.

I personally would do RE on the side - buy at a discount, rehab, then either rent or sell. And use this as secondary income.

Not sure what your support system is like on the outside but consider a house hack, live in flip or starting with an affordable starting home.

Read about taxes - I think you can save yourself a lot of $ w/ a business.

Denise Supplee · Answer

Hello @Austin Duncan,

I would urge you not to put all of your eggs in one basket. Diversify! That provides some extra security. You can invest in real estate syndications as well. I cofounded and run an investment club where we invest in a deal per month. Minimum investment is only $5K. And we have invested in large apartment communities, trailer parks, a vacation resort, and even an industrial steel company. Anyway, I wish you much success and am excited to see how you do!

Daniel Murphy · Answer

That's a great situation to be in! Sorry for your loss by the way... I lost my dad a year ago and went through a similar situation.

I think first, it's always best to define your goal & timeline as best as possible.  You said you want to use this for seed money "when you get home".  When is that?  And how old are you? What is your income currently?  If you want safety of principal, it's hard to push yourself past a CD or high yield savings.  All other things can sound sexy, but risk your principal in one way or another.  If your timeline is short, like a year or two this is what I would do. CD or high yield savings.   Yes, you may "lose" to inflation but you're keeping your money safe and you'll have peace of mind.  Based on your post, you seem cautious and thoughtful so my guess is that you may feel more upset with yourself if this money decreased in value, over any "lost" money to inflation.  Hopefully that makes sense... Next, if your timeline is a little longer (2+ years), you could invest your funds into something diversified like others have suggested.  Diversified low cost ETF's.  If this decreased in value, you could try to also factor in your other investments mentally.  As in, If your $100k went down to $90k, mentally try to factor in the gains in the other investments you stated.  How we think about money is important... Depending on your age & income, you may be in a low enough tax bracket to "realize" (sell) some of the investment portfolio and pay little to no taxes on it.  Think of it this way... If this $100k decreased in value by 10%, but you had the opportunity to sell some of your investments & pay 0% taxes as opposed to 15% taxes, it can mentally "offset" the 10% loss.  I fully realize that all of what I said may sound like gobbledygook! ha! Reach out if you want any clarification or have any questions.  It's awesome to see people who put their inheritances to good use and who are so diligent in wanting to do the right thing...

Alan Asriants · Answer

There's a lot of options you have and no answer is particularly right or wrong. It's all about what is right for you in your situation.

If you believe you can repurpose that capital and make more money on it, then do so and then set aside a portion of it for RE investing. With the real estate market the way it is right now if you were to take that hundred thousand dollars and put it into a property you pretty much will have it locked in there for a considerable amount of time until you can see real growth through appreciation.

I keep hearing that Lending money is a great way to make money. We are in a pretty high interest rate market, so the margins are even better for people who lend money. Of course they're a caveats and you want to make sure that you do it the right way and speak with a mentor.

When you are ready to deploy your savings into a long-term rental asset, make sure that you're buying in the right area, an area you know best, and the right kind of property. When you're finally ready to make the step, remember that most of your wealth will be built through equity, not cash flow. So don't chase cash flow in cheap markets. Instead try to find a middle ground where you are in an area that appreciates well historically and can cover your expenses + a little bonus.

I always recommend A-B class properties in neighborhoods you know best.

Good luck!

Ying Tang · Answer

Hi Austin! You can put the money in Robinhood account for 4% apr, which is more flexible than CD, but you need to resist the urge to invest the money into stock market from time to time...

Even incarcerated, you can still purchase properties, if you want to. My friend has helped several people incarcerated purchase house in Phoenix.

Austin Duncan · Answer

Thank you for the advice @Denise Supplee,

I'm actually really interested in investing into syndications for non-accredited investors. Given my timeline, I feel like I can put this capital to use in syndications. I have some questions, however.

1. What types of projects and in what area does your company invest in? How often do you pay out investor distributions – monthly, quarterly?

2. Who is on your investment team and what are their roles and qualifications?

3. What is your projected equity multiple?

4. Is there a preferred return for investors, what does it entail and how is it structured?

5. What are the fees associated with doing business with your company? (e.g., acquisition, asset management, financing, etc.) and how do they align with your investors interests? Also, how is it calculated?

6. What is the expected annual Cash on Cash return on your investors' invested cash?​ And how is it Calculated?

7. What are the (DSCR) metrics your company likes to follow?

8. What is the projected (IRR), accounting for the time value of money? how is it determined?

9. What’s the projected hold time for a given project?

Business Plan and Exit Strategy

• What is your value-add strategy to improve the property and increase its value?
• What is the typical projected Hold period for your company and how flexible is the exit strategy?
• What is your typical exit strategy for a given investment (e.g., sale, refinance, etc.), and what is the expected timeline for exit?
• What contingencies or alternative plans are in place if market conditions change?
• I would love to talk more. Maybe we can schedule a call?...

What is your value-add strategy to improve the property and increase its value?

What is the typical projected Hold period for your company and how flexible is the exit strategy?

What is your typical exit strategy for a given investment (e.g., sale, refinance, etc.), and what is the expected timeline for exit?

What contingencies or alternative plans are in place if market conditions change?

I would love to talk more. Maybe we can schedule a call?...

Austin Duncan · Answer

I had a great opportunity to invest most of my cash into an index fund during the Bear market at the end of 2022 and the start of 2023. But at the time, I was nervous about losing my inheritance, so I decided to only invest a portion of it. I was still new to the market and didn’t want to take on too much risk. Now, after being in the market for about two years, I feel more comfortable and am considering investing more heavily in an index fund like VOO or VTI.

Jules Aton · Answer

My personal strategy if I had $100k and 5+ years to let it cook would be TSM index funds like VTSAX, VOO, VTI, SCHB etc.