Best Way to Invest a Large Lump Sum of Money ($100-$300K)?

[Scott Trench]

Hi BiggerPockets - I am considering writing a lengthy discussion on how to invest a large lump sum of money effectively. This topic comes up for discussion a LOT here on BiggerPockets, as it seems there are many reasons that folks that otherwise save just a few hundred dollars per month suddenly come into tens or hundreds of thousands of dollars (inheritance, sale of a house, divorce, stock options, or good old fashioned luck). 

The goal is to create a resource for folks that receive a sudden infusion of cash. This intended audience earns a median to upper middle-class income. I also assume that a member of the target audience does have the financial capacity to accumulate said amount in a period of less than 5-10 years, meaning that an infusion of cash in the six figure range is a life-changing event.

I *think* I have a plan about what I, Scott Trench, would do if I suddenly came into a large sum of money (much greater than the amount of cash that I currently accumulate on an annual basis) and how I would deploy it in pursuit of financial freedom while working a full-time job. 

But, I'd really like to interview some folks that have done this successfully and hear their stories. I want to create the best resource out there for folks that come into this situation and have the goal of financial freedom at heart. 

So, if you've come into tens or hundreds of thousands of dollars suddenly, and then executed a well thought out plan in deploying that to acquire cash flowing assets that help you move towards financial freedom, I'd like to interview you! Please reply to this thread with your story, or email me at [email protected]. I would also really appreciate the chance to interview you on the phone or via Skype. 

Thanks!

Scott

[Lou Tomczak]

I'm new here, but it sounds like lots of people like the idea of syndicates. 

I am in a position where I have a sum of money of the range mentioned in the title I would like to intelligently invest. I would love to get into real estate, but have been steered towards options like Fundrise (as I am not accredited.) However, the estimated return seems relatively low given how illiquid the investment options appear. At the same time, I don't have the time or knowledge to actively manage a property. Furthermore, being in NYC, even 20% down is more than I afford.

I have some money invested with roboadvisors that has worked out well for me and has required very little active attention, but I'm ready to start growing my wealth and would consider something a little more unconventional.

Can anyone recommend an option for someone in my position? It would be nice to get into real estate, but not have all of my money tied up in one investment for 5 years or more. 

[Ross Bernard]

This happened to me. Out of college I was making about $50K. My parents gifted me $100K. I was renting at the time, so the first thing I did with the money was buy a 3/2.5 for $160K for my primary residence. I rented two of the bedrooms for just over the price of the mortgage. I then bought a rental for $95K and the rest of the original $100K is sitting in cash, soon to become the third purchase. Very happy with the returns so far!

[Dave Foster]

@Lou Tomczak, The key word in your post of course was "intelligently".  Unfortunately intelligently is most often accompanied by a slower methodical pace.  and in the world of real estate that involves a lot of waiting and looking before leaping.  Chasing returns on someone elses word is sure way to catch the dreaded lotto winners flu.

@Ross Bernard's example is picture perfect way to build slowly and intelligently.  Granted he's in a market that is very different than NYC and his model may not work for you.  Unless your goal is to use the gift to change your life now and let the party start (Lotto flu), you need to focus on 

1. Accepting a lower return in exchange for the surety of compound interest and a reward over time. This may be a local NCY property where your NOI is less than 4% but with appreciation outlook.

2. If you really want to chase high returns then vet vet and vet  again the group and the region where you'll be investing.  Successful investment does not always look the same at each stage of the market.  And a lot of folks out there now have been incredibly successful in a young growing market.  If they have no experience in a mature/late or correcting market your returns and capital could take a quick nose dive. 

3. If #1 represents the lowest return and highest safety and #2 represents the highest reward and least safety then A hybrid could be something like a fractional product that carries no debt and is guaranteed by a publically traded national corporate tenant.

Take your time and run the proformas.  Everyone is trying not to miss this bull market that has been running for 7+ years.  If you're patient and methodical you may miss it - but that would make you one of the folks who didn't buy in 2006 and had cash to sweep up bargains at 50-80% discounts in 2010.  

[Lou Tomczak]

Dave,

I certainly have concerns about this bull market slowing down. Prices in NYC have skyrocketed, and I'm not sure how much capital appreciation I can expect with existing properties. Property values have already increased exponentially. Even now, landlords of buildings in less desirable areas are already pricing rents 3 to 5 years out. Is a brownstone in Bedstuy going to 20mil next? I find it hard to believe... And with retail suffering the way it is, I would think there would have to be at least a small correction sometime in the near future.

I am, however, a big believer in tier II cities that are seeing some revitalization in their downtown areas and gentrification of other areas of the city. Columbus, Cleveland, DC, Houston, Austin, some cities in Colorado. I have no idea how to get into those markets, though.

Any suggestions?

[Robert Ellis]

Originally posted by @Troy Whitney:

In my opinion, Grant Cardone is a snake oil salesman.  His "educational" materials that I ordered were completely worthless (for me), and just hype to sell more stuff.  

 Hi Troy, have you looked at the real estate market and specifically looked at multifamily properties as an investment?  Columbus Ohio is a great market to look at. As we are a state capitol and have great population growth and the Ohio State University generating 6,000 graduates annually, there is a lot of need for multifamily housing.  

[Troy Whitney]

Hi Robert - I actually have looked at Ohio. Just last night I requested offering documentation on a property out there. I'm definitely interested in multifamily properties that cash flow - generally, assuming 50% expenses of current actual rent roll, and 15% IRR, and a loan size of $1million +. If you have something that meets this criteria - let me know - thanks.