4 Million -- How to Make Most Money with It?

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4 Million -- How to Make Most Money with It?

Naomi Moore
Member since 2021 · 13 posts · 16 votes

Imagine you had 4 million to invest, and a credit score of 832.

What would you do with it to make as much money as possible?

---

I don't know anything about real estate, but if you can help me with this I might really get excited! 

Someone I know owns a vacation rental that they paid 650k for, and it looks like it rents out at least 10k a month (just looking on VRBO).

So it gets me thinking -- if someone had 4 million .. could they buy 30 properties like this?

So 20% down on 650 = 130k

4 million / 130k = 30 rental properties

Could someone with 30 rental properties make 300k a month with a 4 million investment?

I realize its a bit far fetched, and would be a headache, but someone could easily be hired for six figures to manage it all. 

Thanks a lot

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5y

Naomi, my answer would depend on how you managed to get your hands on $4 million. If you were an entrepreneur that built a business and earned this wealth over time, then I would say you're ready to invest. If you the money was inherited or won in a lottery, then I would say you should sock it away, find a reliable financial advisor, and follow their advice.

The fact you are salivating over a vacation rental that earns $10,000 a month indicates you're not financially savvy and should find an advisor quickly.

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  • Scott M.
    Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
    5y

    don't fall into this trap "looks like it rents out at least 10k".  At best you are looking at gross income.  Zero to do with net.  

    3Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    5y

    “What if” game again. 

    1Reply
  • Mike Leng
    Member since 2020 · 24 posts · 8 votes
    5y

    Buy an ETF with 5% dividend yield will give you 200k a year, with literally no work, and there is the upside of the stock appreciation which over long term is about 7 or 8 percent. 


    An STR generating 120k gross will net about 60 to 70k (subtracting insurance, property tax, utilities, internet, commissions, wear and tear, potential damages and disasters). It will be down to 40k if you hire a property manager. If you have 30 of these, yes you will have a lot more cash flow, but how long will it take to build up this 30-property empire and at what cost to your time and energy?

    The people who are successful at being a landlord, whether LTR or STR, are successful because they enjoy doing it and they are good at it. It's no difference than any other career. If somebody just wants an easy money stream, there are many other ways to accomplish that without the hassle.

    If I have 4 million dollars, I will retire tomorrow regardless my age because I know I will never use up the money (with a middle class lifestyle).

    5Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    Naomi, my answer would depend on how you managed to get your hands on $4 million. If you were an entrepreneur that built a business and earned this wealth over time, then I would say you're ready to invest. If you the money was inherited or won in a lottery, then I would say you should sock it away, find a reliable financial advisor, and follow their advice.

    The fact you are salivating over a vacation rental that earns $10,000 a month indicates you're not financially savvy and should find an advisor quickly.

    The DIY Landlord Book4.7248 Reviews
    WebsiteView Page
    19Reply
  • Naomi Moore
    OP
    Member since 2021 · 13 posts · 16 votes
    5y

    Joe S: 

    “What if” game again.

    If I would've never said "what if", I wouldn't have had entrepreneurial success that I've had.  Saying 'what if', dreaming, taking risks, and actually looking for shortcuts / leverage is actually a big factor to what's made me successful. 

    4Reply
  • Naomi Moore
    OP
    Member since 2021 · 13 posts · 16 votes
    5y

    Nathan:

    I made the 4m an internet entrepreneur, I made several million with my first business but it was my second (Amazon) business that I sold which made a lot.  It has brought me up to 5 million net worth. 

    Can I replicate what I have done?  Honestly I never know. When I start a new project I start all over again and its hard to feel confident with it.  

    I just thought real estate might be more stable, so I posted in here with a dream and a "what if" situation.  

    10k a month is not that much money, you're correct.  No, I am not salivating over it.  But, if rental RE something scalable and fairly secure, I am interested in it.  

    I have a wealth manager but the returns are not as exciting so I thought I'd do a few what-ifs with real estate.  

    6Reply
  • Naomi Moore
    OP
    Member since 2021 · 13 posts · 16 votes
    5y

    Mike:

    "

    The people who are successful at being a landlord, whether LTR or STR, are successful because they enjoy doing it and they are good at it. It's no difference than any other career. If somebody just wants an easy money stream, there are many other ways to accomplish that without the hassle.

    "

    I hear you. I am not sure my passion would be there with RE.  But, maybe if I got a taste of it I'd grow to love it and iot would be more worthwhile than the wealth manager making me a bit of money in the stock market. 

    But I agree I think a passion is critical for success at anything.. an irrational passion is even better :) 

    1Reply
  • Bob Okenwa
    Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
    5y

    @Naomi Moore

    Buy one strong rental property that doesn't need much work, and make sure you buy in a good area that will produce good tenants. Get your feet wet by finding something that is lower risk, which will more than likely have a lower yield, but that's ok for now. The idea is to learn if RE investing is something you can become passionate about and eventually good at. Education and experience are worth their weight in gold. Take the time to learn the ins and outs and surround yourself with people who know what they're doing and have had success in real estate. This should help you on your path.

    30 rentals is dreaming a little large at this moment. And it might not be 30 rentals with that $4M. You'd have to factor in closing and rehab costs as well.

    It's more imporant to focus on getting the first one done and learning processes from their on out. The journey of a thousand miles begins with a single step. 

    1Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    5y

    Buy 1 to test the waters. You can BRRR, go into Multi, STR, etc. You are savvy in business so scaling won't be hard. Listen to podcasts and videos to find a strategy you can learn and love. Be careful with partnering or mentorships off the bat, you can get strung along if you aren't careful. Are you going to start another internet business? Also curious how old are you?

    2Reply
  • Tanner Crawley
    Realtor · Lone Tree, CO · Member since 2017 · 139 posts · 112 votes
    5y

    @Naomi Moore

    Hiring someone to manage $4M is going to be prohibitively expensive.     Someone who is a competent property manager, financial analyst, asset manager, and good at acquisitions is going to cost a lot. If this salary is just a flat $100,000 that is 2.5% of your capital annually. The math is not going to work. For comparison, a professionally managed fund with principals having 40+ years of experience might charge you 2% of invested equity annually. There are funds that do 1% or 1.5%. 

    With that kind of money you are an accredited investor and have access to private investments. I would find some compelling funds to allocate some money to. We have ground-up multifamily developments and retail acquisitions available here in Denver with a projected IRR of 20-25%. We also have some less risky acquisitions with long-term tenants already in place. These are usually projected at 12-14% IRR. Minimum investments are typically $200,000 so you can choose how much to invest in a single fund or project. This could be a good way to diversify and spread the money between a few different strategies/target markets.

    There are funds like this everywhere that will probably outperform your own returns if you were to just jump in. That being said I would look for funds that align their fees with your success through a small asset management fee/ most of their fees tied to the asset performance. You can also negotiate a preferred return which must be paid to you before they can collect any further fees.

    Private funds usually have the deepest network, incredible access to capital, strong deal flow, and experienced managers. They often outperform individual investors if we exclude owner-occupied financing mechanisms which you wouldn't be able to use at scale with $4M anyways.

    TLDR:
    You can invest privately through real estate funds. Minimums are usually $200,000 per investment. 
    Pros
    -Low effort
    -Experienced managers
    -Strong returns
    -Usually low risk (preferred returns of 8-12%, often diversified)
    Cons
    -Fees can reduce potential upside (can be 15-20% of returns above 8-12%)
    -Illiquid (you are committed to a certain hold period)
    -Little or no control

    2Reply
  • Tanner Crawley
    Realtor · Lone Tree, CO · Member since 2017 · 139 posts · 112 votes
    5y
    Originally posted by @Naomi Moore:

    Nathan:

    I made the 4m an internet entrepreneur, I made several million with my first business but it was my second (Amazon) business that I sold which made a lot.  It has brought me up to 5 million net worth. 

    Can I replicate what I have done?  Honestly I never know. When I start a new project I start all over again and its hard to feel confident with it.  

    I just thought real estate might be more stable, so I posted in here with a dream and a "what if" situation.  

    10k a month is not that much money, you're correct.  No, I am not salivating over it.  But, if rental RE something scalable and fairly secure, I am interested in it.  

    I have a wealth manager but the returns are not as exciting so I thought I'd do a few what-ifs with real estate.  

    How long ago did you sell your business? How much of it is allocated to capital gains vs ordinary income? You could defer any portion that is capital gains and get some long-term tax benefits by investing in Opportunity Zones.

    0Reply
  • Naomi Moore
    OP
    Member since 2021 · 13 posts · 16 votes
    5y

    Tanner:

    Ha, yeah I actually looked into that but was too late with it.  I sold it in Sept 2020.

    How do I respond to individual people on this forum?

    0Reply
  • Patrick M.
    Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    5y

    I am hesitant to reply to this because the original post lacks the financial sophistication of someone who knows how to earn and deploy money. Nevertheless, this is what I would recommend:

    Take $3,700,000 and put it into a vanguard index fund that tracks the whole market or the S&P 500. I would then take $50,000 and open a business account. I would look to deploy no greater than $150,000 on an investment property and have $100,000 in savings.

    You will have found yourself in a far-far better starting position then the majority of millionaire property investors on here. And as we all know- success breeds the drive and desire to find more properties and opportunities. But if you fail you can move on to other endeavors, and as someone pointed out- you will have still earned in the market.

    0Reply
  • Naomi Moore
    OP
    Member since 2021 · 13 posts · 16 votes
    5y

    I know how to earn money primarily by putting things in front of people that want them.  I am not sure if I am sophisticated, so I guess maybe you were right.

    I am more of a creative/inventive type than a financial type 

    And you're right -- I wouldn't say I am great at deploying money.  Right now its all invested with a wealth management group, but I feel like RE would be more lucrative. 

    I am not experienced with investing (the guy does it for me) and have no experience in RE.   That is why I posted on here.

    I don't really know what a vanguard index fund is, but I think its money safely spread across the market.  I think I am already doing that but I will look more into it.  

    2Reply
  • Patrick M.
    Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    5y

    @Naomi Moore the bottom line is that you should not be throwing everything you have into a new venture even if you have all of the book smarts in the world. We all have to deal with the risk in its various forms, depending on the investment, and you may not have the stomach for it- be it tenants, property managers or neighbors.

    I would get a handle on you finances with the "wealth management group" and see if you are really making out better then you would be managing your own wealth through indexes. You should know what markets your money is deployed in- not just "guessing"

    Good luck. 

    0Reply
  • Victor SteffenBusiness Member
    Investor · Austin, TX · Member since 2017 · 352 posts · 374 votes
    5y

    @Naomi Moore

    It’s funny- just had a very similar conversation. I would find an asset based lender, set aside 250k as a slush fund, and lever the rest into rent by the room houses in growing cities (Austin, boise, Idaho falls, Provo, Tampa for example). Buy 30-40 homes with 25% down on each. Might take a year or two to put your team in place and buy all the real estate. I love the thought of leveraging into a large portfolio, then hitting your goals and focusing on paying them all down and really increasing the cash yield. Thanks for the thought provoker 😎

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    2Reply
    • Michael Haynes
      Investor · Tampa, FL · Member since 2016 · 679 posts · 288 votes
      5y
      Originally posted by @Victor Steffen:

      @Naomi Moore

      It’s funny- just had a very similar conversation. I would find an asset based lender, set aside 250k as a slush fund, and lever the rest into rent by the room houses in growing cities (Austin, boise, Idaho falls, Provo, Tampa for example). Buy 30-40 homes with 25% down on each. Might take a year or two to put your team in place and buy all the real estate. I love the thought of leveraging into a large portfolio, then hitting your goals and focusing on paying them all down and really increasing the cash yield. Thanks for the thought provoker 😎

      Hello Naomi Moore, you question is what every successful Doctor and Lawyer type has encountered. When I first got to Miami, Florida forty years ago I worked with a Handyman and he did repairs for those Doctors and Lawyers. They had the idea that they would have to buy enough "doors" to be able to afford full-time Management. They did not consider the increased Equity advantages to investing in Commercial properties of more than four doors. They needed to park their Money in a Self-managed, Passive Investment which is why the BP members end up suggesting you Invest in Syndcations when you have a lot of Money to Invest. You can expect to get 3 to 6%, before Taxes if that appeals to you. The idea of buying hundreds or thousands of Single Family Homes is a nightmare that Black Rock and the Hedge Funds are able to do with the Fed's Zero Interest Money and either Loan it at 3% or buy thousands of SFH's to net 3%. With the new Administration waging War on our Energy Production, we now have Inflation at greater than 5%. So, you have to make more than 6% on your Buy and Hold, Passive Investment in order to show any possible Profit after Tax. I have always looked for Tax-free and Tax-deferred investments. That would suggest things like Section 8 properties or Opportunity Investment Zones that are designated by the Government. Look at the Hotels that are getting big Government Money, our Taxes, to house all the Illegal Immigrants that this Administration has flooding across our borders. Almost no one on BP ever talks about playing the Bank and learning how to Buy and Sell Notes. Just call your local Hard Money Lenders and shop around for a partnership to put your 3 Million to work.

      0Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    5y

    @Naomi Moore The most fatal mistakes are what you missed, and that is the framework of making the best roi SAFELY, preserving your $4m capital. If you have 0 care for risk level well hell, let's go for it and do some Air-America crazy sh#t in say the Philippines, and go for a 180X factor...... if we don't get shot in the process, or realize the 97.89% probability of failure and loss of everything. 

    I have worked with some of the wealthiest persons and 100% of them have a shared trait; EVERYTHING is first viewed in the lens of "what is the risk potential". 

    The intelligent answer to this question is always the same; LEVERAGE. Now what your are maybe looking for is a nuts and bolts answer, an ABC 123 answer of step by step what to do, how etc., and it will be wrong, absolutely without doubt. The "how to" is a river, ever changing and moving so it can be wrong from time, or the simply foundational fact that competition sucks and those who can will work to crush it at any and every potential. Think of the law of competition like the law of money, those who say money is evil, don't have any. Those who say competition is good, are not in a position to have any. 

    How would I deploy $4m, leverage. How would I assure it's best performance and safety, human leverage and opportunity leverage. The nuts and bolts, that answer comes with a price tag. 

    1Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    5y

    @Naomi Moore

    I have a supply of ultra-rare beans with supernatural properties. Willing to sell or trade. Guaranteed results.

    If you're not into bean investments, I understand. We also have seminars teaching you how to quadruple your money in formed and flaked pork products.

    2Reply
  • Matthew LoPiccolo
    Flipper/Rehabber · Canton, GA · Member since 2021 · 32 posts · 27 votes
    5y

    @Naomi Moore

    Bitcoin and lottery tickets. It’s a win win

    1Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Naomi Moore:

    Joe S: 

    “What if” game again.

    If I would've never said "what if", I wouldn't have had entrepreneurial success that I've had.  Saying 'what if', dreaming, taking risks, and actually looking for shortcuts / leverage is actually a big factor to what's made me successful. 

    It appears by your other statements you have four million already to invest. That’s a whole different story. There are tons of threads where people are basically broke and they’re fantasizing what they would do with a few million that they don’t have. Congratulations on your 4 million to invest. :-)

    1Reply
  • Patrick M.
    Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    5y

    It reminds me of that viral meme interview:"Sir, what will you do if you win the lottery?"

    "Cocaine and hookers!"

    2Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Matthew LoPiccolo:

    @Naomi Moore

    Bitcoin and lottery tickets. It’s a win win

    I’m hoping you are just kidding and that the poster will not take your word for this. :-)

    0Reply
  • Matthew LoPiccolo
    Flipper/Rehabber · Canton, GA · Member since 2021 · 32 posts · 27 votes
    5y

    @Joe S.

    Definitely a joke, but with a really, really, really risky potential to double your investment.

    That kind of money, you should be confident where you’re placing it IMO

    No online opinion would sway my decision after reaching that landmark.

    1Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    5y

    @Naomi Moore if you have $4M invest in passively into class A shares in a syndication. Do nothing, get a 10% return ($400k) and get your money back later.

    [email protected]512-888-9122
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    0Reply
  • Matt M.
    Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    5y

    1. I'd removed your full name from your profile since you've announced having this much money. This is an online public forum.

    2. I'd buy 1 or 2 vacation spots to airbnb AND for you to use for fun.

    3. Put the rest in a few apartment syndications. Hands off approach to RE investing. 

    4. Save 10% for rainy day fund. 

    0Reply
    • Naomi Moore
      OP
      Member since 2021 · 13 posts · 16 votes
      5y
      Originally posted by @Matt M.:

      1. I'd removed your full name from your profile since you've announced having this much money. This is an online public forum.

      2. I'd buy 1 or 2 vacation spots to airbnb AND for you to use for fun.

      3. Put the rest in a few apartment syndications. Hands off approach to RE investing. 

      4. Save 10% for rainy day fund. 

      Its not my real name. I am really a dude actually :)

      0Reply
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