How should I invest $2 million

Question

I’m in the process of selling my business(food) and the building it’s located in to my partner, I will net about $2m for my 1/3 of everything.

I want to re-invest most of this money( after I pay off all my bullshit debt about$70k)  to generate the most income possible with growth potential( more on the conservative side as this is my life’s work), I’ve been thinking nnn properties with investment grade tenants or multi unit residential. I need some advise or direction, I don’t want to make the wrong choice.

Thanks Joseph

Mike Dymski · Answer

Congrats on the sale. Decide if you want to be active or passive and that will narrow down your possible strategies. For example, you can find a broker who specializes in NNN and end up pretty passive.  Other the other hand, sourcing multifamily residential will be a more active strategy. If you want to be passive, investing in syndications is another alternative. And watch out for the crooked sharks...they see $2 million on a public forum and they start circling.

Dave Foster · Answer

@Joseph Falco, Your sale will include 3 components - Land/building, FFE (furnishings fixtures and equipment) and good will (or blue sky or profit premium).  Only the land/building portion is able to be 1031d.  However a 1031 of the land/building would allow you to defer all tax on the profit and depreciation recapture from that part of the sale.

The portion allocated to good will is just profit and taxable.  So try not to allocate any portion of your sale to that.  Good will includes things like intellectual property, trademarks etc.

The portion allocated to FFE is also taxable but it has also probably been treated with accelerated depreciation of some sort. You also want as little as possible of the purchase allocated to this.  Most folks will try to match their adjusted cost basis with the sale portion allocated to the FFE of the business so there is little or no depreciation recapture for the FFE.

Whatever allocations for good will and FFE you end up with can be used to pay off those pesky personal bills.  Meanwhile you can then do a 1031 exchange on the land/building portion of your sale and defer all of the tax and depreciation recapture from that sale.

Investment grade (national credit tenant) NNNs are the sure way to go to make this your legacy contribution.  Cap rates will rise with time.  Income is most certain.  And there's actually some out there that can be had with decent starting cap rates.  Debt can kill the return.  But your kind of cash makes for a very nice down payment to get some extended amortization terms.

Jay Hinrichs · Answer

well if your going to find yourself unemployed you may want to invest locally and be more hands on just to give you something to do and watch over your investments..

I think diversification would be in order..  Plenty of opportunities in the real estate game these days.

being a lender though done right can be pretty passive and returns though not tax sheltered can be pretty nice and most are short term so you have some liquidity.. and you can lend locally.. so you have a good pulse on what your laying your money out for.. a good broker can help with this as well.

So basically I think you got to figure out how much control you want to have..  for instance syndication generally speaking you have no control.. your success if predicated on the sponsor and the asset.

But as everyone has mentioned  LOTS of options..  but I think @Dave Foster@Amit M. give good advice figure out tax first and foremost that could dictate what you do with a portion of your proceeds..

And depending on your age and what U like to do  There is not many investments more passive than buying a nice chunk of timber ground.  Although this is somewhat age dependent.

Alina Trigub · Answer

@Joseph Falco

1) Congrats on the success with your current business!

2) I'd refrain from advertising on social media (like BP) how much funds I have to invest!

3) Decide whether you want to be active or passive.https://www.biggerpockets.com/member-blogs/10850/84064-what-type-of-investor-to-be-when-i-grow-up-active-or-passiv4) Research various niches available within the option you pick in #3 above. Weigh in all the pros and cons for your personal case

5) Educate yourself on the niche you select.

6) Only after you complete step #5 above and fully understand what you're investing in, take action.

Remember, if you're good in making decent money in your food business, then consider sticking to it! Maybe it means that passive RE options are better for you, but you make that determination for yourself.

Need more help, feel free to reach out.

Account Closed · Answer

@Joseph Falco congrats, you have completed the first step to having a million dollars in the stock market.  In all seriousness congrats, nice job.  Its also great to see you are not assuming that since you were successful in one area you can replicate that success without doing any research.

I like the NNN recommendation, that is a great long term play to build some lasting wealth.  If you are looking to 1031 into a large project check out offerings in a DSTs (Delaware Statutory Trusts).

Brent Shields · Answer

The
NNN properties I had were not paying much, so I sold most of them
along with all my single family rentals and all the notes I could.  I
started investing in syndicated apartment deals, they are more
passive and pay better than any of the previous investments I had. If
anyone would like to know more about how I invest please click here and send me a
message I would be happy to explain.

Chris Virgil-Stone · Answer

The first steps that any prospective real estate investor should take are 1. Goal Set and 2. Educate.

Goal Set

Why are you setting goals before you even know where or how to invest? Because without a clear path of where you want to be, you will never reach your goal. To be clear, your goal is what you want to get out of real estate, not what kind of portfolio you want to hold. Your goal should be fueled by your WHY, which is your motivation for investing in the first place. Some people want extra income for retirement, to fund religious missions, control over their investments, tax advantages, freedom from their job, funding for their kids’ future, etc. For me, my WHY is my family and community. My goal is financial freedom, where I can leave my job to spend more time with my wife, kids and educate our future generations on finance and money- something not taught in our schools today.

Defining your goal allows you to concentrate your education on what will help you achieve that goal. Without the clear direction, you will be learning about anything and everything real estate oriented, taking time and energy away from that which is most impactful. My goal demands achieving a high amount of cash flow over a short time period which means I may need to be more active in my investments, focus on value-add deals and utilize partnerships for larger projects. I know that if I come across turn-key projects, I don’t need to waste any time analyzing them, as they don’t fit my criteria. That being said, just because something doesn’t fit specific criterion doesn’t mean you can’t be creative and make a profit. Whatever you hope to achieve through real estate, defining your goal is the first step, as that will direct what types of investments you pursue.

Educate

This step may sound like a no brainer to some, but there are prospective investors believe real estate investing is a straight and narrow road with one clear path. Fortunately, it is not. There are countless ways to invest in real estate- residential buy & hold, flipping*, value-add (BRRRR), wholesaling*, commercial, hard money lending, development, land, tax liens, new construction, crowdfunding, mobile home parks, short-term rentals, etc. On top of these avenues for investment, there are endless ways to structure deals- partnering, owner financing, conventional financing, lease option, syndication, etc. On top of these avenues for structuring deals, there are many levers you can pull to make deals more favorable and provide higher returns.

There’s no one right RE investment vehicle for everyone, so I would be skeptical of anyone who told you where to put your money and time. You also don’t need to be an expert to start investing. When I suggest that you educate yourself before investing, it is so that you choose the right direction for you to achieve your goals. It’s my opinion that you don’t need to know the ins and outs of an investment before getting started, but you should at the very minimum understand at a high level how it works and the risks and benefits of that specific investment vehicle. I always recommend reading books, listening to podcasts and browsing forums posts of those who have already done what you’re trying to achieve. I am not a genius, so I would rather replicate than attempt to re-create the wheel.

John Fortes · Answer

Congratulations on coming full circle with your life's work. Exciting times.

What you can suggest is allocating some capital in passive investments while working with some capital on active investments on that NNN side that you are seeking. If you don't have experience, find someone who does and partner with them and learn the process.

Otherwise, you can invest passively and somewhat ride into the sunset. Happy investing!

Bjorik Mutize · Answer

Whatever you do, don't buy a jet.

How should I invest $2 million

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