What would you do with $200,000 cash in today's market?

Question

Hey BPI'm looking to crowd source some ideas for some inspiration. If you had $200,000 in cash right now, what would you do with it? I know this depends on your current life situation, but let's hear it!Alternatively, if you want to pick apart my situation and provide me with your two cents feel free to chime in...My situation:Owner of primary residence, one rental locally, self-managed, and one joint venture rental out of Province (I'm in Canada). I've got a decent job making ~$60,000 per year, but it's keeping me crazy busy at the moment without much free time or mental capacity for other projects. I'm hoping to dial back my workload in the next 3 years by replacing my income with cash flow, which will free up some time for me to be a more active investor. Earlier this year, I inhereted a house in NC, which was sold for a $200,000 profit.What I did:Since my workload is so heavy at the moment, I was looking for more passive investments. I would love to buy more property where I am and self-manage, but my market has gotten a bit too expensive for that to work realistically. Instead, I put $150,000 into two syndication deals. One is an apartment complex in Indianapolis. The hope here is to make a return on current undermarket rents while fixing it up and raising rents over the next 5 years. At that point, depending on market conditions, the managers of the deal will decide whether or not to re-finance and return principle or sell and divy out the profits between investors. In the meantime, investors should receive some return quarterly of around 8-10% on average with hope for 15% or better when the deal is closed. The second syndication is currently raw land in NV that a developer will be building out into a townhouse community and selling individual units over the next 3ish years. The investment here is for a 15% return paid on the back end with a share of profits from the sales. The last $50,000 was invested with a note provider. I chose a property in Philadelphia that a turnkey provider needed a loan on and was set up with a note that will pay out 9% per month over a 5 year term. Anyone have any better ideas?

Matt Maurice · Answer

When you have $200k cash, how can your local market be "getting too expensive?". I'm sure what that actually means is the cashflow or COC return is lower than what you find ideal, but personally I think folks jump ship from their local market WAY too fast. Syndications can be great & passive, but there are a ton of people doing them these days and I'm inclined to think not all are qualified. Any development deal is inherently risky and should have an appropriate upside to account for the risk.Now back to the backyard piece... there is no market that you will ever know better than the one you live in. There is no property manager that can do as good a job as a professional self-managed investor. Even if you don't intend to manage it yourself, being local gives you a lot more control over repairs, maintenance and setting cap-ex expectations. Expensive markets tend to get expensiver (ok not a word, but roll with it). A low COC can be incredibly insignificant to the power of appreciation & leverage. All those folks that bought $400k properties 4 years ago that are now worth $500-$600k are taking their appreciation to the bank... to buy more property.

David Barnett · Answer

I'd do one of two things. I'm hoarding cash right now, waiting for things to cool off a bit, or deploy if a really good deal comes by. If you'd like to deploy the cash, I'd consider being a private lender on a shorter term deal (6-9 months max). If the money gets lent out directly, I'd do some very careful vetting to make sure you aren't going to need to foreclose if the property can't sell or a rehabber can't refinance out the BRRRR.

Aaron K. · Answer

@John Humphries my concern with NV would be if the development is in Vegas. That city has had some housing headwinds over the past couple of years and townhomes and new construction are both harder to move in a slowdown. Smaller builders can also be a bit more unreliable and if things were to go south there is nothing to foreclose on of much value unlike your note investment.

Joe White · Answer

This point in the market, we have likely seen an inflection point and we will be seeing the down cycles shortly. Might not be an ideal time to be building new construction, with the intention of selling. The only benefit to building during a recession is that labor and even material costs will go down.

Alina Trigub · Answer

@John Humphries There are tons of posts on this topic. While I understand it may not be a one size fits all solution, but plenty of folks post their advice. Also think about the following: why would you want the world to know how much money you have to invest.Here's one post example: https://www.biggerpockets.com/forums/519/topics/750811-what-would-you-do-with-200k?page=2Also, in terms of whether to be active or passive here's an article to give you some guidance on the direction: https://www.biggerpockets.com/member-blogs/10850/84064-what-type-of-investor-to-be-when-i-grow-up-active-or-passiv

Roni E. · Answer

Hello, the NV I would be safe budget 5 years if not longer. I would be emailing and calling the Developer/GP every 90 days for detailed updates. I would continue to build your cash pile up in the meantime and continue to reinvest the cash coming into further syndications. So build up $50k and invest again.

Aaron K. · Answer

Personally I'd be slightly concerned about the NV syndication but the others sound just fine. I like to have a bit more control so I likely would have gone into SFRs but to each their own.

Steve B. · Answer

@John HumphriesSounds to me like you did a great job with it considering you are short on time. I like the diversification. Hope it all pans out for you.

Troy Sheets · Answer

This is the best piece of advice I've read on this thread yet!

John Humphries · Answer

@Alina Trigub, thanks for the resources and pointing me to basically the exact topic that I put together! BP has gotten so big with posts now that I completely missed that one. Some interesting commentary on that post as well.