What would you do with 100k cash and 6 undisturbed months?

Question

WIth 100K cash and 6 months to focus on success, what aspect of real estate would you choose to concentrate on and what would be your game plan for building wealth?

The money in question is my savings and I have separate funds to take care of me for about 8 months. I don't have any debt, and at this point I do not have an income. Ideally, I would like to establish an income on which to rely for the future...

Thanks for the insights!

Jon Holdman · Answer

I don't really believe you can walk away with $1000 a month in true cash flow out of $1400 a month in rent.  Expenses (including vacancy and long term capital investments) just aren't that low.  If you pay cash, $700 would be about the best you could do, IMHO.

Really, you want to do something that will let you make yourself more valuable and better able to earn once the six months are up.

One route is to learn something.  A college degree in some engineering discipline is a route to a good job (that's all most real estate investing is, by the way.)  Won't happen is six months, though.  But there are number of short term certifications that will almost certainly get you a job that pays better than $20K a year.

Buying some sort of business is another alternative.  Either a going concern in an area you know something about or a franchise at least has the possibility of a nice income.

For that matter, if you want to be close to real estate a handyman type business could turn a decent income.  Six months is time to learn and $100K will give you a nice cushion to getting started.

Get a real estate license and start managing properties.  That's very quick to do.  Combine that with the handman skills and you could pull down 15-20% of the gross rents of the properties you're managing.  Managing 20 of those section 8 properties you mention would not, IMHO, be a full time job, and if you're doing both the management and maintenance and collecting 15% off the top you're making $50K a year.  Expand that into a business over a few years where you have systems in place and employees doing most of the leg work and you can make a nice income with not a lot of effort.

If you're looking for truly passive income, like owning a NNN property, you just don't yet have enough cash.  If it was a million bucks, it might be possible.  $100K just isn't enough.  But it is enough to parley into a business that will make you a decent income.

Paul B. · Answer

$100K and 6 months without spousal or paternal obligations?

You'd find me at the Venetian's poker room...

Jake C. · Answer

J Scott, where Im moving "back" to is out of the country. Opportunity seems to be in the States at the moment so...

Deuce, I have non existent credit. Not bad credit, just non existent. I'm working on it though :)

Financexaminer, I hear what you're saying! Sounds like it could be very profitable...but I see myself doing that only after I've gained more of a foothold in real estate myself.

Jon, I can tell from your posts and especially your last one on this thread that you are a very wise man. I have thought about and would LOVE to start a management company as you described, but like Ive said...Im moving out of the country! My wife is American but grew up outside of the States. She absolutely loves where she spent her childhood and wants to raise our children there...so I must keep her happy and move back. Ya gotta do what ya gotta do!

Bill Gulley · Answer

Jon is right, TF loans will not float everyday, but in your area, I would shhot for three deals a week. If you market yourself to brokers (whoyou wouldneed to go throuh unless you get into the business) 10 brokers in the windy City shouldkeep your money moving. Then  there are the Realtors whoneed bridge loans to get deals done, another safe bet since you can take a security interest in twoproperties, the one needed to be sold and the one being purchased.

Might consider partnerships with landlords, investors buying. You be the money guy, let them take the headaches on the Section 8 properties.

You might consider the paper game, buying notes and flipping those for a profit, that's easy and quick and your returns can be easily doubled in a year.

Speaking of paper, I shyed away from mobile homes, but financing them with park owners and finance the owner.

You're in a good position to do several small deals in a partnership. It does not have to be real estate. You could finance inventory for a contracted fabrication shop, machine shop.

Business only transactions require short term financing outside the banking arena too. Knowing a good small business broker can bring you all kinds of deals.

There are tons of newbies here that want to dooptions and they usually will need money for the option price, another partnership possibility.

Staying with one strategy to keep the velocity of your money moving can be a challenge, it usually takes an open mind, being receptive to all kinds of transactions and in the beginning, knowing a good attorney that can keep your money secured properly and identify the risks. After having done somedeals, you will pick up as to what to do and when.

Paul B. · Answer

Assuming that I was hamstrung by not having any income with which to secure financing from traditional sources, I would probably try to develop a few private lender relationships and use the $100K as my down payment on a combination of flips and long-term rentals.

J Scott · Answer

This still doesn't answer the question, "What are your goals?"

If you want to move back to where you're from, why not move back first, and focus your real estate investments there instead of where you are (but where you don't plan to be in 6 months).

Many real estate strategies/deals take more than 6 months to play out, so having a deadline where you plan to move in 6 months can really limit your ability to succeed.

Jake C. · Answer

I have never bought a property before. I'm a risky guy by nature but I need my first deal to be a good one so that I don't get turned off. I would like to move back to where I came from as soon as possible, I only came in to establish something. If whatever I end up doing is successful, I suppose I would make trips every now and then to slowly build things up.

Jake C. · Answer

Well Jon, I appreciate your candor! Yes, after just a bit of research I dont think the lending business will help me accomplish my goals. I came to Chicago looking to get into Section 8 housing. Its not unheard of to be making 25% annually around here. 40K into a property thats renting for $1400, walking away with about $1K a month. I figure if I can line up two or three, I'll already be on my way...

J Scott · Answer

Can you give us a bit more information?

For example:

- How much real estate experience do you have (and what is it)?
- How much risk are you willing to take with the money?
- Do you need to have enough cash flow at the end of 6 months to continue to live without a job?  If so, how much would you need?
- Are you okay with spending that 6 months mostly learning and building a skill where you can continue after you get a full-time job?  If so, how much time will you have ongoing once you get the job?

Not knowing any of that info, my suggestion would probably be notes or transactional funding (as others said).  But, depending on your goals after 6 months, I might suggest landlording or flipping.

I might even suggest getting your real estate license and learning to represent buyers/sellers (among other strategies) if your goal is to parlay the 6 months into not having to get a full-time job...

Jon Holdman · Answer

My first thoughts ran in the same direction as Pauls, but I find I don't really have the patience for poker nor do I think that would generate long term income.

To be honest, $100K isn't going to directly translate into a long term livable income.  Its not really enough money to be very effective with either transactional funding or hard money, and with either I think you'd be doing good to squeeze out 12% long term returns.  Hard money is lumpy in that deals are different sized and you can't keep all your money invested all the time.  You also have dead times between when one loan pays off and another can be started.  Transactional lending will be even more like that.  Yeah you may get 2% for one day's investment, but its not going to come out one day and go back in the next.

If you're in the right spot, fix and flips could potentially generate something like $30-40K a year from that money.  That's two $150K ARV deals a year, each giving a $15-20K profit.  Since you're taking the profits as income, your business doesn't grow, though.

If you leverage that into $400K, and buy 16 $25K units that rent for $500 a piece and generate $100/unit/month in real cash flow you're looking at $19K a year.  I think that would be a real challenge to pull of in six months and without any W2 income.  But perhaps in the right spot and with a number of creative deals, it might be possible.

The cynical side of me says the most profitable approach would be to become a guru.  Buy a nice suit, put together some DVDs and CDs, travel around and pitch home study courses and mentorships.  Doesn't take many students paying $1000 a month to make $20K a year.  Like two.

What would you do with 100k cash and 6 undisturbed months?

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