But what if you had $500K to invest, where would you put it?

[burro_blasta]

Sorry for the tongue-in-cheek title, but reading the $50k and Side Hustle threads got me wondering what people think about taking your financial game to the next level.

As far as normal wealth building, the name of the game is save like crazy and buy/hold/diversify. But at what point does enough money in the bank become game-changing and what does that look like?

It seems like smart leverage through rental properties are the next logical step in the process, then porta potty franchise empires . For those on here further ahead on their journey, what types of things become available and profitable that can't be done during the early stages? Or maybe it's mostly still just buy a truckload of cheap mutual funds and let it pile up?

[Rmtt]

Originally Posted by burro_blasta

Sorry for the tongue-in-cheek title, but reading the $50k and Side Hustle threads got me wondering what people think about taking your financial game to the next level.

As far as normal wealth building, the name of the game is save like crazy and buy/hold/diversify. But at what point does enough money in the bank become game-changing and what does that look like?

It seems like smart leverage through rental properties are the next logical step in the process, then porta potty franchise empires . For those on here further ahead on their journey, what types of things become available and profitable that can't be done during the early stages? Or maybe it's mostly still just buy a truckload of cheap mutual funds and let it pile up?

Honestly...I would follow corn18 advice he has listed in the other thread for long term investors.

It's what I already do. And the little side hustle is just a means for more cash for me to do what he has posted multiple times.

But I am a bit conservative....and keep probably too much in the bank where it's not doing anything!

[BimmerDimmer6]

Index funds for a year> real estate> then open a business when you refi.

[burro_blasta]

Originally Posted by BimmerDimmer6

Index funds for a year> real estate> then open a business when you refi.

Sounds like the progression that really rich people take.

Long term, figure equity funds will give you ~8% returns and rental properties will give you...13%-15%?

Certainly plenty of risk in rentals but it seems like they're probably the most obvious answer to my question - at some point, just slugging a ton of money into funds means you're missing out on illiquid and/or high-minimum investments that make a huge difference in the long run.

[BimmerDimmer6]

Originally Posted by burro_blasta

Sounds like the progression that really rich people take.

Long term, figure equity funds will give you ~8% returns and rental properties will give you...13%-15%?

Certainly plenty of risk in rentals but it seems like they're probably the most obvious answer to my question - at some point, just slugging a ton of money into funds means you're missing out on illiquid and/or high-minimum investments that make a huge difference in the long run.

Real estate is the way to go if you're buying under market value and can value add.

I love tangible assets... cars, houses, land, physical businesses. The potential to add value to either one of these is limitless.

Utilizing a 1031 tax deferred exchange is a great tool for reinvesting your profits after a sale, as you don't pay any taxes and forces you to grow.

A 1031 is what has enabled me to live a comfortable life as I'm constantly "under the gun" and have to keep buying.

[Rmtt]

Lol....I couldn't be a landlord. I've already told that story though in another thread. I would have to have someone else manage my property.

[BimmerDimmer6]

Originally Posted by Rmtt

Lol....I couldn't be a landlord. I've already told that story though in another thread. I would have to have someone else manage my property.

As strange as it sound you have to remove yourself completely from your tenants. I own over 15 properties and have only met a handful of these people.

I have a guy on salary who manages the leasing and day to day and I handle the backend.

It's a chore, but anything worth having is.

[dreamingat30fps]

Originally Posted by BimmerDimmer6

As strange as it sound you have to remove yourself completely from your tenants. I own over 15 properties and have only met a handful of these people.

I have a guy on salary who manages the leasing and day to day and I handle the backend.

It's a chore, but anything worth having is.

Don't you need to have enough properties to afford to hire a guy? I mean if you have 1 or 2 properties I would imagine having a guy would eat into all your profits. I like the tangible aspect of real estate, but it just seems like a lot of work for little return per property.

[RMNB]

Originally Posted by dreamingat30fps

Don't you need to have enough properties to afford to hire a guy? I mean if you have 1 or 2 properties I would imagine having a guy would eat into all your profits. I like the tangible aspect of real estate, but it just seems like a lot of work for little return per property.

Totally worth it! Don't bother me, I'm on the golf course!

[BimmerDimmer6]

Originally Posted by dreamingat30fps

Don't you need to have enough properties to afford to hire a guy? I mean if you have 1 or 2 properties I would imagine having a guy would eat into all your profits. I like the tangible aspect of real estate, but it just seems like a lot of work for little return per property.

I’m in multi family. The more doors under a single roof, the better. I could run the whole thing in a heartbeat, and did for over 10 years, but is nice to have it on cruise control. That’s until shit hits the fan of course. Which it just has. I couldn’t think of a worse situation right now for landlords. Fortunately I’m not over leveraged and have had no defaults yet, crossing my fingers.

[TrevorM3]

Originally Posted by dreamingat30fps

Don't you need to have enough properties to afford to hire a guy? I mean if you have 1 or 2 properties I would imagine having a guy would eat into all your profits. I like the tangible aspect of real estate, but it just seems like a lot of work for little return per property.

i only have a few properties, no one mangaes them except me. i've actually never looked into having someone manage them, or a company. Too much money. I can do it, why give away your profits. Unless you have 20+ units, then thats different imo. I'm fortunate enough to not have a mortgage on them, so i couldnt imagine having 1, and paying someone to manage on top of that.

[corn18]

I thought leverage was what made RE investing profitable? If I have $100k to invest, I could buy one property for $100k cash and get what, $500/mo rent? Not a great ROIC. But if I buy 4 properties w/ $25k downpayment, I can get a much better ROIC and reduce my risk.

[Humdizzle]

i wouldn't count any income as profit until i had the properties completely paid off. which at 500/month for a 100k house.. would take 200 months 15-16 years to recoup. Thats just me though. i know im over simplifying as theres insurance, property taxes, repairs, variability in housing prices etc.

it is a solid long term plan though if you have the patience for it to pay off.

[BimmerDimmer6]

Originally Posted by corn18

I thought leverage was what made RE investing profitable? If I have $100k to invest, I could buy one property for $100k cash and get what, $500/mo rent? Not a great ROIC. But if I buy 4 properties w/ $25k downpayment, I can get a much better ROIC and reduce my risk.

Yes sir, you've got it! You always play with the banks money. LLC yourself and protect your personal assets. It's how you play the game.
'
There's only two instances where I'm paying cash for a property 1) Cash only auctions (foreclosures) 2) I need to snag a deal quickly so I have better terms and can close quick. And even then, I'm refinancing down the road and pulling my cash out.

[BimmerDimmer6]

Originally Posted by Humdizzle

i wouldn't count any income as profit until i had the properties completely paid off. which at 500/month for a 100k house.. would take 200 months 15-16 years to recoup. Thats just me though. i know im over simplifying as theres insurance, property taxes, repairs, variability in housing prices etc.

it is a solid long term plan though if you have the patience for it to pay off.

Stick to your day job.

[dreamingat30fps]

Originally Posted by 335xi Beast

Totally worth it! Don't bother me, I'm on the golf course!

Probably, but if you are starting out and have 1 property generating a couple hundred bucks a month I would imagine you would be losing money by paying someone to manage it. So in that case you probably couldn't afford to be golfing.

Originally Posted by BimmerDimmer6

I’m in multi family. The more doors under a single roof, the better. I could run the whole thing in a heartbeat, and did for over 10 years, but is nice to have it on cruise control. That’s until shit hits the fan of course. Which it just has. I couldn’t think of a worse situation right now for landlords. Fortunately I’m not over leveraged and have had no defaults yet, crossing my fingers.

That's my point. I'm sure you can have it all managed at some point, but starting out you will have to manage it yourself. Having tried renting my condo that was upside down for like a year... I'm pretty sure I'm not cut out for land lording.

Originally Posted by TrevorM3

i only have a few properties, no one mangaes them except me. i've actually never looked into having someone manage them, or a company. Too much money. I can do it, why give away your profits. Unless you have 20+ units, then thats different imo. I'm fortunate enough to not have a mortgage on them, so i couldnt imagine having 1, and paying someone to manage on top of that.

I think I would prefer flipping... but considering I have no handyman skills... it would probably be riskier than my penny stocks.

[TrevorM3]

Originally Posted by corn18

I thought leverage was what made RE investing profitable? If I have $100k to invest, I could buy one property for $100k cash and get what, $500/mo rent? Not a great ROIC. But if I buy 4 properties w/ $25k downpayment, I can get a much better ROIC and reduce my risk.

everyone has their own though process regarding earning/saving money. I've been fortunate enough to not carry a mortgage, so i much prefer it this way.

[TrevorM3]

Originally Posted by dreamingat30fps

Probably, but if you are starting out and have 1 property generating a couple hundred bucks a month I would imagine you would be losing money by paying someone to manage it. So in that case you probably couldn't afford to be golfing.



That's my point. I'm sure you can have it all managed at some point, but starting out you will have to manage it yourself. Having tried renting my condo that was upside down for like a year... I'm pretty sure I'm not cut out for land lording.



I think I would prefer flipping... but considering I have no handyman skills... it would probably be riskier than my penny stocks.

I'd love to flip. The main problem is i don't have anyeon reliable enough to do the work in the alotted time. I bought a condo back in 2014, found a guy that agreed to do everything (re-tile, cabinets etc) I took him to the store, we purchased literally everything he could need. Told me 3 weeks. Gave him the keys, and said call me when you're finished. Took him almost 2 months. As i'm sure you know, south florida is full of fine workmanship.

[burro_blasta]

Looks like I'm mostly of the same mind as BimmerDimmer and Corn on this stuff.

Been trying to figure out the #s behind all of this, and I think it comes back to my earlier comment that traditional equities give you 7%-8% a year after taxes (hopefully) and so far it seems like rentals can give you 13% or so ROIC (ie, the IC being your down payment and reserve cash) net of everything as long as you're smart and hardworking about it.

7% vs. 13% isn't get-rich-quick money, but over 10-20 years you're talking a significantly different result. Especially if you get lucky with market appreciation and/or are very smart with improvements and you're in the high teens % return range.

I think the other interesting part about rental properties is the entrepreneurial spirit and lifestyle of it all, compared to a salary job/corporate grind, which is why some people (not here) get very evangelical about it.

Going back to the original topic, maybe it's just that having a few hundred grand in the bank gives you the liquidity and down payment ability to open up these opportunities that are nearly double what you'd get in mutual funds in the long run. BUT, you need to do your research, and have the willingness/energy to deal with the 3 Ts (tenants, toilets, and taxes). So the extra return comes at a "cost" but you can afford that cost if you're determined.

Sure, you can get a rental property with only $20k down, but it's going to be a long time until that growth turns that into game changing wealth...even though you're returning twice as much in % terms I feel like it wouldn't be worth the effort for the $ returns at that level.

[TrevorM3]

Originally Posted by burro_blasta

Looks like I'm mostly of the same mind as BimmerDimmer and Corn on this stuff.

Been trying to figure out the #s behind all of this, and I think it comes back to my earlier comment that traditional equities give you 7%-8% a year after taxes (hopefully) and so far it seems like rentals can give you 13% or so ROIC (ie, the IC being your down payment and reserve cash) net of everything as long as you're smart and hardworking about it.

7% vs. 13% isn't get-rich-quick money, but over 10-20 years you're talking a significantly different result. Especially if you get lucky with market appreciation and/or are very smart with improvements and you're in the high teens % return range.

I think the other interesting part about rental properties is the entrepreneurial spirit and lifestyle of it all, compared to a salary job/corporate grind, which is why some people (not here) get very evangelical about it.

Going back to the original topic, maybe it's just that having a few hundred grand in the bank gives you the liquidity and down payment ability to open up these opportunities that are nearly double what you'd get in mutual funds in the long run. BUT, you need to do your research, and have the willingness/energy to deal with the 3 Ts (tenants, toilets, and taxes). So the extra return comes at a "cost" but you can afford that cost if you're determined.

Sure, you can get a rental property with only $20k down, but it's going to be a long time until that growth turns that into game changing wealth...even though you're returning twice as much in % terms I feel like it wouldn't be worth the effort for the $ returns at that level.

Not think, this is absolutely 100% true. Why would i want to "have to" go to work to make a paycheck? Why deal with a boss? Why take shit from anyone? That is the entire concept behind investing. Don't get me wrong, i still have two other careers in which i work 7 days a week. I love to work, but under my own terms. If i get fired, laid off from one, it wouldnt even matter. Not tooting my own horn, but i see so many lifeless bodies at the hospital, struggling to come to work everyday, moaning and complaining, cant retire becuase of bills etc.. It's sad. I strive to NOT ever have to be in that position.

[TrevorM3]

Originally Posted by BimmerDimmer6

Yes sir, you've got it! You always play with the banks money. LLC yourself and protect your personal assets. It's how you play the game.
'
There's only two instances where I'm paying cash for a property 1) Cash only auctions (foreclosures) 2) I need to snag a deal quickly so I have better terms and can close quick. And even then, I'm refinancing down the road and pulling my cash out.

I need to learn more about the LLC, right now all properties are in my name. Advice?

[dsad1]

Originally Posted by corn18

I thought leverage was what made RE investing profitable? If I have $100k to invest, I could buy one property for $100k cash and get what, $500/mo rent? Not a great ROIC. But if I buy 4 properties w/ $25k downpayment, I can get a much better ROIC and reduce my risk.

Not sure how that reduced risk. What happens when a pandemic comes, you lose a quarter of your tenants and now lose all four properties to the bank?

I agree that leveraging assets in a smart way can very much boost returns, but it doesn't reduce risk.