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You have $500,000.00 cash, what do you do?

15,683 Views | 81 Replies | Last: 3 yr ago by gvine07
AgSoccer2007
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all you entrepreneurs out there, where would your entrepreneurial spirit take you if you had the cash to start with?
CS78
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$50k in basic ammunition (yes serious but only at the right price), $150k to flip houses, $300k for down payment money on financed rental homes (approx 20 homes). Use profits from 3-4 flips per year to buy additional 2-3 rentals per year.
ac04
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$50k in ammo?
CS78
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quote:
$50k in ammo?


Don't knock it til you've tried it. You should have seen the email I got from my CPA when reviewing bank statements. But I'm also the type that will buy and sell anything if I'm knowledgeable on the market and the numbers are right.

[This message has been edited by CS78 (edited 10/9/2013 1:15a).]
techno-ag
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So you're the one buying up everything at Academy!
wessimo
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20 rental homes? Hope you don't have a day job.
2012Ag
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quote:
$50k in basic ammunition (yes serious but only at the right price), $150k to flip houses, $300k for down payment money on financed rental homes (approx 20 homes). Use profits from 3-4 flips per year to buy additional 2-3 rentals per year.


This is pretty much my online GTA V life.
claym711
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Probably use it to finance a small O&G production property.
CS78
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20 rental homes? Hope you don't have a day job.


Currently sitting at 28 rental units and maintaining the day job too. Property manager is managing 12 of those. Its a grind but its worth it and you can always have a prop manager handle as many or as few as you like depending on your other obligations. Ill be able to ditch the day job and manage them all myself within 6-12 months. I wont be rich any time soon but its as close to a sure thing as you can get long term. Rock solid financial independence is what its all about for me. Anybody with the will can do it but its dam sure not for everybody. It does not require a big wad of cash.

The other option is keep $30k cash reserve and use $470K to pay cash for 5-6 rentals. Lot less headache with a lot less return.

[This message has been edited by CS78 (edited 10/9/2013 9:08a).]
JD Shellnut
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Sounds like you have a good thing going cs78. I would love to do something similar but my job keeps me out of town for months at a time. Just doesn't seem like much money for down payments on 20 rent houses. Are most of your rental homes lower income houses?
AgSoccer2007
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My fear with lower income rental homes is the type of people who live in them and the damage you can expect.
Whitetail
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Generally, the higher the risk (expanding on the lower income comment), the higher the return.
CS78
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Are most of your rental homes lower income houses?


I mix it up with everything from low income multi-family in the hood to middle income single family in decent parts of CS. Purchase price everywhere from $20k to $120K. They can all do well if the numbers are right. The key is to match the purchase price with the rent and tenant type. My bottom income properties have gross monthly rents of 3% purchase price. That helps buffer all the cost and headache of dealing with those types. Top end stuff is about 1.1-1.2% of purchase price. Much lower income but not near the issues.

On the down payment/finance end- anybody that plans to do a lot of active investing is well served by establishing a relationship with a portfolio style in house lender. 15-20% down is the norm. Higher rates but much lower closing cost. They are typically much easier and faster to deal with then any of the big bank loans.

[This message has been edited by CS78 (edited 10/9/2013 1:05p).]
ramirez78
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Buy longterm rental properties with positive cash flow. You can probably get 3 good houses in the 100k to 150k range.
ac04
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wait is the $50k ammo an investment? i assumed you were just an insane person preparing for world war 3
CS78
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wait is the $50k ammo an investment? i assumed you were just an insane person preparing for world war 3


Both!
Colt98
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I currently have 17 duplexes, 5 single families, I 10unit complex, 3 commercial properties. I still have my day job. Although I probably don't need to be. My plan is the bulk of them will be paid off in 12-15 years when my kids are out of college. There are small headaches from time to time(mainly the 10 unit- low income, but I make my largest return on it). My goal is to have 200 doors in 10 years. I use to flip a house or two every year, havent in two years, that part has been a little harder with the day job. But that could change after this year. Real estate is always a good option if you are comfortable with it. If not you can move backwards pretty quick.
AgSoccer2007
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dp

[This message has been edited by AgSoccer2007 (edited 10/9/2013 7:38p).]
AgSoccer2007
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quote:
Real estate is always a good option if you are comfortable with it. If not you can move backwards pretty quick.


can you expand on that?
AgSoccer2007
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This is what I am wondering...

I see stuff about people making profit buying real estate with loans (hence a mortgage), and doing pricey remodel work to flip, or renting out the property a xx dollars.

I've always wondered where the risk is if the cash is available to purchase without messing with loans and mortgages, and all the remodel work can be done with personal ability to do all the work yourself. (and also have the connections to the type of people and companies to get materials below-retail).
Colt98
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You limit most risk if you pay 100% cash for everything. I think you limit some opportunity to. Leveraging can multiple your returns. Of course that brings in more risk. Some people are not cut out to be landlords. Just remember you make your money when you buy the property(by it right!). Recently I could have bought 3-4 properties for cash and had a great investment that would have paid me a little more now, but instead I bought 10 and have around 30% equity in them. They will pay for themselves plus make 15-20% on my cash investment return at current rents over the next 12-15 years while they pay themselves off. Plus it actually freed up more cash so I could look for the next deal/make a few renovations to the current properties so I can raise rents a little over the next year.



[This message has been edited by Colt98 (edited 10/9/2013 8:14p).]
AgSoccer2007
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Do you use a property manager or do you do all of your own work getting your properties leased yourself, Colt?

Can anyone give any personal experience doing it one way or the other with the pros and cons, besides the standard "one costs money, the other costs time"
Colt98
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I have a manager for the small apartment and a group of 10 duplexes. They were managing them when I bought them so I kept them on. I could do it and save some money but I do have a day job. They make it a lot easier. I don't deal with the day to day mess. On my newer stuff I manage them myself.
mazag08
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CS78 and colt98.. what kind of cash on cash returns are you looking for when evaluating a home. I've heard people tell me over 10%, 5%.. yet I've run numbers on a 2% that looked like it would be very profitable in the long run.
Colt98
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10% would be the minimum for me, although I guess I have been fortunate that all of mine are much higher than that. I personally wouldn't go through the headache of being a landlord for 2% net return on cash. You can beat that all day in the stock market. I shoot for at least 15% and then when you figure in depreciation, and capital appreciation of the property your investments return is magnified. Plus I am in the building business so I am able to keep my rehab cost lower than some. They would even be lower if I would actually do the work myself. "I ain't go time for that..."

Now going forward I would like to look into some larger complexes. I would assume that the percentage of return on a larger unit(40+unit apartment) would be lower initially depending on how you buy it.
mazag08
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Do you finance your investments or pay cash?
JD Shellnut
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I'm from rural east texas and I know a few people who buy "gently used" single and double wide trailer homes for say 20k, place them on a half acre of land or less and rent them from 550 to 7 per month. I know unlike homes, trailers do not hold their value over time, but still a strategy that I may go with.
wessimo
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Does Buc-ces franchise? Those places print money. The one off I-10 in luling is now the size of a wal-mart and it is constantly packed. I bet you could open up a knockoff "chuckees" on the other side of the highway and make a killing
sayas2005
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quote:
10% would be the minimum for me, although I guess I have been fortunate that all of mine are much higher than that. I personally wouldn't go through the headache of being a landlord for 2% net return on cash. You can beat that all day in the stock market. I shoot for at least 15% and then when you figure in depreciation, and capital appreciation of the property your investments return is magnified.


Colt98, are you including the principle portion of your mortgage or are you getting 10-15% cash?
Wrec86 Ag
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Daytrading penny stocks!!!

Just think, you find something at 50 cents and it takes a small jump up to 55 cents, you just made $50,000.







edit: this was a joke by the way.... re-read it after I posted and it didn't read as obvious as I thought.

[This message has been edited by Wrec86 Ag (edited 10/10/2013 4:36p).]
GarlandAg2012
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Watchlisted. Working on purchasing my first investment property right now. Had one under contract but the inspection indicated that the foundation was shoddy so I backed out.
Colt98
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That is after I pay PITI and after expenses are paid. It varies a little every year depending in repairs, but that's what I shoot for.

The ones that do better are the lower rent properties. I have to deal with a little more headache with tenants but I have less in the properties. I make less on the higher end properties but have almost zero matainence and tenant issues with them. So that's the trade off.

I do finance the properties. 15 yr notes with at least 20% down.

[This message has been edited by Colt98 (edited 10/10/2013 7:59p).]
mazag08
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I've met multiple people who go the 15 yr route.. some through banks in the form of 5 year balloon payments.
Colt98
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I have a few properties that are fixed for 15yrs. The others are 5-7 yr notes with 15 yr amortization. At the end of those notes I should have more than 50% equity in them, so should not have a problem refinancing. I also have great relationships with small local banks.

The problem I've run into recently is I have people coming up to me all the time wanting to sell their rentals to me(mainly older folks wanting to cash out) and I am running low on capital bc I've purchased more recently than I had planned(deals were to good to pass up). I need a year to build it back up.
claym711
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I generally laugh off ammo comments but I also don't think people realize how close we were just a few years ago to things like ammo having massive value
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