4 million family fund
So i’ve been busting my head on what to do about this. My dad and my 2 uncles have 6 million in real estate that they personally own one third each. We’re four kids and the uncles are willing to help us grow the family fund. They real estate is paid for and brings in much below market return of 250k revenue and 100k profit. Were thinking of putting the RE in a partnership owned by the uncles and refinance it to loan around 4M to a corporation owned by the kids.
What should we do with this money? Invest in a SMBs, stock market, real estate, crypto?
My goal would obviously be for the corp to cover the debt service of the partnership by paying off the loan and keep profits in the corp.
Be candid, be critical, be creative please i really need this to work.
If you’re looking for long term sustainable wealth I see two options… you take the $4 mil and you buy crypto calls or you buy a few new cars and look to flip them.
Why don't you first improve the properties and get the cash on cash back to around market rates? At that point you will comfortably be able to cover the debt service such that you don't, "need this to work," which is a weak frame to approach any kind of commercial opportunity with - scared money doesn't make money. From there, you might not even feel the need to expand into things you don't know much about, and instead keep growing the real estate business. Just my two cents on this.
Thanks for your feedback! The thing is that it’s not viable to invest so much in the current real estate, its far out of the city, its by a riverbed and its not a constructible zone so no insurance, the existing houses/cottages have long lasting tenants that pay low rent. Or have shit tenants because of the location, price, and overall quality. No young couple willing to pay that price will chose our location rather than a spot in the city. The urgency in i need this to work is mostly about my uncle being old and i need to find a transition plan quick, the goal is to have it remain in our property but we’re wondering the best way to go about it. I still think staying in real estate is a good idea, my angle on exploring other business opportunities is because the corporate tax rate on rental income in canada is complete shit
If it's returning below market rates and you have feasible way to change that due to structural issues with the deal, why not sell it off? Sounds like dead money. Not sure when you bought this, but given that property values have risen since the pandemic you might still be walking away with a healthy profit even if you price it at a discount to get out. I'd rather re-invest into something else that could grow. You would also avoid a cash out refi on what seems like a weak deal which would reduce your financial risks, as well as allow for a cleaner split of the assets amongst you all.
Maybe coming up with a thesis and an approach to generating a return before refinancing and getting access to funds?
Act like the money isn't there, do your homework, find markets, prove concept and make sure the returns are there on paper, and then push for access to capital... that's the way any advisor would probably outline for you to approach the situation, GL.
Fan of SMB's, also a fan of Crypto however Crypto investing is for money you can afford to lose (so if you did maybe go small amount would be my take), stick with basics, find what makes gd RE deals and gd SMB deals invest and and go from there.
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