$700K Inheritance- How can I get started in building up my Real Estate portfolio?

My goal is to build up a portfolio of properties worth $10M+ over the next decade or so.

I recently inherited about $700K that I'd like to use towards beginning to pursue this goal. This liquidity will allow me to start with a big swing, and I should be able to add about $100k annually for further expansion.

I come from a finance background- not much experience in RE, and because of that my goal is very vague right now.

My basic plan is to buy a few rental units in an attractive area with the right headwinds for around $2M using leverage, and use rents to pay down debt- and eventually Refi and continue buying more units- and keep repeating. Is that the right way to think about it?

How can I learn the RE market and what should I be thinking about? And who should I be speaking to?

 
Most Helpful

Do you know how to manage real estate?

You'd probably be better served buying a duplex, and living on one level and renting the other.  Get some actual experience in what it means to be a landlord without biting off more than you can chew.

The number of people who think "real estate investing" is just signing a deed and then watching the money flow in, month after month, is truly scary.  Especially on a forum like this, which is way more financially literate than the average person

 

CREnadian:

This - there is a reason big LPs pay considerable sums of fees and promote to GPs to execute on a deal and manage the property long term. This isn't an easy game.

Yes I can appreciate that, but long term I’ll be way better off in the drivers seat.

Sure, there’s a learning curve but the upside is much greater as a GP.

I’m not looking at this as the end all, it’s a stepping stone.

 

High level, I think you've got it. I'm working on a similar plan myself, just without any kind of inheritance to back it. In today's environment, I would recommend you play as conservative as possible though with your underwriting (expenses and income) and do not over lever. If I was in the market to purchase a new rental today, I think I would need around 50% LTV to actually get a positive cash flow. In the past couple of years, I have really struggled with appliances, both cost and availability, and it has really eaten into my bottom line.

 

Geographically what makes the most sense?

Should I stay close to home (nyc) or get started in another part of the country with greater opportunity to expand and become a player in the long term?

I don't want to be a tiny fish in a huge pond. I'm leaning towards betting on an up and an coming area like Myrtle beach etc.

Traveling a couple times a year won't be an issue.

 

aspiringtechnoking:

Geographically what makes the most sense?

Should I stay close to home (nyc) or get started in another part of the country with greater opportunity to expand and become a player in the long term?

I don't want to be a tiny fish in a huge pond. I'm leaning towards betting on an up and an coming area like Myrtle beach etc.

Traveling a couple times a year won't be an issue.

I am echoing what others have said. Invest in a deal sourced and managed by a pro. When I first got into the MF business many years back I opted to invest in a condo instead of my company’s project solely to be “the driver”. I ended up purchasing several more over the next few years and then finally sold around 2020. While I did pretty well financially, those investments were an utterly horrible return on my time. Something you will find more and more important.. There are so many things I didn’t think about and frankly was not aware of when becoming “the driver”.

In regard to your comment on Myrtle Beach.. I have almost 400 units under construction in the area and one of my partners lives there almost full time. In the course of doing business there for the last 4 years I can tell you that just because it’s a smaller growing market doesn’t mean there aren’t highly sophisticated, deep pocketed, and well connected investor/owners. I am highly skeptical of your ability to lock up something that one of the twenty or so people I know down there haven’t already seen and passed on for a reason you would never see.

I say all of this not to discourage you but instead to provide a reality check. I wish someone would have convinced me not invest in those condos! Best of luck.

 

Brother, just kick back a couple glasses of brown liquor, put it all on black and let fate take the wheel. 

I would recommend partnering with some RE friends that live and breath this stuff in the GP and go from there. You value add is the requisite capital for the GP, and your partner would be driving, but you get to learn how its all done without stumbling through the dark yourself, and inevitably fucking up way more than you would in this scenario. 

 

Lots of shit advice here. Sorry for your loss. 

Don't take advice from your buddies from school. Don't start out doing anything except speaking with an accountant and a financial advisor. Many people lose a fucking lot of money getting into RE without knowing what they are doing. If you don't speak with people that deal with these types of lifetime transitions for a career, you are setting yourself up to fail. Reach out to a few of the bigger private banks in your area and ask to can grab coffee with one of the IAs. Be upfront about the liquidity you have because you won't meet their minimums, but someone will likely share some advice / refer you to someone local that can help you.  

 

longtheusa:

Lots of shit advice here. Sorry for your loss. 

Don't take advice from your buddies from school. Don't start out doing anything except speaking with an accountant and a financial advisor. Many people lose a fucking lot of money getting into RE without knowing what they are doing. If you don't speak with people that deal with these types of lifetime transitions for a career, you are setting yourself up to fail. Reach out to a few of the bigger private banks in your area and ask to can grab coffee with one of the IAs. Be upfront about the liquidity you have because you won't meet their minimums, but someone will likely share some advice / refer you to someone local that can help you.  

So I can pay them 1.5% a year for a 60/40 portfolio?

No thanks. Maybe if I was older & busier/lazier…

This isn’t my retirement money…I have 40+ years to work (Hopefully). This is a leap into the real estate business - I’m looking to build a foundation/skill set that I can expand on over time and that will enable me to become wealthy over a few decades.

(I don’t expect to get rich off one small deal but I do think it could start my journey there)

 
aspiringtechnoking

(I don't expect to get rich off one small deal but I do think it could start my journey there)

Well, I'm glad you've at least written the investment off before it has been made, it's the first smart thing you've said on this thread.

I just don't understand the mentality.  You're going to light $700,000 on fire so you can claim you got some experience?  Why not make a smarter, safer investment and get to the same place, but with the equity intact?  You're here complaining about paying someone 1% to advise you, meanwhile you're starting a career in a field you know nothing about and are aggressively resistant to learning about... yeah, this'll end well

 

Send me a private message. I own a firm which specializes in Real Estate lending and have lots of connections with investors.

 

Buy 1 property that you can actively manage as Landlord/Property Manager to understand what is going on (eg. simple things like what paperwork is required, if a toilet blows who will you call). 

With the remainder of the money, invest in local real estate GPs who are open to syndicating portions of the capital stack (typically developers but could also be folks who raise money on a fund-by-fund basis). This will keep the rest of your money "working" and gives you insight into the institutional side of real estate

 

Perferendis modi nihil eos quia cum aut architecto. Explicabo enim tempora facere et ea qui. Reprehenderit architecto et modi nihil omnis consequatur.

Tempora voluptatem dolore vitae porro. Dolorum quod rerum quo voluptas et illo. Quasi et consequuntur nemo illo aut saepe. Aut sapiente error ipsam et ut.

Repudiandae ipsa autem dolorem enim quia molestiae. Aut provident dolorum ea deserunt aut.

Velit quam et repellendus error voluptas veritatis. Natus sunt repudiandae praesentium aliquam. Dolorem sint perferendis enim qui corporis deserunt excepturi veritatis. Repellendus labore repudiandae molestiae quia. Et dolor magnam veritatis nostrum.

Career Advancement Opportunities

May 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Lazard Freres No 98.9%
  • Harris Williams & Co. 25 98.3%
  • Goldman Sachs 17 97.7%
  • JPMorgan Chase 04 97.1%

Overall Employee Satisfaction

May 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.9%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 04 97.1%

Professional Growth Opportunities

May 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.9%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

May 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (21) $373
  • Associates (91) $259
  • 3rd+ Year Analyst (14) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (68) $168
  • 1st Year Analyst (205) $159
  • Intern/Summer Analyst (147) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
BankonBanking's picture
BankonBanking
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
Secyh62's picture
Secyh62
99.0
5
kanon's picture
kanon
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
GameTheory's picture
GameTheory
98.9
9
Jamoldo's picture
Jamoldo
98.8
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”