I quit banking with 5 million bucks. Tell me how to maximize my net worth moving forward.

I quit banking with 5 million net bucks and now I'm trying to figure how to maximize my net worth leveraging this base of capital.
 

Created this to hear people's different thoughts about building wealth and I'll follow along. Assume I can't repeat what I did to initially get the capital due to luck / timing (don't ask bc not the purpose of thread). Assume I don't care about how long it takes to multiply but would need to manage capital preservation / some liquidity due to lack of w-2 income. Early 30s, married in HCOL city with a $2xx,xxx earning spouse.
 

So far I've read up on some franchising opportunities, if I open 8 DD franchises I can expect 800k-1MM annual operating cashflow. Have also thought about putting it all into SPY applying 1:1 leverage in perpetuity. Need to run the numbers on math and sensitivities but would like to build in a cushion for a 35% market draw down without a margin call.
 

Would love to hear your thoughts.

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Comments (66)

Apr 6, 2021 - 3:10pm

Sounds like you are happy to throw your newfound freedom into working on businesses?

You could do the classic index fund route if you didn't want to work so hard.

If you are happy to continue working I might consider putting ~3mm into index funds and using some of the remaining to do a self-funded search fund - do a mini LBO of a small business w/ 5-10mm in EV.

  • Associate 1 in IB - Ind
Apr 6, 2021 - 3:37pm

arbjunkie

Sounds like you are happy to throw your newfound freedom into working on businesses?

You could do the classic index fund route if you didn't want to work so hard.

If you are happy to continue working I might consider putting ~3mm into index funds and using some of the remaining to do a self-funded search fund - do a mini LBO of a small business w/ 5-10mm in EV.

Small business LBO would be interesting but I don't have any background sourcing quality businesses so that would be a hurdle and also would need to avoid overpaying which could be a challenge and would take some time to do the right deal in this environment.

Apr 6, 2021 - 3:51pm

Sounds like GameStop to me

haha it really does 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

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Most Helpful
Apr 6, 2021 - 7:16pm

"don't ask bc not the purpose of thread"

Good luck.

lol I thought this was the purpose of being 'anonymous' - so he/she can answer these questions....

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

  • 2
Apr 6, 2021 - 3:25pm

put 500k each into ChainLink, PolkaDot and Cardano (next generation of Etherium -smart contracts with multiple chains like a hydra, and 1000x faster transaction speed)

This portfolio should 10x over next couple years to overtake bitcoin...they are a currency with actual utility (smart contracts + data linkage/storage)

just google it...you're welcome
  • Associate 1 in IB - Ind
Apr 6, 2021 - 3:34pm

faceslappingcompilation

put 500k each into ChainLink, PolkaDot and Cardano (next generation of Etherium -smart contracts with multiple chains like a hydra, and 1000x faster transaction speed)

This portfolio should 10x over next couple years to overtake bitcoin...they are a currency with actual utility (smart contracts + data linkage/storage)

Thanks I don't have any background with cryptos so I'd just be blindly dumping money 

Apr 6, 2021 - 4:07pm

Invest early in a start-up robotaxi company (i.e. not Tesla since it isn't a start-up). It's the next big thing. It's going to be the first society-transforming invention since the iPhone in 2007. Your investment won't 10x; if it's successful, your investment will 50x or more.

Array

  • 1
Apr 8, 2021 - 10:47pm

Quentis1

What robotaxi company do you have your eye on?

I have some ideas, but the ones I'm thinking of are very, very private and are only in the development stage. But if you got $5 million you can get their attention.

Array

Apr 6, 2021 - 4:08pm

You could buy some houses and rent them out to high earning tenants (less likely to wreck your place). Airbnb possible.
 

Or you could rent houses and Airbnb them out and even hire property managers if you didn't want to deal with all the BS. I've seen people with Airbnb empires making $600K per year in profits. It's scalable.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

  • 1
Apr 6, 2021 - 4:09pm

Elon made $180 million off of PayPal and reinvested most of it into SpaceX, Tesla, and Solar City. The balls on this guy.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Apr 6, 2021 - 6:51pm

Pizz

Not bitcoin, unless you want to lose money. 

$5 million on Bitcoin - he'll be worth $500 million in 10 years riiiiiiiiiiiiiiight

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Apr 6, 2021 - 7:21pm

not bitcoinm but the etherium 2.0 platforms are going to skyrocket...cadano and plokadot are different strategies for smart contracts 2.0 (faster, more distributed, more capability) and chainlink is putting offblockchain data onto the blockchain....these are currenlty around $40 billion (all in the last 6 months) and should 10x within a couple years.

bitcoin is just a store of value...but nothing else.  these smart contract crypto currencies are a store of value + smart contracts...so they have actual utility...and as more projects gte built with them, their value will skyrocket.

smart contracts = value transfers after some event takes place...but an also be linked to blockchain activity...so you can easily do partial ownership of things like real estate, land or whatever...can't easily do that now.....also, crypto banking will be driven off these smart contracts....this is the future

PolkaDot, Cardano, Chainlink....buy all 3

just google it...you're welcome
  • 2
Apr 8, 2021 - 5:53pm

Where are all these "chill $200k jobs"?

Air Traffic Controller obvs - 'super chill'

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

  • Associate 1 in RE - Comm
Apr 8, 2021 - 6:55pm

My dad worked one of these chill 200k jobs. Just work at any F500 in a meaningful corporate role and get promoted (eg not back office). He was never home later than 7 and pulled $500k pre GFC and $300k post until retirement. Post GFC he would come home and take naps during lunch. Obviously that's not as much money in your 50s but he was promoted to that level in his early 30s

Apr 10, 2021 - 12:01pm

Just landed a corporate analysis role at a big tech company after ~5ys of banking. All-in comp is around $160k, so could pretty reasonably hit $200k all-in comp in a few years. 40-45 hours a week (half of it meetings, not actual work) if you really didn't care to add value past your job description. 

Apr 8, 2021 - 6:36pm

what business you going to do? need to share with the community

sharing is caring

Apr 7, 2021 - 8:09am

If you're going to take a margin loan on your investments, I'd use super low LTV like 25% and roll it into a stable cash-flowing asset like multifamily properties.  If you have a solid wealth management relationship you could probably pull out $1mm at like 2% i/o for 5 years and buy a 5% cap property.  I would be way too nervous about taking a margin loan just to buy more stocks or anything with volatility where the cash flow doesn't easily cover the debt service.

Array
  • Analyst 1 in IB - Ind
Apr 7, 2021 - 8:16am

jesus christ this read so much like an informal rfp / client request it triggered my ptsd

edit: sorry i mean ctsd - i am currently going through the traumatic experience that is bulge bracket investment banking

Apr 8, 2021 - 3:08pm

Honestly get yourself a professional to take on the stress of your portfolio. Make it generally passive and focus on some rock-solid dividend equities that pay out 2-6% each year, live off that. Then find yourself in hobbies that give you meaning such as volunteering. 

Apr 8, 2021 - 5:31pm

Buy residences at luxury hotel properties on leverage and rent them out on Airbnb. Important that they let you do it, but if they do, the hotel can clean up after the guests, the guests can check in at front desk, and they'll just take a fee. But prices are down because of covid and luxury properties should rebound first and the guests will be cleaner.

Apr 9, 2021 - 1:36pm

I actually did something similar to this back in 2009-2010. Found a bunch of rooms at hotels that they were selling (cash strapped hotel chains), purchased them and then let the hotel manage the bookings/cleanings etc. I got them for relatively nothing and the hotel purchased them back from me for more than double after 6-7 years. I think the hotels cut was only 28% of the booking gross. Never paid an assessment and the hotel dues were included in their "cut" of bookings.

Apr 9, 2021 - 2:00pm

The specific one I had in mind I know for certain the management fee is 30%. If you can sustain the cash flow requirements to support the P&I, insurance, HOA, etc. of ~$3200 a month, you'd need to rent it out for $400/nt 11 nights a month to be above break even. Rates at the hotel well exceed that almost year round, so it seems like a no brained.

Apr 9, 2021 - 3:44am

and you ask bankers on how to do it?

Ask them what's in their personal portfolio, otherwise it's 100% guaranteed they'll sell you crap

Never discuss with idiots, first they drag you at their level, then they beat you with experience.

  • 1
Apr 9, 2021 - 12:34pm

bingo.

also curious if this is $5mm liquid or already invested, big difference. if still invested, actual capital after-tax is likely lower

but either way, good on you bro, I've got nothing to add.

if I had $5mm after tax, after paying off my primary mortgage, I'd probably continue working, put 60% into the strategy I run for clients (100% public equity), 20% in a few hedge funds/private placements I like, establish residence in south florida (can get a pretty nice single story in Hollywood for $500k), keep 5% in cash, and keep another 5% for investing in startups/VC/crypto

Apr 9, 2021 - 10:51am

Do you have any specific reason to remain in your HCOL city? You're early 30's, already married and now quit IB. I guess I don't know what your wife does, but I don't really see why you can't move to a Tier 2/Tier 3 city where your $5MM will go much further. 

Array

Apr 9, 2021 - 3:30pm

Please go on r/fatfire or any of the FIRE subreddits if you're planning on going to internet advice route.  

This forum is 90% early career folks, and even among the darker blue users (VPs, Principles, Partners) not that many of them are in a position where they have accumulated significant assets. 

If your going to ask anyone ask APAE E.  He would know best.

Good luck and congrats on the success!

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