If you had $100mm to invest, what would you invest in? Market? Debt vs Equity? Product-Type?

This is a question commonly asked in interviews and would be helpful to this forum. Plus, it would be interesting to hear the opinions of the members of WSO.

Comments (50)

Best Response
Mar 3, 2017

Single tenant NNN dining and service (excluding banks) in growing affluent markets. You could manage the portfolio yourself.

Mar 3, 2017

Exactly what I was going to say.

Mar 3, 2017

I agree with that sentiment. Retail, as an entire product segment, seems to be dying as more and more retail is being brought online thanks to Amazon. To your point, restaurants and services (gyms, hair/nail salons, etc) cannot be sold online and thus will continue to have a physical presence.

With that said, in your current market, have you not seen a rapid price appreciation / cap-rate compression for assets of this nature? I'm in SoCal and high-credit dining tenants will NNN leases seem to be at all time lows in terms of cap rates.

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Mar 3, 2017

Cap rates have certainly compressed but if there is enough term on the lease I would go low LTV and line up by am schedule with the length of the lease and bank on the fact that the value of the first and lease rates would increase by the end of the term.

Mar 3, 2017

SoCal is low. But generally speaking if the lease is long enough (as Maineiac says) that they are low in a lot of places. Edit- as long as it's a high credit/ not in the Timbuktu

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Mar 4, 2017

I'm in PB...my immediate market has deals with credit tenants sub 4 caps for sale the market right now.

Edit - Pacific Beach San Diego

Mar 3, 2017

garden apartments in high-density infill suburban locations, the replacement product is no longer garden/surface parked but rather mid-rise/structure parked. I think thats got to be the most resilient strategy in a downturn.
industrial

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Mar 3, 2017

I'd use 30-50% portfolio leverage and do some self-storage developments, buy some NNN retail with credit tenants, I'd buy a few multifamily ground leases, put some money into the highest rated REITs (e.g. Boston Properties, AvalonBay), and I'd acquire some Delaware Statutory Trusts (DSTs). I'd also set aside a few million for venture capital.

Basically, I'd have a totally different investment strategy with $100 million than I'd have with $5 million (i.e. I'd do more merchant builds, use higher leverage, and weight the portfolio toward residential).

Mar 3, 2017

I typically like self storage for the crazy SBA terms you can get (85-95% LTV, 25 year full am, fixed rate), but I think the $100mm in cash would disqualify you from getting SBA financing.

Mar 3, 2017

I don't like high-leverage deals for large-money investors. Overall reason is that once you have that kind of wealth there's no reason to lever up to max levels. But it's just a matter of opinion--no right or wrong.

Mar 4, 2017

And high margins on prime based deals. 5%+ money...the deal has to totally pencil like a mofo. To get more than 85% financing with SBA you need to usually offer up additional collateral like your house. There is a saying with SBA "they cross everything including the toilet paper"

Mar 4, 2017

From everything that I have heard, Storage is always a good play as far as cash flow is concerned

Mar 3, 2017

It can be a good play, but it is management intensive. Cap rates are compressed right now which makes it difficult to get significant leverage. I believe that ownership will consolidate significantly due to new management technologies coming out (automated kiosks, remote overlocks, etc. ). It will squeeze a lot of mom and pops out.

Mar 3, 2017

Probably go
$33mm in Index Funds
$33mm in Retail RE, like Restaurants and Gyms
$33mm in Apartment Buildings
$1mm on a little bigger house and turn my current into a rental

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Mar 6, 2017

i would buy a farm in a safe and not easily accessible place.

Mar 6, 2017

Now, probably tech.

I am not cocky, I am confident, and when you tell me I am the best it is a compliment.
-Styles P

Mar 6, 2017

Nat gas infrastructure

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Mar 6, 2017

Or bet the house shorting the Euro. After being over there for quite some time I've actually seen that monetary union collapsing. High unemployment, even higher prices for goods/services, economies that depend a good deal on tourism(which will dissipate soon). And who takes breaks(siestas) for hours during the middle of the day??

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Mar 6, 2017
Revolution:

Or bet the house shorting the Euro. After being over there for quite some time I've actually seen that monetary union collapsing. High unemployment, even higher prices for goods/services, economies that depend a good deal on tourism(which will dissipate soon). And who takes breaks(siestas) for hours during the middle of the day??

Shorting the EUR against what? A number of different currencies?
Or how would you go about shorting it?

Personally, I'd use some money to buy land in certain parts of Asia I know well and then put the rest in a fixed deposit account earning 10% a year.

Mar 6, 2017

i wouldn't do shit till the debt ceiling issue gets resolved

Mar 6, 2017

I would invest it in the three Gs. Gold, guns and girls.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

Mar 6, 2017
Mar 6, 2017

A large chunk of mine would go to some solid yielding international treasury bond.

As an example:
1000000 (dont actually out the whole thing) at 7.2% yield will give you 2,000,000 in 10 years. Average earning of 10% a year.

Touch to not take that in this climate.

Mar 3, 2017

@MonopolyMoney With your 33% / 33% / 33% what coupon do you expect to clip on a blended basis?

Mar 3, 2017

Index funds 7%
Retail and Multifamily would probably be acquired in the 4-7 cap range range for stabilized projects, depending on size, with less aggressive leverage I could be looking closer to 10% IRR off that.

Would probably get into development once I got comfortable with owning.

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Mar 6, 2017

Whichever offers you the best risk-adjusted return. Unless you're an equity- or debt-only mutual fund, then it's easy.

Mar 6, 2017

Exactly the best thing to do is to find investment opportunities that will give you equity like returns with debt like risk. Sometimes it's better investing in the company's equity when the company looks very promising and is in a high growth phase. Other times when the company is mature but still has stable cash flow its better investing in the debt

Mar 6, 2017
RepRex:

Exactly the best thing to do is to find investment opportunities that will give you equity like returns with debt like risk. Sometimes it's better investing in the company's equity when the company looks very promising and is in a high growth phase. Other times when the company is mature but still has stable cash flow its better investing in the debt

Um, this is a terrible characterization of investing. But I assume you're in high school, maybe college.

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Mar 3, 2017

A big old portfolio of Southeast warehouse space.

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Mar 3, 2017

How are those cap rates these days?

Mar 6, 2017

Equity. Bonds are in a bubble. Yields on debt are at all time lows. It is hard to see if there are any future gains to be had in any of the debt markets.

Mar 6, 2017
Seth Davis:

Equity. Bonds are in a bubble. Yields on debt are at all time lows. It is hard to see if there are any future gains to be had in any of the debt markets.

bond yields being at an all time low doesn't by itself imply they are in a bubble. If the economy proves as stagnant as some predict equities aren't going anywhere.

Mar 6, 2017

few shares of berkshire hathaway

  • eyelikecheese
  •  Mar 6, 2017

I'd buy into emerging market equities/start-ups and early stages.

Mar 6, 2017

Though I think the bond market is overheated, there's also a generational shift going on right now as many boomers are retiring, pushing up the demand for fixed income.

Personally, I'd try and angel invest a few startups with partner status and/or maybe buy a nice-ish condo.

Mar 6, 2017

bonds are not in a bubble...high yield bonds are at all time lows at 7 3/4.....you invest on how much risk you are willing to take...equities are very uncertain rite now and recovery is not occurring at a rapid pace....you should invest in something that really interest you and the rest invest in a high yield corporate bond if were speculating here

Mar 6, 2017

I would quit my job and trade for myself...

If I had asked people what they wanted, they would have said faster horses - Henry Ford

Mar 6, 2017

Go4It, you know that low bond yields mean bond PRICES are high, implying a bubble, right?

Mar 6, 2017

As Kenny said, when yields are low, prices are high. The yields on almost all debt classes and maturities is at all time lows, or in other words the prices on these bonds are at all time highs. While yields may stay low over the next 12-18 months it is unlikely these yields will stay low forever. Typically, when one invests in bonds, you expect yields to fall.

Mar 6, 2017

Long Natural Gas Future 5 months out / Short the 17 month contract.... Some out of the money puts to hedge.

Mar 6, 2017
Mar 6, 2017

Commodities. Soft grains in particular.

Mar 6, 2017
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Mar 4, 2017