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

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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 - 12:29pm

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

Array
 
Mar 3, 2017 - 1:06pm

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.

 
Mar 3, 2017 - 3:00pm

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).

Array
 
Mar 6, 2017 - 9:47am

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.

Array
 
Mar 6, 2017 - 10:03am

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??

 
Mar 6, 2017 - 10:10am

Investing in debt or equity (Originally Posted: 01/16/2016)

Hey guys,
I have a quick question about investing in general. How would you decide between whether to invest in debt or equity, especially given that debt encompasses so many different things?
Thanks!

 
Mar 3, 2017 - 5:13pm

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.

 
Mar 6, 2017 - 10:12am

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 - 10:13am

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.

 
Mar 6, 2017 - 10:18am

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 - 10:19am

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.

"Dude, not trying to be a dick here, but your shop looks like a frontrunner for the cover of Better Boilerrooms & Chophouses or Bucketshop Quarterly." -Uncle Eddie
 
Mar 6, 2017 - 10:20am

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 - 10:22am

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

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
 
Mar 6, 2017 - 10:23am

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 - 10:27am
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