What would you do with $250k?

[IronGoat]

Hello everyone. I'm new here and I'm interested in the opinions of savvy investors and entrepreneurs on my situation.

Upon the sale of a rental property I stand to make about $250k net after tax and commissions.

For a bit of history, I had my FTE last summer and left a six-figure career to become self-employed as a manufacturer's rep in November doing B2B sales. As you probably know, getting paid as a rep can take some time. The sale is made, then it must be delivered, then the customer pays your principal, and then finally your principal pays you...this process can take anywhere from 3 to 6 months, depending on a variety of factors. My wife also had her FTE and left her six-figure career to go full time as a realtor earlier this year.

As I began to think about what I'd do with the money, I came up with a few options:

• Buy a business. I currently live in CA and I'm not a fan, but I have personal commitments that prevent me from moving. The goal is to pick up stakes and get out of here in about two years, so anything brick-and-mortar wouldn't work in the near term, so perhaps something in e-commerce. I already have a print on demand side hustle and I am copywriting as well, so it would have to be passive or lucrative enough for me to justify me dumping one of the other gigs (preferably the copywriting, as it takes a lot of time).
• Liquid investment with a low rate of return. There's uncertainty associated with the 100% commission gig that I'm currently engaged in, and it would be nice to have additional cushion to fall back on during the lean months. My wife is less of a gambler than I am, so a $250k parachute would help keep her from worrying about money, but having that money lose value during this hyper-inflationary period isn't desirable.
• Dividend stocks. I was reading an article where someone with a similar investment of around $250k claimed to be making roughly $2700/mo in passive income. I'm no whiz at stocks, so picking the right portfolio to match this performance could be challenging.
• Crypto. I hopped on the crypto bandwagon at the height of the market last spring and after suffering some losses, my portfolio is back to where it started. As much as I like crypto, in my opinion there's a significant amount of uncertainty in this market now that it has the attention of politicians, governments have successfully frozen people's crypto assets for disagreeing with public policy, increasingly haphazard and uninformed regulation, and now lawsuits against exchanges, etc. by jilted investors. Not saying I'm done with this market, but I'm not sure how much more I want to invest in it in the near term.
• Buy another property. While it was a write-off, the property being sold barely netted a couple hundred dollars a month after expenses, and then in between renters I was often out a few grand for new carpet, etc. I could pay cash for a property in a different state (can't get much for $250k here in CA) and have nearly 100% cash flow each month, but I'm concerned that we're at the height of this real estate market and the Fed is going to start jacking interest rates to combat this inflation. I bought the property at the height of the boom just before the bubble popped in 2008 and it's been a wild ride that I'm not too keen on repeating.

I'll add as a footnote that I have just under $1M in my 401k. There's been a couple of evenings while sipping a whiskey that I thought about what I'd do with that money and my $250k combined, but I haven't sufficiently researched the pros/cons of that course of action.

All this said, what would you do with $250k? Thanks in advance for your suggestions.

 

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[okamndud]

Hello everyone. I'm new here and I'm interested in the opinions of savvy investors and entrepreneurs on my situation.

Upon the sale of a rental property I stand to make about $250k net after tax and commissions.

For a bit of history, I had my FTE last summer and left a six-figure career to become self-employed as a manufacturer's rep in November doing B2B sales. As you probably know, getting paid as a rep can take some time. The sale is made, then it must be delivered, then the customer pays your principal, and then finally your principal pays you...this process can take anywhere from 3 to 6 months, depending on a variety of factors. My wife also had her FTE and left her six-figure career to go full time as a realtor earlier this year.

As I began to think about what I'd do with the money, I came up with a few options:

• Buy a business. I currently live in CA and I'm not a fan, but I have personal commitments that prevent me from moving. The goal is to pick up stakes and get out of here in about two years, so anything brick-and-mortar wouldn't work in the near term, so perhaps something in e-commerce. I already have a print on demand side hustle and I am copywriting as well, so it would have to be passive or lucrative enough for me to justify me dumping one of the other gigs (preferably the copywriting, as it takes a lot of time).
• Liquid investment with a low rate of return. There's uncertainty associated with the 100% commission gig that I'm currently engaged in, and it would be nice to have additional cushion to fall back on during the lean months. My wife is less of a gambler than I am, so a $250k parachute would help keep her from worrying about money, but having that money lose value during this hyper-inflationary period isn't desirable.
• Dividend stocks. I was reading an article where someone with a similar investment of around $250k claimed to be making roughly $2700/mo in passive income. I'm no whiz at stocks, so picking the right portfolio to match this performance could be challenging.
• Crypto. I hopped on the crypto bandwagon at the height of the market last spring and after suffering some losses, my portfolio is back to where it started. As much as I like crypto, in my opinion there's a significant amount of uncertainty in this market now that it has the attention of politicians, governments have successfully frozen people's crypto assets for disagreeing with public policy, increasingly haphazard and uninformed regulation, and now lawsuits against exchanges, etc. by jilted investors. Not saying I'm done with this market, but I'm not sure how much more I want to invest in it in the near term.
• Buy another property. While it was a write-off, the property being sold barely netted a couple hundred dollars a month after expenses, and then in between renters I was often out a few grand for new carpet, etc. I could pay cash for a property in a different state (can't get much for $250k here in CA) and have nearly 100% cash flow each month, but I'm concerned that we're at the height of this real estate market and the Fed is going to start jacking interest rates to combat this inflation. I bought the property at the height of the boom just before the bubble popped in 2008 and it's been a wild ride that I'm not too keen on repeating.

I'll add as a footnote that I have just under $1M in my 401k. There's been a couple of evenings while sipping a whiskey that I thought about what I'd do with that money and my $250k combined, but I haven't sufficiently researched the pros/cons of that course of action.

All this said, what would you do with $250k? Thanks in advance for your suggestions.

Buying another proprety in a state with higher ROI might work,also you wouldn't have to pay taxes if you did a 1031 exchange.I am not well educated in the current housing markets,but if you feel like a proprety is a good enough investment on its own,may as well use the 1031 to avoid tax.

 

[BizyDad]

I would buy businesses. Ones with a managers already in place.

You could make peanuts in rental profit, or you (allegedly) can make $32400/yr in dividends.

But what if you could take that $250k and begin to make over $200k/yr owning a portfolio of businesses? For some inspiration, read this...

GOLD! - HOT! - From 0 To $240,000 Per Year PROFIT In 18 Months (Acquisition Entrepreneurship)

From 0 to $240,000 per year profit in 18 months I've been a follower of this forum for about a year now, had read the Millionaire Fastlane book, and finally have decided to tell my story. About a year and a half ago, I found myself unemployed and with near zero savings, two house payments, and...

www.thefastlaneforum.com

 

[Matt33]

I would put it all into PSLV, SILJ, and PHYS. The fed can't raise rates enough to fight this level of inflation because of all the debt we've got. I'm thinking we're headed for a recession which will lower the value of stocks and real estate, without actually lowering the number of dollars they're worth.

 

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[Guest-5ty5s4]

Business or property. I would avoid California, but buy the deal not the market. Get niche and specific. Find the deal. Good luck

 

[biophase]

It would be hard to purchase e-commerce stores due to their current high multiples. But that’s where I would go. You have $1M in retirement so you can go more aggressive with the $250k.

Real estate is not going to make you rich compared to what $250k can do with a business. It’s sounds like you want an active investment anyway. Buying a business at 5x means $50k a year. That would be significant to you in addition to your current income.

 

[IronGoat]

All great suggestions so far, thanks everyone who's answered.

I would buy businesses. Ones with a managers already in place.

You could make peanuts in rental profit, or you (allegedly) can make $32400/yr in dividends.

But what if you could take that $250k and begin to make over $200k/yr owning a portfolio of businesses? For some inspiration, read this...

GOLD! - HOT! - From 0 To $240,000 Per Year PROFIT In 18 Months (Acquisition Entrepreneurship)

From 0 to $240,000 per year profit in 18 months I've been a follower of this forum for about a year now, had read the Millionaire Fastlane book, and finally have decided to tell my story. About a year and a half ago, I found myself unemployed and with near zero savings, two house payments, and...

www.thefastlaneforum.com

Thanks for this, I'm going to give the whole thread it a read this evening.

 

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[Johnny boy]

If 250k landed in my account we would get more crews rolling, hire some more people and then open up 3 locations next spring and be pacing a million in profit.

 

[Andy Black]

I already have a print on demand side hustle

Grow this?

 

[Guest-5ty5s4]

People are saying that profit in rentals would be "peanuts." They are right. But... rental cash flow is not the goal with real estate. I mean, it might be the end game once you own the biggest property ever, but the capital gains are where you make your real money.

You can sell a property for a cap rate. The lower the better. Just like a business.

Property bringing in net income of $20,000, sell for 10% cap rate = $200,000 sale price. Sell for 5% cap rate = $400,000.

Increase income, lower cap rate. Profit.

Can't think of a good thread on the topic, but just chew on that.

The master of this is @SteveO

As an engineer who enjoys numbers (but hates calculus lol) this is pretty fun for me

Forgot to mention @WJK who is also a master of this topic

 

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[rc08234]

Have you thought about loaning your 401k and 250 out as hard money? Alot of dumb money in the market right now. I know dudes paying 16%

 

[BizyDad]

People are saying that profit in rentals would be "peanuts." They are right. But... rental cash flow is not the goal with real estate. I mean, it might be the end game once you own the biggest property ever, but the capital gains are where you make your real money.

You can sell a property for a cap rate. The lower the better. Just like a business.

Property bringing in net income of $20,000, sell for 10% cap rate = $200,000 sale price. Sell for 5% cap rate = $400,000.

Increase income, lower cap rate. Profit.

Can't think of a good thread on the topic, but just chew on that.

The master of this is @SteveO

As an engineer who enjoys numbers (but hates calculus lol) this is pretty fun for me

Come on Fam, you gotta sharpen your pencil.

Is taking $250k and turning it into $400k in commercial real estate all that good a profit figure? Maybe in CRE terms it is. I honestly don't know, but that sounds right.

But can you buy a $250K building and turn it into a $2M building as fast as you can with a business? That's what I call fun...



Your post isn't comparing apples to apples. (pun fully intended)

Compare yearly net profit to yearly net profit & final sales price to final sales price.

In which scenario is it easier to grow yearly profit? Commercial RE or owning a business?

In which scenario is it easier to grow the final sale price? CRE or owning a business?

Shoot, look at the cash flow figures of absentee owner businesses in Cali selling right now for under $250k.

Businesses in CA For Sale - BizBuySell

Browse CA Established Businesses for sale on BizBuySell. Find currently operating CA businesses for sale from restaurants to service businesses.

www.bizbuysell.com

And you could take that $200k, buy one of these businesses, invest the other $50k in business improvements and a couple years later sell the whole thing for $400k.

In fact, getting a return that small sounds kind of disappointing in business terms.

At least the yearly cash flow (should be) much much better with the business vs cre.

If commercial real estate was the better way to go, you wouldn't have any problem finding such threads on this forum.

For asymmetrical returns, you can't beat having and growing a quality business.

And before anyone points out that you can use leverage in CRE, well, you can finance the purchase of businesses too, so I left that bit out of both examples.

 

[Guest-5ty5s4]

Come on Fam, you gotta sharpen your pencil.

Is taking $250k and turning it into $400k in commercial real estate all that good a profit figure? Maybe in CRE terms it is. I honestly don't know, but that sounds right.

But can you buy a $250K building and turn it into a $2M building as fast as you can with a business? That's what I call fun...

View attachment 43065

Your post isn't comparing apples to apples. (pun fully intended)

Compare yearly net profit to yearly net profit & final sales price to final sales price.

In which scenario is it easier to grow yearly profit? Commercial RE or owning a business?

In which scenario is it easier to grow the final sale price? CRE or owning a business?

Shoot, look at the cash flow figures of absentee owner businesses in Cali selling right now for under $250k.

Businesses in CA For Sale - BizBuySell

Browse CA Established Businesses for sale on BizBuySell. Find currently operating CA businesses for sale from restaurants to service businesses.

www.bizbuysell.com

And you could take that $200k, buy one of these businesses, invest the other $50k in business improvements and a couple years later sell the whole thing for $400k.

In fact, getting a return that small sounds kind of disappointing in business terms.

At least the yearly cash flow (should be) much much better with the business vs cre.

If commercial real estate was the better way to go, you wouldn't have any problem finding such threads on this forum.

For asymmetrical returns, you can't beat having and growing a quality business.

And before anyone points out that you can use leverage in CRE, well, you can finance the purchase of businesses too, so I left that bit out of both examples.

I said both.

 

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[BizyDad]

I said both.

Speaking of both, now I'm looking at absentee owner businesses in California for under $300k that you can buy which also comes with commercial real estate.

I usually only look at Arizona businesses. Arizona businesses don't have this kind of cash flow to purchase ratio.

People must really want out of that state. Lol.

 

[Guest-5ty5s4]

Speaking of both, now I'm looking at absentee owner businesses in California for under $300k that you can buy which also comes with commercial real estate.

I usually only look at Arizona businesses. Arizona businesses don't have this kind of cash flow to purchase ratio.

People must really want out of that state. Lol.

You’re derailing the thread a bit, but there are a lot of good reasons for that. California has proven that they don’t care about business owners and will arbitrarily shut you down, prevent you from evicting tenants, stop you from collecting rents, and more. It is definitely a risky place to do business.

Anyway, yeah, there are pros and cons to both, and there are people who have gotten insanely rich in both.

Can’t think of anyone who got insanely rich buying index funds.

 

[Kevin88660]

Money market instrument. Low return but low risk and highly liquid.

You need cash cushion for adjusting for self-employment.

No one gets broke due to inflation. From a net worth perspective you are still mainly in assets not cash (401k).

 

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[IronGoat]

Glad to see I've inspired some conversation. I'm learning quite a bit just reading everyone's responses, so thank you.

Just finished my deep dive on @doitman's post... Noticed that he hasn't been seen on the site in over a year, hoping he's in Central America with a cool drink in his hand and reaping the rewards of all of his hard work.