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What’s The Best Way To Invest $100K?

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Let’s have some fun today and talk about the best way to invest $100,000.

It is a lot of money, but it’s also not a lot. You might have $100k after selling a house, rolling over a 401(k) or IRA, receive it as an inheritance, etc.

So, let’s dive into the best way to invest $100k.

Should I Diversify my $100k Investment?

The first thing to think about is diversification. Should I diversify?

This will depend on my current financial situation. If I have a bunch of other investments elsewhere, then I would consider dropping my $100k into just one investment.

If this was all of my disposable money that I want to invest, then I’d diversify it.

I will assume that this 100k is all the money available, so I’ll diversify it. But, if I ever wanted to dump it all in one place, I could just pick one of these categories and put it all in there.

Allocating My Money

Since I’m going to invest my $100,000 in a diversified fashion, I’m going to plan how to allocate the money first. In order to do that, I need to lay out some options to invest in first. Here are a few.

  • Stocks
  • Bonds
  • Real Estate
  • Business Ownership
  • Commodities
  • Venture Capital
  • Crowdfunding (venture capital, real estate, etc)

There are definitely more options but these are probably the most mainstream. I don’t want to dive deep into something that requires a lot of very specific knowledge or experience to get into.

Looking at this list, I’m going to cross a few items off right away.

Crossing Off My List

First, toss bonds. They earn too little and values are inversely related to interest rates. Since interest rates are going up, bond values are going down. Plus, who wants a few percentage points of return when everything else returns so much more?

The next thing I’d toss off is venture capital. The minimum investments are going to be too high and the cashflow is not there. Generally, VC companies have big pay days if they sell or go public, but won’t return any capital in between. I like good cash flowing assets.

The third item I’m going to toss is commodities. It’s an area where you can make a lot of money, but it requires a lot of specialized knowledge that most of us don’t have. Or, it requires a lot of speculation and that isn’t a solid investment strategy.

That leaves stocks, real estate, business ownership, and crowdfunding.

I personally would allocate my money into those 4 categories as follows:

  • 40% – Direct Real Estate Ownership
  • 20% – Crowdfunded Real Estate
  • 20% – Stocks
  • 20% – Side Business Venture

1. Crowdfunding:

I’m starting with crowdfunding because it’s easy to get started. I’ll be putting $20,000 of my $100k investment into this.

I’d jump right onto my favorite platform, Fundrise, and drop a portion of my investments right in there. The great part is you can invest with your retirement fund.

Investing With Fundrise

It’s a super simple process so this won’t take long.

I like Fundrise because it’s done well with the money I invested in it back in 2016. My return has average around 10% per year, and there has been some appreciation as well.

So, here’s how to invest with them:

First, go to the Fundrise website and pop your email address in there.

Next, select your plan.

Third, connect your account and fund the investment.

Simple, right?

2. Direct Real Estate Ownership

I’d put 40% of my $100,000 investment money into my own real estate. At the $40k mark that allows me to buy a property that is roughly $200k in value. I can get a good triplex or fourplex at that price.

I think real estate is one of the best ways to invest money, regardless if you have $10,000, $50,000, $100,000 or even more to invest.

I’d expect at least a 15% cash on cash return and another 2-3% per year in appreciation. So, this $40k should earn around $7,000 per year for me.

Getting started in real estate is a little bit more challenging than just dropping money into crowdfunding. You can get started making offers in the next 30 days by checking this course out.

There are 4 things you need to learn in order to succeed at investing in real estate:

  • Find a Deal
  • Run the Numbers
  • Finance the Property
  • Fill it With Good Tenants

Finding Good Real Estate Deals

There are really 3 ways to find good deals – MLS, Direct Mail, or Online Lead Generation.

Of course, some deals are found by worth of mouth, knocking on doors, etc. But the 3 methods I mentioned are the only 3 that are truly scalable.

Finding Deals on the MLS

I’m not going to go into this too much, but, here are the basics.

First, find a good real estate agent. I like to use Agents Invest for a few reasons. First, the owner of the company is a real estate investor and she finds and trains agents around the country how to work with investors.

Second, it’s totally free to the investor.

Third, her agents often find deals that are not on the MLS, so it saves a lot of work for me.

Direct Mail Marketing

If you want to cut out the agent and go direct to the seller, a good way is with direct mail marketing.

 

In a nutshell, you buy a list of addresses, put together letters, and mail to them. Then, you wait for calls to come in.

Every time I’ve done this, I get about a 3% call back rate. So, if I mail 1,000 addresses, about 30 call me. Of that 30, maybe 3 are good deals and of those 3 I might get one.

In some markets, it’s more competitive so the numbers may be lower.

I go into a lot more detail on this method in my course on creating deal flow.

Online Lead Generation

Most questions start with a google search. Everything from “how do I avoid foreclosure” to “how do I sell my house fast” are all questions that people go to the internet to solve.

So, by creating that resource online, you might be the one they contact!

I use Investor Carrot for my online lead generation sites. Getting started with them is super simple too!

Simply go to the Investor Carrot site and pop in your email address.

Go through the prompts and set up your free trial.

Then start building content!

It does take about 3-6 months to generate any movement on Google, so be patient when first getting started.

Running the Numbers

This is the hardest part and there is no way we can get into it all here. But, we’ll cover the 4 basics you need to know, which are:

  • Determine After Repaired Value
  • Estimate the Rehab Costs
  • Know The Rents
  • Budget for Ongoing Operational Costs

Determining After Repaired Value

After repair value, or ARV is what the property will be worth after any necessary repairs are completed. Hopefully, the ARV is higher than whatever you are purchasing it for.

The goal is to buy it for a certain price, do some work, then have the ARV be significantly more than what you put into it.

The best way to estimate the ARV is to do a comparative market analysis (watch this video and subscribe)

Estimate Rehab Costs

There are a lot of rules of thumb and none of them apply everywhere. It also depends a lot on the size of the property in question.

The best way to estimate costs is to bring a contractor with you to give a rough idea.

You could use the $25/foot method which assumes a full interior upgrade costs about $25/foot, but that is fairly substantial.

There is also the $3,500 – $7,000 rule for interior upgrades on smaller apartments.

or…

You get the point. It’s hard to estimate!

Know Your Rents

Similar to doing a comparative market analysis, you’ll want to look at comparable rents in the area.

Here are the keys to estimating rents:

First, find 3 or 4 apartments for rent in the area that have similar characteristics such as age, amenities, size, number of bedrooms, etc.

List their rent prices from cheapest to most expensive. If one is way out of alignment with the others, you want to know why. If it’s an outlier, I’d discard it.

Look at the remaining comparable apartments to see if they have rents that are similar then simply average them if it’s true. If they have a wide variety, then look to see which one is most like yours. Then, go find more apartments for rent that are more closely aligned with yours.

Operational Costs

This is one of the biggest mistakes that most new investors make – they forget to budget properly for operational costs.

The easiest thing to do is to simply use the 50% rule. Basically, this says that 50% of your income will go your your expenses (everything except the principal and interest payments).

3. Create a Side BusinessI’d take $20,000 and invest it in a side project.

While this is not an entirely passive investment, it can become passive if it grows. Additionally, if it’s set up in a smart way, I can dedicate just a little bit of time to hopefully get outsized returns for the time commitment.

Honestly, not investment starts as completely passive, not even rental property. The key is to set it up well and have good systems in place.

There are two ways to go about this. I could start something completely unrelated to my other investments such as an eBay or Amazon FBA site. The other option is to start something that has synergy with one of my other investments.

Me personally, I’d rather have a business that ties in with other things I’m doing. So, I’d start a business related to real estate, but that isn’t actually investing in real estate.

4. Investing in Stocks

This is the most boring of all the options and the most well understood, so I’ve put it last.

I would invest the remaining money into a low cost index fund that tracks one or more of the major indices such as the DOW, Nasdaq, or S&P 500.

I’d probably divide my total investment between 2 or all 3 of them.

There are other low cost ETFs or funds that mirror other indices in the US or around the world, so you can get creative here and just go with the ones you think will perform the best.

For me personally, I like the S&P 500.

I’ve covered a lot of different ways to invest $100k. Like I said before, it really depends on your personal situation and risk tolerance.

It also depends on any other investments you might currently have as well.

This article originally appeared on idealrei.com. Read the full article here.

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Real Estate Investing

Here’s Why You Need To Use A Mortgage Broker When Buying Your Home

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Would you like to build or buy a home today?

There are many factors that you should consider. You will note that earlier on, most people used to visit banks in order to get loans that could enable them build or buy a house of their dreams. This used to work well for some people.

However, others used to have a difficult time securing loans. This is because some banks used to charge higher interest rates. This normally discouraged these people. This is the reason why you should consider using a mortgage broker.

What are the advantages of working with this broker? These include:

1. Enable you to Save Money

Would you like to save more money when you are buying a home? You should consider using the services of a mortgage broker. You will realize that this broker can help you compare several home loans from dozens of lenders.

You will not be dealing with one lender only. The good news is that you will be dealing with different lenders. This can help you get a good deal in terms of interest rates and fees.

This can play a major role in helping you save more money.

2. Saves Time

The process of getting a home loan can be very tasking. You have to visit different lenders so that you can compare their interest rates. Sometimes, you might not have all this time. You might end up choosing a lender who charges you more interest.

If you want to save more time, you should consider using the services of this professional. The good news is that this professional will do most of the work for you.

This will include the following activities; liaising with conveyances, real-estate agents, lenders and even settlement agencies.

3. More Peace of Mind

Securing a good mortgage loan can be very hectic. Most people normally struggle to secure these loans successfully. This can make you not to enjoy some peace of mind.

However, the good news is that this professional can help you secure a good loan successfully. You can trust that he will go for the best option out there. This can help you have some peace of mind as you will be doing other activities either at home or at the workplace.

You will realize that this professional will stay in contact with you to check if you have the right mortgage from the right lender.

4. Little Chances of Refusal

There are people who normally apply for a mortgage loan and are denied this loan. This could be due to their credit score, among other factors. This can be detrimental. You are likely to get frustrated.

Some lenders are very strict. However, there are some who are lenient. This is because different lenders normally have different credit policies and restrictions regarding who they will lend to. This is the reason why you should choose this broker to help you out.

This broker will considerably reduce the chances of refusal because he has vast knowledge on lender policies. He will help you settle for a good deal. Thus, an increase the chances of you building or buying your dream home.

5. Professional Advice

You can trust that this professional will help you understand all the mortgage-related information. He or she will help you understand the numerous types of mortgage available out there.

You will note that each of the mortgage types normally has its own parameter and technicalities. This can actually be very confusing to the common man. This mortgage broker will help you sort out all this information and also explain the different types of deals available in the market.

The good news is that this expert will help you narrow down the information to finally choose the mortgage that suits your needs. Sometimes, it is difficult to understand all the legalities that are related to mortgages.

However, this professional will give you professional advice in this field. This can help you avoid certain pitfalls since you will be fully aware of everything that you must know.

6. More Convenient

We all like convenience. The good news is that the professional will work hand-in-hand with home loans and lenders every day of the week. You can trust that this professional will assure you that the entire process will go smoothly and successfully.

7. He Represents you

The good news is that the mortgage broker normally represents you. You can trust that he will work on your behalf and not on behalf of a particular bank.

He will work with different lenders to ensure that you get the best deal out there.

8. You do not have to Pay this Broker Directly

You will realize that you do not have to pay this broker directly for their services. In most cases, they are normally paid by the financial institutions that arranged your mortgage. This makes it ideal to work with this broker.

The mortgage broker normally works for you. He is independent and can help you navigate the often confusing world of mortgages. He or she will work on getting the best deal for you.

This is because dealing directly with the companies can be hard. Some of them might not have the best interest in mind. This is the reason why you should consider using the services of a mortgage broker.

In addition, he or she will help you save more time in the long run. You can carry on with your usual activities either at home or at work as the broker works for you.

You will even manage to save more money. Consider hiring the services of this broker, and you will not regret. The services of this broker are truly incredible.

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Real Estate Investing

5 Strategies To Close Your First Real Estate Deal

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