What’s the Best and Highest Use of $20 Million in Real Estate Investing?
Each week, we post a new question to the Best Ever Show Community on Facebook. The Best Ever Show Community is a place where real estate entrepreneurs of all stripes and sizes can come together to interact with each other, me, and the guests featured on my podcast with the purpose of everyone helping each other reach the next level in their businesses and their lives.
What better way to add value than to ask you, the community, for your Best Ever advice on a variety of different real estate topics. This week, the question was someone is handing you $20 million in property for FREE. Which asset class would you choose?
This week’s question was a little different. We conducted a survey in addition to asking for written responses to the question, particularly for those who selected “Other.” The breakdown of the answers were as follows:
- Multifamily: 58
- Self-Storage: 15
- Commercial offices, retail centers, etc.: 11
- Other: 5
- Mobile Home Parks: 4
- Single Family: 2
- Urban Mixed Use: 2
Mitchell Drimmer is one of the 15 people who selected self-storage, mainly because he has purchased multifamily in the past and is not a fan. He admitted that multifamily may perhaps have a higher cap rate but are nothing but problems day in and day out, especially in “value neighborhoods.” Mitchell hasn’t purchased self-storage in the past. But as an outsider, he says self-storage is seems like a business with almost no clients, no hard luck stories from residents, no evictions, no complaints about certain maintenance issues and very little code enforcement issues. Done properly, at the right price and in a good location, Mitchell believes self-storage is a great business model.
Ryan Gibson also selected self-storage for similar reasons – it is an asset class with the lowest “resting heart beat” (no tenants, little maintenance, minimal employees). But additionally, he picked self-storage because it has the most automation and the highest returns.
Brandon Moryl was one of only two people who selected their $20 million to be in the form of single family homes. And in particular, luxury homes. According to him, that part of the real estate market has yet to fully recover, meaning there is the potential for a lot of growth. Additionally, there is less competition in the high-end SFR space compared to your typical $75,000 fixer upper. He also said, “with the stock market killing it and the overall economy rocking, combined with programs like 5% jumbo [loans], that’s is where I would be.” Finally, and maybe most importantly, he says it’s sexy owning million-dollar homes. Indeed!
The investors who selected “other” offered more creative or niche investment strategies.
Danny Randazzo went with a diversified approach. Chibuzor Nnaji Jr. concurred. Danny would look for a deal in each asset class and invest in a few of the most attractive opportunities. “It could be one deal requiring $20 million or it could be a deal in each. Share the love!”
Deren Huang, with the support of Michael Nerby, would invest in NNN, or triple net leases. According to Wikipedia, a triple net lease is a lease agreement on a property where the tenant or lessee agree to pay all real estate taxes, building insurance and maintenance (the three “nets”) on the property in addition to any normal fee that are expected under the agreement (rent, utilities, etc.). He said NNN is the true passive investment.
The last two individuals left the real estate market entirely – at least in part.
Lane Kawaoka selected two answers. He would invest in multifamily because it “it’s the sweet spot in terms of the sharp ratio risk reward matrix. Not too hot, not too cold…just what the baby bear likes.” However, he would consider accepting the entire $20 million amount in the form of a savings bond and just live off the interest.
Finally, Diogo Marques would forgo real estate altogether and purchase solid, stable companies that he could see operating in 10 years’ time with a 10% to 15% net profit margin annually.
COMMENT BELOW: Someone is handing you $20 million in property for FREE. Which asset class would you choose?
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