… in cash that you must spend as soon as possible, how would you invest it to get the best returns?
I don’t know why you would have $50K that you HAD TO SPEND asap. That doesn’t make a lot of sense to me.
When investing in real estate, I don’t use my own money. Therefore, I would keep the $50K in a bank CD until the stock market takes a big hit, and then put it in an index fund. That money would be used as a reserve. I would then buy a bunch of cash-flowing rentals using other people’s money.
Mike
Thanks Mike for the reply.
The reason for wanting to invest it as soon as possible is because there is an interest being paid on it. I know many people have a different style when it comes to investing. I wanna see various ideas from many people because everybody does it differently.
What kind of returns can you receive from CDs or index funds?
What kind of returns can you expect from rental properties?
Thanks.
<<What kind of returns can you receive from CDs or index funds?>>
4-6%
<<What kind of returns can you expect from rental properties?>>
Listen to what Mike told you…don’t use your own money…use OPM. If you have nothing invested and your property returns $100, your return is ‘infinite’…($100/0 = infinite number)
Keith
So you are saying I should put the 50k in a CD or index fund, and use 100% OPM for real estate investing?
I guess I would have to ask what interest rate are you paying on this $50k loan? and can you afford to lose any of it? A bank CD or a money market mutual fund could be paying between 4.5% to 5.5% right now, but CD’s are not liquid. A money market fund would be more liquid if you need to use the money soon. These would be good choices if you cannot afford to lose any of the money, but if the interest rate you’re paying on this money is about the same or higher, then you’re losing money.
An Index fund is a type of stock fund, which can be quite volatile. You could lose money if the markets start to tank, and with mutual funds you cannot sell your shares until after market close. Many economic indicators are pointing to weakness in the coming months, so I would be very leary of putting that much money into a stock fund right now, especially if I couldn’t afford to lose any of it.
You may want to consider consolidating some of your other debts with this loan. If you’re paying 18% on a credit card balance and then pay it off, it’s like getting an 18% return on the money used.
So, what you’re asking is, "If you borrowed $50,000 and were paying interest on it, where might you invest that money so as to (1) maximize your return (and profit) and (2) minimize the chance of loss, given that it’s borrowed money.
Correct?
Sounds like it.
I would do a private loan and get 10-15% return if I had to invest it quickly.
Thanks for the insights, guys.
Ok, here is the deal:
Right now I have a HELOC, so if I don’t use the money on it, I don’t have to pay a dime. The property went up in value. I’m getting the largest possible HELOC the banks allow. I still have 50k equity left. I’m refinancing the first mortgage, so I’ll have that 50k in cash. Now that’s money I have to pay (5.875%) interest on even if I don’t use it. So this is why I want to invest it as soon as possible.
My plan is to use it for downpayments on other properties. Unless you guys can give me any better ideas 
What would you do with 50k in the same situation?
Thanks.
fadiz, can you tell me more about that private loan thing?
Well, if it is a HELOC, I personally would not invest the money unless you are single. I hate to put my home on the line specially if I am learning how to do real estate.
Private investing is basically you lend the money to other investors. You get 1st lien on the property and the loan-to-value must not be greater than 70%. Make sure you see the property and agree to put your money in it because if he defaults, you are stuck with the house to finish and sell. They will pay you %10-%15 for your money, or go 50/50 with you on the deal. Make sure you have a balloon too, not 30 year loan. Maybe a year or two depending on the deal.
Same here. I’d loan it to trusted investors as private money.
n604,
If you haven’t already done the refi, I would call the bank and tell them that you don’t want the cash. Why borrow the money if you don’t need it?
I also would not rush to do something with the money. With REI, it is important to buy RIGHT, not to buy fast. Learn the business; learn your market; join your local REIA and meet the SUCCESSFUL investors in your area; and only then pur your money at risk.
I agree with the others that being a private lender could be a good deal IF you loan the money to a successful investor with a track record. Loaning the money to a newbie could be a disaster and I certainly would not do that!
Finally, you need to consider what the market and economy are doing and how that will affect whatever you do.
Good Luck,
Mike
Thanks for the tips.
I’ve been learning RE, going to clubs, etc… for over a year now. I’ve got a team, and many deals lined up. I’m ready to go. I’m not gonna use the HELOC to invest, instead I wanna use the 50k from the refinance of the first mortgage. I already got rental income coming in from this house, so I can afford the monthly payments on the 50k. But of course the plan is to get the next properties to pay for that…
The private money thing sounds like a great plan. I know many people already who wanna borrow money for investments, but I figured if I did my own investments, I would be making more. With a lot more headache too, though.
If I had $50,000, I would definitely invest it in a CD. But I dont understand why you would have to spend it asap. Anyways, I think investing in stocks are too risky.