How would I turn 500 grand into a fixed income of $10,000 a month. I did some quick math and that’s 120,000 on a $500,000 investment. Would you want to make 24% ROI per year and make that in cash flow?
Now this is a tough because it’s certainly a high yield. A yield, that’s a cash return in the year. That’s got to be liquid. That’s got to be in your pocket. The only way I think that anybody can make a nice return like that consistently and safely, I think there’s two major ways to do that. I think one is you can use your 500 grand, depending on what you can borrow … if I have 500 grand to invest and I wanted to make that kind of return, I would use that 500 grand to buy $5 million of real estate. That would be an apartment block. Now depending on the market that you’re buying in, you might be buying at let’s say $50,000 a door. If you have $5 million divided by $50,000, let’s assume that’s about 100 doors of real estate. 100 doors of real estate, and let’s say we make $100 per door. So 100 doors at $100 a door, that’s $10,000 a month in cash flow that you can take home that’s one way.
Now you might have to be a smart guy to know have to do this. You’ll have to know how to locate property. You’ll have to know how to manage it. You’ll have to know how to borrow the other four and a half million. There’s some skills involved with this. You’re not going to get this kind of return by being a dumb guy. You have to be pretty smart. I don’t know if just sending off a question on the internet’s going to be enough to make that kind of return.
The other thing I would do if I had 500 grand and wanted to make a high return like this is I’d start an active business. Now just for some quick numbers, I’m not using 500 grand, but I’m an entrepreneur. I start businesses all the time. Here’s an example. I started a home staging company that puts furniture into homes. Let’s say I spent 40 grand in furniture. In the first year I make $70,000. If you do it like this, if you do your math like that, we’re looking at almost a 200% return. The tough thing is with this, guys, this takes time, money, effort, energy.
One thing you can do is you can certainly look into could you buy a franchise, could you buy a business that’s already running. I’m sure there are many franchises you can buy with a $500,000 down payment. Now for myself, I would really be on the fence as to whether I want the apartment block or if I want the franchise. Franchises or buying businesses that are already up and running could be a faster turn, faster yield. Maybe they’re going to be increasing in value in the near future. There’s more skills in doing an active business. Over here this is something that’s more passive. It’s got a lot of debt attached to it, so the question is how smart are you, what kind of education do you have, and are you happy with debt or do you want to have no debt.
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