Posted by Sailor on September 09, 2007 at 16:58:54:
I’ve passed on your post to HRH–
Tye
Frank Chin et al, $200k to invest in comm or biz - Posted by June
Posted by June on September 05, 2007 at 21:19:36:
Frank Chin and other business and commercial RE gurus here, please help me with a $200k question. We have the amount in cash, and would like to invest in either commercial real estate or a business. We had some experience doing residential RE but do not like the property management side of it (we did it ourselves for our rental). The goal of the investment is to replace the income stream so one of us can quit our corporate America job. The other goal is for long term wealth building and retirement. The last but not the least is to have some quality time with the family and kids.
We both have excellent credit and jobs with good pay, but one of the job (hi tech worker) is getting too stressing lately. Owning a business has always been a dream but none of us have experience, and we don’t know what type of business offers the benefits of regular 9-5 schedule or could be managed via semi-absentee ownership while still profitable. Any suggestions on where to even get started? Are franchising business good ones for starters? What’ll be the exit strategy if we eventually want to get out of it?
Any input is welcome! Thanks very much for your help!
- June
two books for you to read - Posted by Anne_ND
Posted by Anne_ND on September 13, 2007 at 07:32:51:
“Taking the Mystery Out of Money” by Lonnie Scruggs
-will help you understand how much yield you need to make on $200K in order to leave your jobs- very eye-opening.
“The Four-Hour Workweek” by Timothy Ferriss
-step by step process for getting out of your job and replacing income with totally passive income. There are some really thought-provoking and original ideas here, especially for the internet-savvy.
I did the single-family home thing for 4 years while working, and got a lot of equity, and not much cashflow (and a lot of headaches from property management). When I started doing Lonnie deals, I was able to quit my job in 5 months.
good luck,
Anne
Re: Frank Chin et al, $200k to invest … - Posted by Frank Chin
Posted by Frank Chin on September 12, 2007 at 04:39:11:
June:
My last corp job was in IT, so I know about the stress that you speak of.
Prior to that, I had my own, one man, “computer consulting” business. That was stressful because I’m the sales guy, and developer. When a project is done, I’m under the gun to find the next job. When I get the job, I’m under the gun to get it delivered.
Then later, I had a tenant, a work at home computer consultant with the same issues. I suggested to him that he hire a “sales rep”, and for a while, it worked out well, and his business prospered. That was till his “sales rep” quit, went to work for a competitor, and took along his cusotmers.
After the last corp job, I bought my own business, with employees this time, and a manager. The purpose was to run it absentee.
It wasn’t any easier. Employees come and go, and fortunately, the manager was good in handling customer complaints,though some tough customers shout and scream and want to talk to the owner. It got less absentee when I suspected “employee theft”, and hung around a lot more. Finally, sold it after a aerious accidemt when three employees got hurt, one sriously, and I decided it was more stress than I ccan handle.
If you’re thinking commercial property, it’s a whole diiferent animal than residential investing. My dad has a small commercial property with two stores. Once it was paid off, he’s able to live comfortably off of it.
As with anything else, IF you select thte right tenant, have the property in a good location, a commercial tenant can stay forever, and take care of maintenance, and pay the utilitis and RE taxes. What else is the owner to do other than to chase after deposit the rent checks. NNN leases are nice, but you still have to chase after and deposit the checks, NO??
The problem was ONLY $200K is that uou won’t be able to walk away from that job right away. We had $100K to start with way back, invested in residential properties, and it still took a short while before cahs flow from rent increase enabled the wife to stay home.
As to franchises, many of the cheaper ones would require the owner to work it to make a go of it. Some, like McDonalds require a hefty investment and REQUIRES the owner to work it.
Actually, besides managing my RE business, I’m thinking of the next thing to go into, and an internet business might give me the flexibility, but, as you, I have to come up with a product and service.
Frank Chin
Re: $200k to invest in comm or biz - Posted by Penny
Posted by Penny on September 09, 2007 at 18:47:41:
Congrats on your savings and financial progress. Most people do not have the ability to self-finance a business start up.
If owning a business is a dream, then use your current employment opportunities to help you gain as many success skills for your future business as you can. Starting out a business will not be a 9 to 5 schedule, often, entreprenuers are trading family time to get the business going. When you are the one signing the checks, believe me, you will look at things quite differently to grow your business. The 80-20 rule is alive and well in a small business. Expect to spend 80% of your time with support tasks in order for you to do the 20% part that you are truly passionate about.
Instead of quitting, maybe transferring to another department or role with your current employer could provide a positive change that will also help build entreprenuerial skills needed. Take advantage of any opportunities at your current employment to get experience and training in hiring, marketing, accounting, giving employees direction, project planning and management, performance appraisals (HR stuff), and other leadership skills. Learn as much as you can on someone else’s dime before you make the leap to starting your own business. The important financials of owning a business or real estate is your return on investment AND your return on equity. You don’t need to be an expert on everything, but you do need some breadth in business knowledge - knowing enough to keep your employees on task and whether the performance is reasonable for what you ask them to do. Hiring people who are smarter than you can be very smart.
In the meantime, you could invest some of the money per some of the suggestions of other posters. You could also invest in commercial real estate. The triple net retail/office/industrial markets are different from residential, but have their pros & cons, as well. Identify what you dislike about the residential property management so any future acquisitions take that into consideration. Some things you will just need to do, even though it isn’t your first choice of tasks to do.
You could also position yourself to purchase a building for your future business - there are some financial advantages there. You could buy a property first and have other tenants, then put your business there at an appropriate time in the future, or buy a property when you are ready. Depending on how much of the building you occupy, there are small business adminstration (SBA) financing programs for small businesses to purchase their facilities as well as business start up financing.
Above all, develop a plan for where you want to go or you’ll end up somewhere else. What is your 1 year, 3 year, 5 year, 10 year goals? Then look to see how that $200k could best be put to use.
Just some thoughts - hope it helps.
Re: $200k to invest in comm or biz - Posted by Sailor
Posted by Sailor on September 07, 2007 at 15:53:56:
Lin Bennett is our Queen of Self-Storage. I’ll pass on your info to her–
Tye
Re: $200k to invest in comm or biz - Posted by DJ-nyc
Posted by DJ-nyc on September 07, 2007 at 16:03:48:
Sailor,
Can you send my email address to her as well. I am interested in self-storage as well.
thanks,
DJ-nyc