How to Invest $100,000: Diversifying Between Real Estate Syndication and Money Market Funds

With $100,000 in your investment arsenal, the path to building a diversified, resilient portfolio opens up. You now have more money to deploy and we hope this article helps you understand not just some potential investment vehicles but what those returns look like for each.

In order to answer the question of “How to Invest 100 thousand dollars?” let’s explore a strategic approach of splitting your investment between real estate syndication, particularly focusing on promising markets like Texas, and the safety of money market funds. This diversification aims to blend growth with liquidity, paving the way for both passive income and wealth expansion.

Overview:

$100k total

• $50k into a real estate syndication deal
• $50k placed into a money market fund

Real Estate Syndication: Building Wealth Through Property:

Investing in real estate syndication allows you to leverage collective buying power, entering the real estate property market in a way that would be nearly impossible solo, especially with just half of your total capital. The typical minimum investment from an accredited investor is $50k. So, let’s continue with this scenario where the first $50k of your $100k to deploy goes into a real estate syndication deal. Here’s what you gain by allocating $50,000 to real estate syndication:

1. Passive Income Stream: By investing in a real estate syndication as a limited partner (LP), you can expect an 8% average annual cash-on-cash return, translating to $4,000 yearly. This stable income stream complements the significant capital appreciation potential within the real estate market. Especially in areas like Texas, where the market is expanding, your investment is poised for growth. This cash on cash return could go towards a vacation, more time away from work with the family, or a new set of golf clubs!
2. Multiplier on Investment Capital (MOIC): Real estate syndications often aim for a 2x return on your invested capital over a five-year period. This means your $50,000 could grow to $100,000, assuming successful property appreciation and management. This is one of the typical return metrics GPs look to present their LPs. This equity multiple of 2x or more is paid out at the end of the real estate syndication project life cycle via a sale of the property or refinance.
3. Tax Advantages and Inflation Hedge: Real estate investments come with notable tax benefits, including deductions and depreciation. Additionally, real estate often acts as a hedge against inflation, protecting your purchasing power as property values and rents typically increase with inflation. Another great benefit!
4. Community Impact and Tangible Assets: Investing in real estate syndication means contributing to community development and owning a piece of tangible progress, which can be rewarding beyond the financial returns. While some investors may over look this benefit it truly does support communities when managed properly. Your involvement in the syndication includes input to the GP team in how the building is maintained and how it increases the overall appeal and value of the neighborhood.
5. Total Gains Over Five Years: Combining the annual cash returns with the capital appreciation, you would generate $20,000 from cash flow and an additional $50,000 from the equity growth, culminating in a total profit of $70,000 on your real estate investment. That’s not too bad for essentially just writing a check. The GP team handles all of the paperwork, property purchase, maintenance, and sale or refinance. That’s one of the best pain points to overcome. Allow the GP team of the real estate syndication deal to do all of the work while you make passive income.

Money Market Funds: Ensuring Liquidity and Stability:

Now let’s take a look at what to do with the other $50,000. The second half would then be allocated to money market funds providing a safety net and ensuring liquidity. While these funds typically offer lower returns compared to real estate, they come with their own set of benefits:

1. Safety and Security: Money market funds invest in high-quality, short-term debt. They are considered one of the safest investment forms, ideal for preserving capital while still earning a return.
2. Liquidity: Unlike real estate, money market funds allow you to access your money quickly and without significant penalty, providing a financial buffer for unexpected expenses or investment opportunities. Easy to set up and contribute funds at the start and easy to remove at exit if needed.
3. Steady Income: While the yields are modest compared to real estate, money market funds provide a steady income stream, contributing to the overall diversification of your income sources. It’s a set it and forget it but not very exciting should you decide to check in on this $50k.
4. Average Returns: Generally, money market funds yield between 1% to 3% annually, depending on market conditions. For our scenario, we’ll use a conservative estimate of 2%. This would result in a $1,000 annual return, accumulating to $5,000 over five years.
5. Total Gains Over Five Years: With lower risk and liquidity as its primary features, the total return from your money market fund investment would be $5,000, providing a stable, if modest, increase in your wealth.

Combining the Best of Both Worlds:

This investment strategy offers a comprehensive approach to growing your $100,000. By allocating funds between real estate syndication and money market funds, you balance high-growth potential with security and liquidity. Here’s how this balanced approach serves as a roadmap to wealth:

• Real Estate Syndication: Acts as the growth engine of your portfolio, offering substantial returns through passive income and capital appreciation. This is particularly appealing for investors looking to leverage the real estate market without the complexities of direct property management.
• Money Market Funds: Provide a financial safety net, ensuring that part of your capital remains liquid and protected, ready to be accessed whenever needed or to take advantage of new investment opportunities.

Conclusion:

Investing $100,000 with a dual strategy in real estate syndication and money market funds crafts a pathway toward significant financial growth while safeguarding against market volatility and personal financial emergencies. After five years, this approach aims to transform your $100,000 into approximately $175,000, combining the aggressive growth from real estate with the steady, secure gains from money market funds.

Your journey toward financial freedom involves making informed decisions that align with your goals, risk tolerance, and timeline. This investment blueprint is designed to guide you through diversifying your portfolio, maximizing your returns, and building a robust financial future.