How Should You Invest $1 Million in Real Estate Right Now?

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It’s fun to think about: What would you do with $1 million to spend in real estate if a money fairy magically handed over a sack of cash? 

We posed this question to three experienced investors who invest in different markets and asset classes across the country. Their answers in this challenging market offer some great ideas. 

Look to Florida Real Estate and Affordable Housing

Kim Meredith-Hampton, of Hampton Real Estate and the Florida Nest, said this: 

If I had $1 million to invest in a real estate project in Pinellas County, Florida, I could take advantage of the county’s strong and diverse economy to maximize my chances of achieving a high return on the investment. 

Because of the need and demand for affordable housing, I would love to repurpose an old school, church, or office building for adaptive reuse. I have helped homeless families in the past find housing and found it to be extremely difficult to find places to house them. There are also many city and county tax incentives to help offset the cost and expense.

In addition, I also have a bank that I’m associated with that absolutely loves community and social programs, and am sure they would be on board to fund the project with my skin in the game of a million dollars. The property would also need to be close to public transportation, shopping and other public needs. 

If you had $1 million to invest, you could also consider buying an ultra-luxury high-end home [or a] furnished home on or near the beach for Airbnb. With numerous neighborhoods in the county along the beach areas that offer excellent access to public transportation, shopping, restaurants, and entertainment, you would likely be able to find an area with a strong appreciation potential that could produce a substantial return on your investment. St. Pete Beach to Clearwater Beach are extremely popular and garner a higher ADR (average daily rental) and occupancy. 

Related: How to Buy a Vacation Rental Property

Finally, I would also consider investing $1 million in commercial real estate. Pinellas County is home to a large and diverse business community, meaning that a commercial real estate investment could potentially pay off well. Investment in properties such as office buildings and warehouses could bring a steady income, while increasing the value of the property over time. 

My all-time favorite is multifamily. Although it may seem expensive right now and interest rates are high, our multifamily almost always, like clockwork, doubles in three to five years. 

My million dollars would go a long way for myself and my family. Building my income for retirement is priority No. 1.

A Syndication Deal is the Way to Go

Soli Cayetano, based in the Bay Area with more than 40 doors around the country, would do this with $1 million: 

I would probably put $250,000 into a syndication for diversification. I know a few good operators who give 7% to 8% preferred returns plus upside at sale. I’ve invested in syndications in the past, and it’s some of the most passive income you can make.

With the rest, I would probably pay off a few properties, maximize their cash flow, and be able to take a line of credit out on them. We’re flipping quite a few houses right now, and for the ones we don’t flip, we are using the BRRRR process, so we are using private lenders to fund 100% of the purchase and reno prices. 

We typically invest using $0 of our own money, which allows us to buy properties at scale. By pulling lines of credit off our properties, we could essentially act as our own private lenders when needed. When not using the lines of credit, we’d have the benefit of the added cash flow. 

This is probably an unconventional answer, but I like Chad Carson’s small but mighty approach. Sometimes more units aren’t always the answer, and there’s a way to maximize cash flow with a small portfolio.

Fix-and-Flip Will Drive Huge Returns

James Dainard, a seasoned investor and developer in the Pacific Northwest and a frequent host and guest on BiggerPockets podcasts, shared what he would do:

With the current market conditions—high costs, high inflation, and high rates—I would focus on growing the capital as quickly as possible. Two of the highest-return products we like to invest in are fix and flip and development. That amount of cash would [allow] us to purchase four to five fix-and-flip properties with purchase prices around $800,000 to $900,000.

Typical rehabs would be around $250,000. We would obtain a construction loan to leverage each property. A typical return here would be 30% to 40% annually. With development, it ranges from 50% to 60%, and we’d look for $300,000 to $400,000 growth.

If I didn’t have the resources, I would select a fix-and-flip/development operator and offer a 50/50 split, which would return $150,000 to $200,000.

Fix and flip [and development] is a high-risk, high-reward business. The more resources you have, the more you can reduce risk. 

Other ways I would work the million would be to do hard money/private loans. The average rate is 12% and 2 points annually. [It’s] a great way to work money with a high return without having to do the work.

If you had $1 million to invest in real estate, what would you do with it? Let us know in the comments.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.