A budding investor thinking of profitable ways he can invest $80,000
Do you have $80,000 lying around? Well, that’s great. You might have gotten these funds from working, a winning bet, or an inheritance. While this sum might look like a massive pile of cash, you can run through it in an instant if you don’t make the right choices.
Therefore, you’ll need an investment strategy — and fast too. Time and tide wait for no man, and the earlier you get this aspect all sorted, the better. However, with a myriad of investments available, what form is the surest?
While we can’t give a definitive answer to this question, one investment keeps popping up on our radar — real estate. Real estate investments have delivered the goods in terms of steady and high ROI values from time immemorial.
These profit margins remain constant in today’s world. Thus, seeing investors troop in to get their portion of positive dividends is a no-brainer. You have access to low risks and high rewards in the real estate sector.
Should you invest 80,000 in real estate alone? Not quite. Despite its perk-filled nature, we’ll be looking at other investments you can consider. Now, you can diversify your investment portfolio without hassles.
Investing $80,000 in the Real Estate Market: Mediums That Produce Profitable Returns in the Long Run
Now’s the time to lay a claim in the real estate sector. Quickly, let’s look at the mediums vital in bringing this vision to life. Top mentions include:
Real Estate Syndication
As a budding investor with $80,000, you might want to invest in real estate structures without committing your funds 100 percent. Thankfully, there’s a solution in the real estate sphere — syndications.
In a real estate syndication, investors contribute funds to acquire landed properties they wouldn’t have been able to own or manage on their own.
Although real estate syndication has become a popular activity amongst investors these days, it wasn’t always so. In times past, only the wealthy could join real estate syndications.
However, 2012 marked a turning point in proceedings with the signing of the JOBS (Jumpstart Our Business Startups) Act by former President Barack Obama.
This policy effectively loosened regulations instituted by the Securities and Exchange Commission (SEC) on small-scale businesses. It also grants more access to syndications as companies can pool investors without registering with the SEC.
No real estate syndication deal can occur without these parties: the sponsor and investors. The sponsor or syndicator is responsible for facilitating the deal from scratch. These are typically individuals with broad knowledge of the real estate scene. Typically, the sponsor acquires the property, makes renovations if needed, and manages the structures.
On the flip side, investors pool their resources together to provide the capital required to acquire the property. Unlike the syndicator, investors play more of a passive role. These investors will receive profits based on their contributions.
If you’d like to adopt this investment style and do it the right way, it might be time to sail towards a reputable firm — Peoples Capital Group. Despite the tricky nature of real estate investments, being on the scene for over 30 years gives us the edge to know what works and what doesn’t.
Seeking to jumpstart your real estate investing journey, Peoples Capital Group offers the best deals for as low as $30,000. While fluctuations are recurring in the real estate sector, you get a passive income stream with relative ease.
Real Estate Investment Trusts (REITs)
If you want to invest $80,000 into a real estate venture that grants you some decent profit margins without owning property, it might be time to consider a Real Estate Investment Trust (REIT).
Now, the question is — what are REITs?
REITs, in simple terms, refer to companies who have a claim to landholdings and other real estate structures. Sharing some similarities with mutual funds and ETFs (Exchange Traded Funds), the disparity is that these entities don’t own a vast array of assets for investments. You can receive profits from a particular real estate property when you invest in REITs.
Although REITs exist in different variations, the most common form is “equity REITs.” In this REIT format, investors come together to fund property acquisition, development, and management.
These REITs deal with specific property types, including hospitals, malls, hotels, and apartment buildings. As a general rule, investors will share 90 percent of the accumulated profits earned by these properties.
If you want a diversified portfolio with relative ease, it’s time to consider REITs. Since most REITs trade on financial stock exchanges, this investment type can make decent returns from real estate and be liquid enough to trade stocks. Here, the “double or nothing” mantra comes alive.
Investors are running towards REITs these days. Why? These investments don’t field corporate tax. So, rather than losing money, you stand a chance of making more from an $80,000 investment.
To have decent liquidity when you trade REITs, we advise sticking to the publicly traded form. You can secure these shares through a brokerage firm, traditional IRA, or 401(k).
With public REITs owning over $2.5 trillion in gross assets in the US, it’s no surprise why Americans are running towards this investment form to lay a sizable claim.
Investing $80,000 in a rental property and advertising it to prospective tenants through sign posts like this
A classic way of investing in real estate is by acquiring properties and leasing them out (whole or part) to tenants. Since you’d probably require a 25 percent down payment on rental properties, you’ll need to set aside $50,000 for a property worth $200,000. Thus, you should be fine with $80,000 in hand. There are also closing costs, renovations and operating reserves to consider.
If you’re looking for a proven strategy here, you might want to purchase a multifamily property and rent it out. However, this plan only yields positive ROI values if the property fields low overhead costs.
If your tenant’s rent doesn’t cover maintenance, taxes, and mortgage and insurance you’ll lose money in the long run. With fixed mortgages, raising rent is vital, ensuring you have more in your pockets as time goes on.
Does this method sound a bit complicated? You might want to consider “house hacking.” Here, you purchase a multi-family property, and rather than subletting every available unit; you reserve one for yourself. By doing this, you reduce your living expenses. With the rental income received, settling mortgages and taxes is easy.
However, you can take things further. When the time is right, you may be able to convert these apartments to condos and sell them individually for the top dollar.
Although rental properties might come off as profitable ventures, it’s not for every “Dick and Harry.” This form of investment is engaging. While employing a property manager might help, you’ll have to spend money paying for their services and you still need to know how to find, analyze, finance and manage real estate.
While the TV shows might portray house-flipping as a perfect real estate investment, this is one of the more challenging ways to earn a profit in real estate.
But first, let’s see what it entails.
With house flipping, you go through listings to seek a decently-priced property. Once you’ve made the buy, it’s time to renovate the structure. Afterward, resale for a price higher than the purchase value.
While this seems great on paper, house flipping isn’t a 100 percent investment form as some issues might crop up during the revamp process. So, before you opt for this investment form, conduct a full-scale evaluation of the market.
Most times, home flippers discover that they can’t sell the property for their intended prices. Therefore, they incur losses in the long run. To avoid this, ensure that the total renovation doesn’t exceed 70 percent of the expected sale price.
Although house flipping might seem risky, engaging the services of experts (engineers, interior decorators, and licensed attorneys) is vital. While this could make the selling process smooth sailing, having cash reserves in case things go haywire is non-negotiable.
If you have a low-risk tolerance and you’d like to key into a “recession-proof” investment, now’s a good time to invest 80000 in self-storage. Since you don’t have to deal with continuous tenant calls about clogged sinks, passive income may be easier with this type of property.
Unlike some other real estate investments, self-storage is appealing to investors (new and seasoned) due to its low construction costs and overheads. Also, you don’t have to go through the hoops of extensive property management as they require little to no maintenance.
While self-storage was a hidden gem some years ago, it has become big business in the US. For context, the United States, according to a recent Sparefoot report, is home to 49,233 storage facilities. Generating over $39 billion yearly, making a sizable investment here is vital in creating a diversified portfolio that yields profits.
Moving Beyond the Real Estate Market: Other Investment Options Worth Considering
While your financial advisor might recommend the real estate sector due to the limitless possibilities available, diversification is crucial.
Let’s look at alternative investments you can consider to boost your ROI. They are:
The Stock Market
$80,000 is quite a lot, you can invest some of this into stocks. Using this investment channel, you can create wealth and diversify your investments.
Typically, the stock market averages over ten percent yearly. However, this value isn’t definitive, as it can increase or reduce, depending on your investment timeline.
Stocks are liquid assets, and thus, you can foster cash exchange easily. That said, most investors are turning towards individual stocks as they offer a low entry point and decent profits.
Despite the advantages of individual stocks, budding investors may find, to invest in stocks properly, that they’re time-consuming and risky investments. Since they require a fair amount of knowledge, you have to conduct due diligence on the company whose individual stocks you’d like to buy.
That said, due to the complexities of the stock market, your stocks might depreciate when the economy takes a downward turn.
ETFs and Mutual Funds
Viable media to invest $80,000 effectively include ETFs and mutual funds. Quickly, let’s get some context into these different terms.
With the Exchange Traded Fund (ETF), you can enter numerous investments at once. These investments can include stocks from specific sectors, bonds, and other commodities.
On the other hand, you can use mutual funds to secure funds from an entity that supervises numerous assets.
While the concepts of these terms might share some semblance, it’s pertinent to note that there’s one significant difference that sets them apart.
Although ETFs offer flexible transactions, investors might experience some rigidity with mutual funds. On the latter, day-to-day transactions integrate several restrictions, making it harder to trade.
However, it’s important to note that ETFs and mutual funds aren’t foolproof investments. Thus, before you select, confer with a financial planner to put your needs into perspective.
An Emergency Fund
Emergencies usually happen when you least expect them. With $80,000, you might want to save 20 to 30 percent in an emergency fund you can fall back to when things aren’t rosy.
Your emergency fund must be liquid to cover expenses that might crop up anytime. That said, it’s crucial to ensure that the fund doesn’t place penalties when you request a payout.
Although emergency funds should deliver significant returns in the long run, you risk losing your initial investment if the asset class you bought falls below the purchase price.
Individual Retirement Accounts
Although individual retirement accounts (IRAs) might not rank #1 in a popularity contest for investments, it does a great job growing your $80,000. Unlike the regular brokerage account, IRA offers tax advantages. Since “Uncle Sam” can’t make deductions, keeping more money to yourself is feasible.
The perks of IRAs don’t just focus on tax benefits alone. With social benefits reduced, there’s no 100 percent guarantee that these funds will be available in the long run. Therefore, creating an IRA to save money before retirement is a must.
However, note that penalties apply if you request a withdrawal when the account hasn’t reached full maturity.
High Yield Savings Accounts
If you want to keep your $80,000 safe while receiving a steady monthly income, you might want to look at high yield savings accounts and what they have to offer.
Although the returns here might not displace values made by a mutual fund and other stocks, it is better than those on traditional savings accounts.
While a high yield savings account might be a great medium to bolster your personal finance, interest rates might fluctuate in line with market conditions.
Money Market Accounts
Money market accounts are similar to regular savings accounts. However, you have access to higher interest rates with a money market account.
Unlike other savings accounts with varying cons, they are relatively safe as the Federal Reserve insures them.
However, don’t invest your entire $80,000. Here, 15 percent of the total funds should do.
A confident investor checking charts to decipher how his $80,000 investments are faring
We Know That You’re an Investor. But What Kind Are You?
We’ve gone through a myriad of investment options in this article. However, the choice you make determines your kind of investor.
That said, if you’d like to do your own research and go the DIY (Do It Yourself) route, it might be time to create an investment account with a brokerage. By going this route, you have access to details beneficial in making suitable investments.
However, not everyone can take the “solo” path. If you are in this class, you can enter generic investments with great returns.
The medium? A Robo advisor. These investors consider your goals and do all the investing for you while sitting at your home’s comfort, earning. Nonetheless, it’s crucial to note that these services come at a premium.
Do you need in-depth financial advice step of the way? Engage the services of a financial planner. Albeit more expensive than other mediums, these professionals offer personalized investment recommendations.
You have $80,000 in your purse, and that’s a whole lot. If you don’t want to run through these funds in an instant, making concerted efforts to invest is crucial.
Everyone’s situation is unique. So, maybe you’d like to start with a proven asset class like real estate. With real estate syndications, rentals, and self-storage in the mix, your chances of getting a considerable ROI, in the long run, rank high.
Although real estate might seem great, you might want to diversify and engage viable investments like ETFs or stocks, using your IRA. You can also self direct your IRA into real estate.
Whatever you settle for, always remember that no investment class delivers on the goods 100 percent. We’ve done our part, and it’s time for you to set things in motion. Good luck!