What is the Best Real Estate Investment for $1 Million?

by Stephen Twomey | Feb 6, 2024 | Accredited Investor, BAM Blog, Blog, Real Estate Investing | 15 comments

1. Why Invest in Real Estate?
2. Work With BAM Capital for the Best Multifamily Real Estate Syndication Deals

Best Way To Invest $1 Million Dollars In Real Estate

An investor with $1 million has plenty of options in terms of where to put that money. However, they need to be careful with that decision because the goal is to build wealth and not lose your hard-earned money.

Understanding your financial goals, risk tolerance, and timeline can help you make that crucial decision. These are concepts that may seem straightforward, but you still need to figure them out before you decide where to invest your $1 million. Knowing your goals and limitations can help you form the foundation of a solid financial plan. [1]

Identify your financial goals: is it a comfortable retirement? Are you saving up for your children’s education? Define what you want to achieve with your investment before doing anything else with your $1 million nest egg. Similarly, your risk tolerance and timeline will allow you to narrow down your options. [1]

Another thing to consider is the principle of diversification. Spreading the investment across various asset classes such as stocks, bonds, and real estate, can help mitigate the risk of any single investment. Most investors try to maintain a balanced portfolio that combines both conservative and growth-oriented assets.

One of the best ways to achieve diversification is by adding real estate to your investment portfolio. However, there are many different ways to participate in real estate investing, so it can be overwhelming to determine the best investment for your budget. Here we will explore some of the best real estate investments for $1 million and how you can make the most out of your capital.

Why Invest in Real Estate?

Before we proceed with some recommendations, we need to talk about why you should consider investing your money in real estate. Real estate can be a smart choice for your $1 million budget because it is a tangible asset with potential for appreciation.

Unlike stocks or bonds, real estate is an asset that you can physically see and touch. This can provide a sense of security and stability. Depending on the investment, you can also have more control over the asset.

Additionally, real estate has the potential to appreciate in value over time because of factors such as population growth, urbanization, and improvements in infrastructure. Investors can even add more value to the property through renovations and property development.

With a well-located and well-maintained property, you can turn a profit when it’s time to sell. Even if you don’t sell right away, you can still enjoy a higher cash flow due to the tendency of rent to rise over time. [2]

Another reason to invest in real estate is the potential for passive income. By renting out a property, you can generate a steady stream of income through monthly rental payments. Real estate investing provides a consistent source of funds that can even serve as a hedge for inflation, as rental prices tend to adjust with the rising cost of living.

With the passive income from real estate investing, investors can enjoy financial flexibility and the freedom to pursue other interests without sacrificing their financial well-being.

That said, if you are considering renting out a real estate property, this may be a bit more hands-on than you may think. While it can generate passive income, you will still have to manage the property and handle its day-to-day operations. You may have to consider hiring a property management company if you want this to be a true passive investment.

Finally, real estate investing also provides portfolio diversification. Diversification means spreading your money across different types of assets to reduce risk. By having a mix of stocks, bonds, and real estate, you can protect yourself from potential losses in one area.

Real estate has low correlation with other major asset classes, which means having a real estate property in your investment portfolio can lower its volatility and provide a higher return per unit of risk. The value of real estate investments may not necessarily move in tandem with the broader financial markets. During periods of economic uncertainty or market volatility, real estate can provide a stabilizing influence on a diversified portfolio. [2]

Thanks to its potential for appreciation, coupled with the ability to generate rental income, real estate investing is an attractive option for investors seeking both stability and the opportunity for long-term wealth accumulation.

Now that we know some of the biggest benefits of real estate investing, let us explore some options for an investor with a $1 million budget. Residential and commercial real estate may emerge as attractive options.

Residential real estate refers to single-family homes and multifamily properties such as apartment communities and condominiums. Other investors opt for commercial real estate investing. They acquire office buildings, retail properties, or industrial properties.

Both of these can be a good investment since rental properties can generate regular cash flow. However, it may give you some headaches, especially if you have no experience in being a landlord. Tenants can disrupt your cash flow if they are unreliable with their payments. Maintenance can also be burdensome, so some investors choose to work with professional management companies to run their property. [1]

Single-family properties can be a bit more manageable, but your cash flow may come to a complete halt if your lone tenant decides to leave. Multifamily properties can generate a stronger cash flow, and would therefore make for a better investment choice, but hiring a property manager is a must.

Here are some other options to consider:

Vacation Rentals

Vacation rentals are becoming more and more popular these days, and if you do it right, your investment can pay for itself over and over again. [3]

The immense popularity of vacation rentals is driven by the growing trend of travelers looking for unique and personalized accommodation experiences. By investing in a real estate property located near a sought-after vacation destination, investors can potentially tap into a strong and steady stream of rental income. This is especially true during peak travel seasons.

The flexibility of vacation rentals allows investors to adapt to changing market conditions and capitalize on high-demand periods. In fact, the most captivating benefit of having your own vacation rental property is the ability to make more money. The potential for property value appreciation in popular vacation spots can contribute to substantial long-term gains. [3]

As a cherry on top, there is nothing stopping you from using the vacation home yourself, which can save you some money. Some investors use their vacation rental property for things like birthdays, parties, get-togethers, and other gatherings.

However, just like with residential and commercial real estate, you need to know how to properly manage and market your vacation rental. Doing so will help you maximize your returns. Investors can use their $1 million to capitalize on this growing trend and secure a desirable vacation rental property.

Vacation rental properties are also considered recession-proof. Even if there is an economic downturn, you don’t have to worry about losing your money because most travelers continue to look for budget-friendly homes to stay in when vacationing. [3]

Fix and Flip

Investing $1 million in a fix and flip real estate strategy can be a lucrative venture, especially if you are a seasoned investor looking for quick returns. This approach involves identifying distressed properties, renovating them to enhance their market value, and then selling at a profit.

While this can yield attractive returns, flipping requires significant knowledge of the local housing market. It also requires skill in reconstruction. Investors who specialize in this approach have a keen eye for properties that can potentially give them great returns. [1]

With a substantial budget, investors can tackle larger projects and potentially reap higher profits.

However, investors should be able to select the property meticulously and manage the project efficiently as this investment strategy involves many risks like cost overruns, unexpected developments, market volatility, potential delays, and problems obtaining permits. [1]

Real Estate Investment Trusts (REITs)

Another option for a $1 million real estate investment is through real estate investment trusts (REITs). These are companies that own and operate income-generating real estate properties, such as apartments, office buildings, and shopping centers.

REITs issue shares that trade similarly to stocks, and pay out dividends to shareholders. Investing in REITs allows investors to diversify their portfolio without the hassle of managing a property. Investors can also benefit from regular dividends, as REITs are required to distribute at least 90% of their taxable income to shareholders. [1]

This is the perfect choice for investors seeking a diversified and relatively low-risk approach to real estate. By allocating funds to a diversified portfolio of REITs, investors can benefit from regular dividend income and potential capital appreciation.

REITs can also provide liquidity, allowing investors to easily buy or sell shares on the stock market. With a million-dollar investment in REITs, one can build a robust real estate portfolio. They can mitigate some of the risks associated with individual property ownership, while still enjoying solid returns.

Investors should keep in mind that REITs are subject to greater volatility than equities. This is because they are highly sensitive to the state of the economy. Residential and health care REITs are generally considered less volatile. [1]

Finally, investors should take note that investing in a REIT means you do not get to choose what type of real estate property they invest in. You are investing in the REIT itself rather than specific properties.

If you are interested in a hands-off approach to real estate investing wherein you get to choose which property to invest in, then the best choice for you may be multifamily syndication.

Multifamily Syndication

Real estate syndication is an investment strategy that is typically exclusive to accredited investors. These are investors who fit certain financial and professional criteria set by the US Securities and Exchange Commission (SEC) which allows them to invest in unregistered securities.

Accredited investors should consider real estate syndication, particularly multifamily syndication, because it eliminates some of the biggest hurdles associated with real estate investing such as property management.

Real estate syndication involves multiple investors pooling their resources together to collectively acquire and manage a single real estate property. While this can be done with any type of real estate property, multifamily syndication is especially popular because these larger projects are typically too expensive for a lone investor. [1]

A multifamily property can easily cost millions, so it’s very risky for a single investor to purchase it by themselves. But by pooling resources with other real estate investors, these larger properties become more accessible.

This investment strategy offers numerous advantages, such as diversification, economies of scale, and professional management. Multifamily properties are associated with strong and predictable cash flow after all.

This setup also solves the problem of property management, which would normally be a challenge if you are trying to manage a large condominium with several units and tenants. The syndicator, who puts the syndication deal together in the first place, is also in charge of property management. This means investors don’t have to worry about it.

In fact, the syndicator takes on most of the responsibilities associated with the multifamily syndication. Serving as the general partner (GP), they will take an active role in the investment process. They will create and execute the business plan, and also look for investors who will participate in the deal. [4]

On the other hand, the investors take on the role of limited partners (LPs). This means they will provide most of the capital needed for the syndication. They will also pay certain fees that will help get the syndication deal going. But beyond that, they do not have any responsibilities in the syndication deal and they are also not liable for it. [4]

In return, they receive a share of the property’s cash flow, and depending on the deal structure, a share of the equity upon resale. Each deal is different, and the profit split should be detailed in the syndication agreement.

Multifamily syndication is more of a hands-off investment approach for those who may not have the time or knowledge to manage properties directly.

Work With BAM Capital for the Best Multifamily Real Estate Syndication Deals

There are several ways to spend your $1 million on a real estate investment property. However, for accredited investors, multifamily syndication is one of the best options.

If you are ready to join a syndication deal, you need to look for a trustworthy syndicator with a reliable track record for excellence. Work with BAM Capital.

Accredited investors love BAM Capital because this Indianapolis-based syndicator is consistent and reliable. They prioritize properties that are Class A, A-, and B++. BAM Capital chooses high-quality multifamily properties with proven upside potential and in-place cash flow. They then use their award-winning strategy to create forced appreciation while mitigating investor risk. [5]

In fact, this approach is the reason why BAM Capital now has over $700 million AUM and 5,000+ units. BAM Capital has built a reputation for itself as a leader in its industry. [5]

BAM Capital is also a vertically-integrated company, meaning they can handle every step of the syndication process from start to finish. They will guide you every step of the way, from acquiring high quality real estate properties to managing and renovating them.

No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions.

For accredited investors who want to enjoy the passive income and all the other benefits of being in a multifamily syndication, schedule a call with BAM Capital and invest today.