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Old 15-01-2018, 07:36   #1
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Friend's business sold and netted $3m

Hey Everyone,

A friend of mine recently sold his business and walked away with just over $3 million dollars. Him and his significant other are burnt out from 60+ hour work weeks and living in Los Angeles.

They are inlove with the dream of purchasing a used Lagoon 450 or FP Helia 44 in Europe and cruising for a year or more depending on how much they enjoy it.

His plan is to first deploy most of his newly found wealth into large Multi-family buildings in parts of the US where you can reasonably expect 8% Cash on cash returns without too much risk and headache (using good property managers).

So my question is this, is he overly optimistic that with a $3m liquidy event can fund this kind of mini-retirement ?

Love to hear your thoughts/concerns/ideas
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Old 15-01-2018, 07:41   #2
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Re: Friend's business sold and netted $3m

$3M invested, using a conservative 4% withdrawal ratio, yields a $120,000 annual income. I know *I* could live on that. Might not be extravagant, but certainly enough to get by. Question is, could they?
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Old 15-01-2018, 07:53   #3
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Re: Friend's business sold and netted $3m

Take out the purchase price of the boat, and they are investing roughly 2,500,000. Minus any extras, ect. And they are at 2.25.
Still enough for me, but what standard of living are they used to. That is the most important question to answer.
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Old 15-01-2018, 08:08   #4
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Re: Friend's business sold and netted $3m

Multi-family is a PITA, even with good management: every tenant is your customer and there are lots of them to keep happy. Better they buy a triple-net commercial and hire a good management company to run it.
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Old 15-01-2018, 08:25   #5
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Re: Friend's business sold and netted $3m

What is exactly a multi-family, it's obviously a US term.
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Old 15-01-2018, 08:28   #6
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Re: Friend's business sold and netted $3m

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What is exactly a multi-family, it's obviously a US term.
Any rental housing property which houses more than one family. Could be a duplex (2 units) up to a large apartment complex.
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Old 15-01-2018, 08:29   #7
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Re: Friend's business sold and netted $3m

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Any rental housing property which houses more than one family. Could be a duplex (2 units) up to a large apartment complex.
OK, familiar with duplex etc.
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Old 15-01-2018, 08:33   #8
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Re: Friend's business sold and netted $3m

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Multi-family is a PITA, even with good management: every tenant is your customer and there are lots of them to keep happy. Better they buy a triple-net commercial and hire a good management company to run it.
What he said.

You can pick up a Walgreens drug store for reasonable money, and assuming you pay cash for the property you can expect a 9% annual return, and they will sign a 69 year lease. You might be able to structure the deal to use someone else's money and do even better.

There are a lot of bank buildings and grocery stores to be had as well.
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Old 15-01-2018, 08:43   #9
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Re: Friend's business sold and netted $3m

I don't know about the US but in Australia there is alot of vacant commercial retail shops, they just aren't getting filled. Yet residential rental real estate there's a shortage. Aren't you guys over there experiencing a retail store/shopping mall glut? Thought I read that.

I own commercial and residential, although the commercial is a better deal I personally would chose residential in a good area. People always need homes.

Fortunately I have no trouble with tenants, good property manager and I don't get greedy with rent.

Location, location, location.

And yes, can't imagine it's hard to live off that sort of money with conservative investments.
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Old 15-01-2018, 08:50   #10
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Re: Friend's business sold and netted $3m

There ended up some very useful information in this thread: If you had a million dollars.....

Tell your friend congrats on the sale. That number seems to be our threshold for pulling the rip cord, as well.
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Old 15-01-2018, 15:28   #11
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Re: Friend's business sold and netted $3m

You guys make me feel poor
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Old 15-01-2018, 16:24   #12
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Re: Friend's business sold and netted $3m

Well that amount of money in multi family here in New York will get you a small 6 to 10 unit apartment building. I suspect LA is the same...... prices reflect the stability of the asset and the fact that the equity return expected is very low..... under 4%.
And as mentioned before you now have customers... one bad apple and your return goes away on small buildings. Net lease is a much more care free investment.
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Old 15-01-2018, 16:59   #13
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Re: Friend's business sold and netted $3m

Before buying and running a ~1/2M boat, they should test if their investment really works...

Some questions:
How old are they? 3M can be a lot for a 65 year old and very little for a 40 year old who doesn't wish to return to the rat race. Any family plans?
What's the cruising plan? Berthing a 14.1(!)m cat (!!!) is not quite cheap and I suppose they'd need the comfort of a marina most of the times. I'd expect such a beast to burn at least 50k$/year in the Med only boat-costs (berthing, insurance, basic repairs). Anything major (new sails, a new engine - two new engines) changes the landscape completely.

I certainly wouldn't start with anything larger that costs more than 10% of my savings to buy.

That 8% investment profit is a promise, taxes, all kind of hidden costs are due - that's why I suggested: test it, in the meantime relax, charter a boat for a few weeks here and there. No need to rebuild a new rat cage...

Moreover, I am very skeptical that 8% net yield can be safely produced nowadays on the long term. If there was such an investment, the banksters would have taken it long before you can blink. For the average Joe only the bubbles remained (stocks and bitcoin) which will probably continue to grow for a few years but I don't expect a very positive return in the next decade.
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Old 15-01-2018, 17:45   #14
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Re: Friend's business sold and netted $3m

Just asking for a friend eh? Learn to sail, charter a couple times. spend $500k on a cat. Not a big deal. Do it. If you can build a business from nothing to 3mil you can do anything.
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Old 15-01-2018, 18:29   #15
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Re: Friend's business sold and netted $3m

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You guys make me feel poor
Naah. You are one of the wealthy. I regret not cracking a cork with you and the boss when we were "close", but I made the mistake of slipping into a comfortable looking bed for the first time in years. Spent the rest of the trip at the bone crusher getting fixed up. Scuba, guns, boats, planes.......When I grow up, I want to be just like you.
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