How To Turn 100k Into A Million (Step-By-Step)

Most new Passive Investors Circle members come prepared to invest $100K into their first real estate syndication deal.

Many times they’re looking for how to turn 100K into a million in as short as time possible. 

The majority are familiar with investing in the stock market and either want a diversified portfolio with real investments or get out of the market altogether.

Those who have chosen the latter tell me that they can’t handle the market volatility any longer and are looking for assets that can provide a “more stable” return.

I get it.

Before we jump into some of the different areas that can get you to the million-dollar mark, there are a few things to consider first….

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5 Things to Consider When Investing $100,000

#1. What’s your investment objective?

Before you shell out an initial investment of $100k, a good starting point is to define your specific investment objective.

A good question to answer is: “What are you trying to achieve with the $100k investment?”

Different goals require different investing objectives. For instance, if your goal is to generate passive income, then your investment strategy will be different than someone trying to grow the $100k as much as possible.

#2. What’s your time horizon?

The length of time you want to keep an investment is your time horizon. Ask yourself, “When will I need the money?”

The length of time you can afford to invest can impact where you invest. So the first step in growing your $100k to $1 million is looking at where you are now financially, such as how much debt you have (i.e. student loans), annual income, and future earning potential.

Next, consider setting a date to accomplish your goal of investing $100k and turning it into $1 million.  Having 20 years to accomplish your goal versus 3 years plays a big role in how successful you’ll be.

This goal will dictate how your funds are invested.

#3. What’s your risk tolerance?

In my opinion, your risk tolerance and risk capacity are two factors to consider as you determine your investing approach.

Typically, assets with a higher investment risk have the potential for higher returns (and losses).

It’s important to know how the two balance each other out so you can choose the investments to turn your $100,000 into $1 million.

When I first started passive investing in real estate, my wife and I sat down and discussed how much risk we were willing to take.

We elected to only work with sponsors with a long, proven track record that has had at least one deal go full cycle (sell). The assets we choose typically have a positive cash flow from day one, which helps reduce the risk as we’re conservative investors. 

Before investing your $100k, you need to figure out what type of deal you can put your money in that allows you to sleep at night. 

If you’re constantly worried about losing your money, then avoid anything other than cash, bonds, certificates of deposit, or savings accounts. 

#4. What is your current situation?

Before letting the $100k out the door, take a step back and look at your current situation, such as:

• annual income
• family situation (married, kids, planning for kids, caring for parents, etc.)
• your age
• overall health of you and each family member
• Are you expecting an inheritance?

#5. Can you control your emotions?

Even though you may consider yourself to be a rational person, when it comes to money, even the most logical folks aren’t.

How many times have you visited a car dealership with the intent of “only” looking but driving away with a brand new car?

It happens all of the time as our emotions can occasionally impair our financial judgments.

What Type Of Investor Are You?

Most are set up to ask you a series of questions through an online survey regarding your:

• current financial situation
• future goals

Once this is completed, the data is used to offer advice and automatically invest for you. It’s the financial “set it and forget it” system.

Several companies offer these automated services to manage your portfolio.

#3. Financial Advisor – full service 

If you’d rather not be much involved in the investing process, the consider hiring a financial advisor to professionally handle all of your investments.

Typically, they can:

• discuss your options based on your goals
• manage your portfolio
• offer overall financial planning for the future

Out of the three types of investors, this would be the more expensive route.

Where Should You Invest $100k?

I’m a periodontist and NOT a financial advisor. And like you, I’m simply trying to reach financial freedom in as short a time frame as possible. With that being said, please don’t take any of the recommendations below as financial advice. Do your own due diligence and decide which route is best for your situation.

There are several ways you can turn $100k into a million. I strongly encourage you to first answer the 5 things to consider first questions above.

That way, it will make choosing from the list below much easier.

#1. Stocks

Investing in individual stocks is a way to diversify into various industries and companies. Stocks allow you to own shares in public companies traded on the stock exchange.

Its worth is based on investors’ perceived value and potential future earnings. Due to the volatility in the stock market, investors can have fluctuations in their stock’s value. Risk can be minimized by diversification via investing in several different stocks across multiple industries.  

The advantages to stock investing are:

• liquidity (access your money at any time)
• low barrier of entry (i.e., can start investing with as little as a few dollars)

#2. Mutual funds and ETFs

The majority of my investments in the stock market (which gets smaller each year) are either in mutual funds or exchange-traded funds (ETFs).           

These are a collection of stocks, bonds, money market funds, and other assets typically operated by professional money managers. They allocate the fund’s assets and attempt to produce capital gains or income for investors in the funds.

ETFs typically follow a particular index (such as the S&P 500), while mutual funds are a portfolio of stocks that analysts have already selected. If you’re more of a passive investor (like me) and want to dabble in the market, then ETFs and mutual funds give you that hands-off approach.

These investments are chosen to mimic the performance of whatever the investment manager sets as their benchmark.

For instance, some could be set up to mirror entire indexes, while others mirror specific sectors or the performance of blue-chip companies.

If you choose mutual funds or ETFs (or both), typically, your risk will be lowered versus investing in individual stocks due to the fact that your money will be spread out amongst several hundred or thousand stocks.

#3. Personal Loans Investing or Peer-to-Peer (P2P) Lending

According to Wikipedia, “Peer-to-peer lending, also abbreviated as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders with borrowers.”

This strategy allows investors to act as the bank in certain circumstances, which can help out borrowers needing a loan.  Benefits include passive income plus the potential for high return on investment (ROI).

P2P lending has become increasingly popular to allow investors to diversify their portfolios.  Over the last few years, access has been much easier via online platforms.

#4. IRA Investing

More than likely, you’ve been investing in individual retirement accounts or IRAs all along. If you own a business/practice or work for a company, more than likely, some type of retirement account is offered (i.e., 401k, 403b) in which you can contribute.

In my practice, I offer a retirement account where I’ll match each employee’s contribution up to a certain percentage each month. 

I understand that you’re aware of how investing $100K in a retirement account works if you plan on working until you’re 65 or 70 and want to turn that $100k into a million, then consistently investing each year should get you there. 

Who wants to wait that long, right? If that sounds like you, then I’ve saved the best for last…..

#5. Real Estate

If you’ve read any of my articles or watched some of my YouTube videos (thank you!), then you’re well aware of how much I love real estate. 

Before we talk specifics, here are the 5 ways real estate can help put money in your pocket:

a.  Cash Flow

One of the biggest benefits of investing in real estate is the passive cash flow (aka mailbox money).

This represents what’s left over from the money coming in via rent tenants pay each month minus expenses.

For instance, if you’re invested in an apartment complex that collects $12,000 a month and expenses are $9,000, then your cash flow is $3,000 each month.

b. Leverage

Leverage in real estate means buying property with debt instead of paying cash.

One of the best examples of using leverage involves your primary residence. Using leverage from the bank allows you to borrow money for financing in the form of a mortgage.

The ultra-wealthy understand the power of leverage, which is why most of them have real estate in their portfolio.

Related article: Leverage – The Extreme Real Estate Advantage

Leverage allows you to buy a much larger asset and increase the potential return on your investment than you could if you had to pay 100% of the purchase price upfront.

For instance, if you bought a duplex for $250,000,  the bank would require 20% down or $50,000, and they would bring the remaining $200k.

The cash flow made is based on the full $250,000 and NOT the $50,000.

Even though the bank fronts the majority of the money, the monthly rental income goes directly to you, not the bank. 

c. Equity

The great advantage of having a rental property is that your tenant pays the note for you each month.

By doing this, the equity in the property continues to grow without having to come from your own personal income. 

This means that your tenants are essentially building that equity for you.

d. Appreciation

Appreciation is the concept of a home’s value increasing over time. The average home typically sees a 3-4% annual increase, which is usually in line with inflation. 

If you’ve ever sold a home that you’ve owned for several years, then it’s likely you received more than you paid for it. This is an example of appreciation.

Although appreciation is always nice to receive, it’s NEVER a guarantee. This is one of the reasons we personally invest for cash flow.

e. Tax benefits

My favorite reason for investing in real estate is due to the tremendous tax benefits it offers.

Did you know that the tax code was written mainly to incentivize real estate investors and business owners? 

If you’ve owned real estate, then you know that over time, the wear and tear can lower its value along with its contents. This “wear and tear” process is actually tax deductible and is known as depreciation.

Common deductible expenses are:

• renovations
• property tax
• insurance premiums
• property management expenses

This deduction can be taken for the expected life of the property, but it must be spread out over multiple years.

You can also order engineers to perform a cost segregation study.

This can shorten the amount of depreciation time by helping to identify and reclassify personal property assets for taxation purposes. This will reduce income tax obligations.

You can also take advantage of a 1031 exchange, which may allow you to defer taxes from any sale indefinitely.

Now that you understand the 5 ways real estate can pay you let’s take a look at the different ways you can invest $100k to make one million in real estate.

5 Ways To Invest $100K In Real Estate

One of the first questions to answer before investing $100k in real estate is, “Do I want to invest as an active or passive investor?”

#1. Traditional real estate

If you want to invest via the “traditional” route, then you don’t mind dealing with tenants. For me, running a practice full-time + family with kids, I tend to invest passively (more about this below).

This type of investing can involve purchasing something as simple as a single-family home, duplex or small apartment in which you rent out for income. 

Another example is a fix and flip, which is the process of buying a distressed property, fixing it up, and then flipping or selling it. 

By finding lower-priced deals, a $100k investment will typically cover the down payment (usually 20% of the purchase price) along with some repair costs and closing costs. 

Again, you need to decide whether you want to take on the responsibilities of being a landlord or hire a property management company.

#2. Real Estate Investment Trusts (REITs)

A REIT is a company (either private or public) that owns, operates or finances income-producing real estate. 

Examples include:

• office buildings
• hotels
• apartment buildings
• self-storage
• retail centers
• commercial properties

So instead of buying a self storage facility or other type of real estate to generate passive income, you can now invest into larger projects through REITs.

Related article: Real Estate Syndication vs REIT: Which is Right for You?

#3. Turnkey property

A popular way to passively invest in real estate is turnkey rental property.  There are several companies that participate in this buy-and-hold strategy that seek out and find undervalued property in strong rental markets.

They’ll renovate these properties and sell as “move-in” ready for investors which takes you out of the picture from having to oversee the repairs.

Most turnkey real estate companies provide other services such as:

• management services
• maintenance
• marketing to keep occupied

Even though companies will “manage and maintain” the properties for you, it’s still a good idea to monitor their performance by reviewing reports and financial statements from the property manager.

#4. Real estate crowdfunding

I started passively investing in crowdfunding sites and lost my shirt so I tend to steer clear of them. With these online platforms, you’re putting your trust in them telling you whether or not a deal is good. 

People can access and fund these deals (think of a GoFundMe account). Projects receive money collected from numerous sources.

This concept allows investors to participate in large real estate transactions where they can earn a return during the hold time.

I now focus on investing strictly one-on-one with sponsors I get to know via syndications, which is our next investment method. 

#5. Syndications

Real estate syndications are now my go-to strategy for investing passively in real estate.

A real estate syndication is the pooling of money from a group of investors to purchase a more expensive property than any of them could have afforded on their own.

They typically require little capital and are a fantastic way for a busy, high-income professional to start developing multiple streams of passive income.

In my opinion, there’s no better way to invest in real estate (with $100k) and not have to be involved with the property.

Summary

My goal for this site is for you to become informed of your investment options because inevitably, it’s up to you to decide the best way to invest 100K. 

Everyone has different goals. What’s right for me may not be for you.

To learn more about passively investing in real estate, join the Investor’s Circle today.

FAQs

What Investment Strategies Can Effectively Turn 100K into a Million?

A great way to grow 100K into a million is through a diversified investment portfolio. This can include exchange-traded funds (ETFs) for broad market exposure, dividend stocks for steady income, and growth stocks for higher potential returns. Real estate investing, either in rental properties or commercial real estate, can also be a lucrative option. The key is to balance your asset allocation based on your financial goals, risk tolerance, and how much time you have to grow your investments.

How Can Real Estate Investments Contribute to Turning 100K into a Million?

Real estate investing is a powerful strategy for turning a significant amount of money like 100K, into a million. Investing in rental properties or commercial real estate can provide monthly income through rent, along with appreciation in the real estate market over the long term. The key is to conduct thorough research and make investment decisions that align with the market trends and your financial capacity. Real estate investments can also offer tax advantages that can help reduce your taxable income.

Are There Tax-Efficient Ways to Invest 100K for Maximum Growth?

Investing in a Roth IRA or a traditional IRA can be a tax-efficient way to grow 100K. The Roth IRA offers tax-free growth and withdrawals, ideal for those who expect their taxable income to be higher in the future. On the other hand, a traditional IRA provides tax-deferred growth, which can be beneficial for those in higher tax brackets now. Additionally, investing in a taxable account with a focus on tax-efficient funds like ETFs and taking advantage of long-term capital gains can also be an effective strategy for the best returns.

What Role Do Savings and Emergency Funds Play in Growing 100K to a Million?

While investing is key to growing your hard-earned money, it’s also important to maintain a solid financial foundation. This includes having an emergency fund in a high-yield savings account or a money market account to cover unexpected expenses. This ensures that you don’t need to withdraw from your investments prematurely, especially in a down market. It’s a good idea to have enough in your emergency fund before allocating a large amount of money, like 100K, towards growth-focused investments.

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