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Would you invest any differently if you had $10 million?

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  • Avatar Kamban 
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    Status: Physician
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    Joined: 08/01/2016
    Would you invest any differently if you had $10 million (not including your home)? If so, how would invest this?

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    There is a difference between suddenly getting $10M ( lottery, inheritance, IPO etc) vs accumulating $10M over the years.

    In the first group – if you do not have a investment policy you could lose the money rather rapidly, blowing on things you don’t need or useless assets like Supercars.😉

    The 2nd group does not need to change their investment policy that has made the 1M into 3, later 5 and now 10M. Let the compounding grow but periodically withdraw money to enjoy life rather than reinvesting all the dividends / returns.

    #235432 Reply
    Avatar dennis 
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    Status: Retired
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    Joined: 04/18/2019

    We own mostly multifamily but some single family rentals. I was 100% stock market till the 2000-2002 meltdown and I saw so many docs who were 100% stock market get their knees cut out from under them so I was determined to diversify assets to avoid that and started reading about real estate investing and all of the tax advantages so we rolled cash out of the stock market and started buying apartments in 2005. That was with taxable cash. Then I learned about SDIRA real estate investing so started doing that in a SDIRA in 2007. I don’t manage as I didn’t have the time or interest plus IRS rules prohibits you managing your own property in a SDIRA. It’s worked out well for us and my retirement income is currently 50% from the SDIRA real estate income and 50% from property owned outside of the SDIRA. We are taking advantage of Trump’s tax law and using cost segregation depreciation to sell property in the IRA and take a distribution and buying property outside of the IRA and cover the distribution with the cost seg to delay/avoid getting a big tax hit from the distribution. I hope to move the properties out of the IRA before getting dinged with RMDs when I hit 70.5 and before the tax law runs out in 2022.

    #235439 Reply
    Avatar adventure 
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    Joined: 10/24/2016

    Yes

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    ^^

    #235475 Reply
    Liked by Vagabond MD
    Avatar Tim 
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    Status: Accountant
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    Joined: 09/18/2018

    @hank,
    Your plan philosophy is similar to mine.
    With a “new infusion” of $10mm or drastic increase, I think I would moving some “wants” into the “need” column. Thus, the cash equivalent would increase in amount. Most likely it would be a smaller percentage though.
    Love your plan. Adjust when necessary but low probability with plenty of leeway.

    #235518 Reply
    Avatar Dont_know_mind 
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    Status: Physician
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    Joined: 11/21/2017

    I reached 10M NW, I decided not to do anything different. Am 90% real estate, 8% cash, 2% stocks. Probably will deploy 8% cash at some stage, in real estate again, which has worked well for me.

    #235742 Reply
    Avatar dennis 
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    Status: Retired
    Posts: 52
    Joined: 04/18/2019

    @don‘t-know: Is all of your real estate outside of SDIRA?

    #235759 Reply
    Avatar Dont_know_mind 
    Participant
    Status: Physician
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    Joined: 11/21/2017

    @don‘t-know: Is all of your real estate outside of SDIRA?

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    I have 2M in real estate in SDIRA and the rest outside.

    #235953 Reply
    Hank Hank 
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    Status: Attorney
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    Joined: 03/27/2017

    This is years away, but how do you plan to take RMDs in the $2M in real estate in your self directed IRA?

    #236081 Reply
    Avatar FIREshrink 
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    Status: Physician
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    Use the rental income, which should be far more than RMDs until close to the very end.

    #236085 Reply
    Avatar FIREshrink 
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    Splash Refinancing Bonus

    Yes, this thread is silly because instead of asking hypothetically, poster could have just asked those with a NW over $10m to explain how their investing did or didn’t change.

    #236086 Reply
    Avatar dennis 
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    Status: Retired
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    @hank To answer your question I have about $5M in SDIRA real estate and low 8 figures NW. I am 67 and concerned about the RMDs because eventually  the appreciation will outstrip the ability of the property to match the RMDs. Fortunately with Trump’s tax law we can use the 100% first year bonus cost segregation depreciation to move the $ out of the SDIRA and purchase property outside of the IRA. We are selling the apartments in the IRA and finding apartments outside of the IRA and  taking a distribution (being over 59) to buy the apts. and using the cost segregation to cover the income so not getting killed with the taxes on the distribution. This delays but doesn’t eliminate taxes unless we  eventually sell the property we bought outside of the IRA and delay again in a 1031. We will get most of the property outside of the IRA by the time I turn 70.5 and by the time the law sunsets 2022. You have to use the tax laws when they are in your favor. We have done this last year and this year to cover the capital gains on failed 1031s (on property sold outside of the IRA) to good effect. With the ones we bought last yr and this yr we are finding about a 25% first yr. depreciation so that if you buy $1M of apt you get $250K in first yr depreciation. I am an active real estate investor since I retired from medical practice so the tax laws are more to my favor than a passive investor.

    #236119 Reply
    Avatar Dont_know_mind 
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    Status: Physician
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    Joined: 11/21/2017

    This is years away, but how do you plan to take RMDs in the $2M in real estate in your self directed IRA?

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    I’m still 20 years out from RMD’s so haven’t thought about it much. It’s interesting to see what Dennis and others are doing to mitigate it.

    Currently, I’m more focussed on how to use roth-IRA funds to a better capacity. I think I’ve really underutilized the tax advantage of these to date.

    #237004 Reply
    Liked by q-school

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