If you are googling this, congratulations! You are a multi millionaire and want to learn to invest like a multi millionaire too!
Likely you have discovered you have so much money that it’s hard to spend it responsibly! Just because investing is getting hard do NOT blow your money on a couple of Teslas and a house downtown San Francisco. (Unless it’s an apartment building you’ll be renting out…even then rent control is painful).
So today we’ll cover:
- The problems with investing at this level
- What NOT to do
- 3 best ways to invest your $5M
- PLUS a summary of how to invest in your pre-multi millionaire stages
By the way, this is part of a larger “How to invest” at every stage of wealth series where we cover everything from how to invest a thousand dollars all the way to ten million. Because, investing is quite different at every stage of wealth. I’ve been through it and I bugs me when people pretend something that works for a multi millionaire should work for a 20-something just starting out.
And if you’re not a millionaire yet, but you’d like to get on your way, read my super simple How to become a millionaire in 5 years guide with a free worksheet.
What’s the issue with the multi millionaire level?
The issue is mobilization.
You may know that I’m a fan of invest in rental real estate by way of single family homes. Say you have $5M. That much money invested in $100K rental homes means you have 50 homes! And that’s with no leverage.
No one wants to own that many homes!
Buying $100K businesses is, meh…and owning one $5M business is going to be a lot of work. Which begs the question…
Where the heck do I stick my money that won’t absorb my life?
How NOT to spend your $5 million dollars
Don’t buy a fancy house to live in
“Your home is the best investment you’ll ever make”
~ quote by people who have never invested in anything else.
Granted, depending on where you live, houses can appreciate a lot but most primary residences aren’t really “investments” (when you sell it, where are you going to live…also property taxes exist)…
When you become rich don’t go out of your way to buy a mansion to celebrate your multi millionaire status. Beware of lifestyle creep. As soon as you have a super nice home in a super nice area, the cars, boats, furniture, and staff will follow.
Keep it simple and remember stealth wealth.
(And whatever you do, don’t buy an expensive car…. Those end up costing more than houses!)
Don’t buy (or rent) a super yacht or a private jet
So this goes along with the lifestyle creep, but you aren’t rich enough to use private jets or super yachts yet.
Private jets can be bought for $3-10M, or chartered for $1000-$10,000 per hour.
Superyachts can be chartered for over a million dollars per week! But there are actually normal yaughts for around $5,000 per week in Thailand or Greece too (so I guess I’ll allow it.)
Don’t buy a luxury rental home
I’ve done some research on this, and found that luxury rentals can go for as much as $4K per night. So maybe these people know something I don’t.
But putting all your eggs in that basket seems dangerous. I wouldn’t recommend it.
Top 3 ways to invest when you’re a multi millionaire
Okay, so now that you know what NOT to do and the issues to watch out for, let’s look at where to start.
1 – Huge Money Pools (eREITs and stock markets ~4%/yr returns.)
You know I don’t hide that I love index funds and the stock market. The returns are great, safety levels are high, and it’s easy to diversify. eREITS from fundrise etc are basically the same thing in a different industry.
The best part is that they are HYYUUGE! Vanguard’s VOO has over $129B of assets under its management, so your $5M investment is no biggie.
The other best part is that the management fees are still minimal. While management fees may not seem like too big of a deal when you are rich. I argue the opposite. They are charged as a percentage usually so when you are rich it’s the best time to manage your money
If you’re a newbie in investing, definitely read:
How to become an investor in 15 minutes – Beginner’s guide
Can you beat the market?
How to set up your QuestWealth account (for Canadians)
Should I invest a million dollars for guaranteed income?
2 – Apartment Buildings (8%/yr returns)
I don’t even manage my own rentals, and I can already tell you that having too many can be annoying.
Enter apartment buildings.
This is the way to real scale in real estate. Yes, a pile of single-family homes likely provides you with more income, but your time and your brain space are worth much more at the multi millionaire level.
So buy one $3M apartment building. It takes all the issues of rental properties and puts them all under one roof (with a single property manager instead of four dozen.)
Look at this beauty in Ohio with an 8.25% cap rate. (Cap rate being the ratio between what you get per month and what the house costs.)
It will be a learning curve, but much easier to think about than seventy $70K homes. And maintenance and management should be relatively simple too, given that you’re only dealing with one set of people.
If you’re not ready to buy a building yet, try a quad and learn a bit more about the world of real estate investing:
Quadplexes – the unicorn of real estate investing
My real estate portfolio – 8 properties, 7 years, and hundreds of thousands of dollars
Long-distance real estate investing in 2020
3 – Private Equity (27%/yr)
Wanna pretend to be a shark on Shark Tank?
Private equity and angel investing lets you invest in a growing company and get a share of it that earns returns. This can give you way higher returns than stock market investing (AKA public equity) because a lot of your investment are going to implode.
You just need to get that 1 Uber to end up with great multi-year returns.
Not sure how to test the waters? You can join angel investing funds but they take huge cuts.
I would just mention to your most motivated friends that you can bankroll a project for a cut. I’ve started doing this recently, while TRYING to not sound rich…just supportive.
No one has taken the bait yet but no one has figured out I’m secretly rich either.
And if you haven’t done this already…
There are certainly more efficient investments around. Just in case you passed them over visit them all here.
- Invest in yourself
- Rent out your basement ← although once you are a multi millionaire maybe you can live without the extra $1000/mo noisy neighbor downstairs.
- Refinance your house/loans
- Tax-sheltered investing
- And de-leverage for some safety
TL;DR – Invest like a multi millionaire
- Whatever you do don’t blow it to show off your status
- Investing it properly can be difficult because you have so much.
- Large funds can absorb your money
- Get yourself an apartment building
- And start looking into private equity investing
Now I’d love to hear from you. Which one of these are you most likely to try first?
