What should you do with $50k? One Investment Approach

How Should Someone Invest $50,000

Have $50,000 to invest? Here are 11 investment ideas that could turn $50k into even more money.

If you wanted to, you could invest the $50,000 in the stock market, though you would have to be okay with the volatility of stocks. You could also invest your money in government bonds to reduce how much it fluctuates, and get lower interest rates and profits.

I wish there was an option that would give me the high returns of stocks while also having the low volatility of bonds.  To be honest, especially in the investment environment of the last few years, that is what I’m looking for.

Enter: rental properties. The study found that over the last 145 years, real estate has offered the highest returns of any asset class. In other words, gold proved to be a much more stable investment than stocks.

If you have $50,000 to invest, you may be wondering what the best way to do so is. You could invest in real estate for high returns, low volatility, and a relatively passive source of income.

Key Takeaways & Uses For $50,000:

  1. Buy a Turnkey Rental Property
  2. Use the BRRRR (Buy, Renovate, Rent, Refinance, Repeat) strategy
  3. Buy a Short-Term/Vacation Rental
  4. Invest in the Stock Market
  5. Invest in Mutual Funds or ETFs
  6. Invest in Bonds
  7. Invest in CDs
  8. Open a High-Yield Savings Account
  9. Try Peer-To-Peer Lending
  10. Start Your Own Business
  11. Try Fulfillment by Amazon
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What should you do with $50k?

Let’s get into the nitty gritty of different options to invest your $50k.

1. Buy a Turnkey Rental Property

Buy a Turnkey Rental with $50k

Some of the most frequently occurring issues that new real estate investors face are not knowing where to find good deals and low returns on rental properties in their hometowns.

There is an straightforward solution to complaints about time and money: buy a turnkey rental property. This is our own favorite alternative.

First, you can find turnkey properties on nationwide platforms. If you’re looking to buy a property in another parts of the country, you can find a wealth of detailed information online, including data on the local market and the property’s history.

That makes finding properties and analyzing the numbers easier. One of the main advantages of turnkey properties is that they don’t usually need any renovations, which means there are fewer problems to deal with when you’re buying the property. Some turnkey properties come with tenants already living in them, so you can begin receiving rent payments from the first month.

Basically, all you have to do is pick a property, make sure it is a good investment, and then take out a loan to finance it. One caveat though is that I would not recommend buying a property for less than $50,000. From my experience, cheaper properties come with more problems, like challenges collecting rent, high crime rates, and costly repairs.  You are going to want to stick to taking out a loan for the property.

While turnkey properties can be a great option for investors, it can be hard to find ones that are both high-quality and have high returns. The bottom line is that these properties are owned by another investor who is selling them at market price.

It is difficult to “force equity” through renovations on turnkey properties because they do not need them. Instead of looking for motivated sellers in your city, you will find sellers who are ready to go before any other investors.

2. Buy, Renovate, Rent, Refinance, Repeat (BRRRR)

BRRR with $50k

 

The BRRRR strategy is a way to buy long-term rental properties. It stands for buy, renovate, rent, refinance, repeat.

The reason this strategy is powerful is because you can get your down payment back from the property when you refinance it. This means that you could finance 100% of your acquisition costs.

By investing in income-producing properties, you can recycle the money you make from them back into other property investments, continuing to grow your portfolio. It’s a great way to use other people’s money to build your own investment portfolio.

This strategy requires more work from you than buying a turnkey property. A lot of effort is required to find good deals, hire and manage contractors, oversee the renovation, and finance the property twice over. In addition to the extra work, you can usually get better deals and take your money out of the deal to invest elsewhere.

The BRRRR strategy can be difficult to do long-distance. If investing in another market, consider a turnkey instead.

3. Buy a Short-Term/Vacation Rental

Buy Short Term Rental With $50k

You don’t have to rent to long-term tenants just because you buy and hold a property for the long-term.

Some markets may allow you to earn more money by using your property as a short-term rental. This means that the house could be rented out to vacationers on Airbnb or it could be rented out furnished to corporate lessees such as travel nurses.

You will have a better chance of finding the right property for your business if you know your business model first. The amount of money you make or spend on the property changes depending on how long you rent it out, so you need to be careful when calculating the cash flow.

Better yet, run the numbers both ways. When you find a property that produces a positive cash flow from rent regardless of whether it is leased long-term, as a vacation rental, or as a corporate rental, then you know that you can generate profits even if market conditions or local regulations change.

You can finance your investment property in the same way regardless, and always adjust your business model to changing markets. Having more contingency options can help protect you against risks!

4. Take Advantage of the Stock Market

Invest In Stock Market with $50k

You no longer need a stockbroker to trade stocks. Instead of using a regular brokerage account, you can use an online brokerage account, such as E*TRADE. Look for a company that offers a straightforward interface and resources for new investors.

After you have chosen an online broker, you will need to create an account and deposit your desired amount of money into it. Before you select which stocks to invest in, develop a plan and set a budget for yourself so you know how much you can afford to lose.

Now you’re ready to invest. By reading financial news, stock performance histories, and professional forecasts, you can narrow down your choices and pick a few stocks.

Try to choose ones that match your risk tolerance. Wait before investing a lot of money until you feel comfortable with the process.

Personally this is my least favorite option due to it’s volatility, but some prefer it.

5. Invest in Mutual Funds Or ETFs

Invest in Mutual Funds

Funds that spread their investments among many different stocks, bonds, and other short-term investments are less likely to lose money than those that invest in just a few holdings. You can use these funds to invest in a variety of securities at the same time.

First, choose a brokerage. Charles Schwab, Vanguard, and Fidelity are some of the most well-known brokerage firms.

Long-term goals are best served by investing in broader market index funds. This type of fund offers investors the chance to diversify their portfolio and invest for the long term by mimicking a specific index, such as the S&P 500.

Returns on index funds follow market trends closely. While there have been highs and lows, generally, these investment funds have still yielded positive results. These types of investments require little management and often have lower fees.

6. Invest in Bonds

Invest In Bonds

Essentially, when you purchase a bond, you are lending money to the issuer and receiving periodic interest payments in return, as well as the return of your principal upon the bond’s maturity. You can invest in bonds in a similar way to stocks.

You can calculate the return you will get from a bond before you purchase it based on the bond’s rate and maturity date.

There is always some risk involved in investing, even when it comes to bonds – though the risk is very low. For example, your bond could default.

A bond will generally lose value when interest rates rise. This means that if you choose to sell a bond before its maturity date, you will likely make less money than you paid for it.

Generally, bonds must be purchased through a broker. However, T-bonds can be bought directly from the government.

7. Invest In CDs

Invest in CDs

If you want to invest your $50,000 without much risk involved and still make a good return, considering investing in CDs. It is suggested that you use an online bank instead of a traditional bank, such as Chase, as online banks generally have higher rates.

This means that the longer you leave your money in a CD, the higher the percentage of interest you will earn on that money. The higher the account minimum required, the higher the APY.

8. Fill a Savings Account

Fill A Savings Account

When discussing savings accounts, we are not referring to an account at your local bank where you have a checking account. We are talking about online savings accounts that offer rates that are up to 10 times higher than your local bank.

Make sure that the FDIC insures the bank before you invest. Be sure to read the fine print on withdrawals to check for any fees that may apply. Finally, check for required account minimums too.

This is one of our least recommended options, particularly in a high inflation environment.  One famous quote to think about is from Robert Kiyosaki who says, “Savers are losers”.

9. Try Peer-To-Peer Lending

Peer To Peer Lending

If you have $50,000 that you’re looking to invest, and you don’t want to go through a financial institution, then peer-to-peer lending may be a good option for you. Instead, you become the lender. A P2P platform is a great way to connect with borrowers from all over the world.

You may pay a fee when you first take out the loan (origination fee), when you pay it back (closing fee), or every year (annual fee). Prosper is one of the top P2P platforms. They are the ones who work with you and the borrower to help facilitate the loan. The organization provides the funding for the loans, manages the repayments, and offers assistance if the borrower is not able to make payments.

investing in multiple borrowers at once can help you to diversify your risk

Although P2P lending has the potential to provide a higher rate of return than other investment options, it is important to remember that there is always the risk that the borrower will default on their loan.

10. Start Your Own Business

Invest In Starting A Business

If you want to break free from the 9-to-5 grind, investing $50,000 in your own business could be your chance. Just be sure you have a solid business plan.

Get all the help you need to succeed unless you have a lot of experience in the industry. The Small Business Administration has great advice on how to get started with your business. They provide a lot of advice and tips for people just starting out in business, as well as those who have been running a business for awhile.

11. Try Fulfillment by Amazon

Invest In FBA

A retail business can be launched for $50,000 through Fulfillment by Amazon. You send the items you want to sell to Amazon and they take care of any orders and shipping.

The amount of money you’ll need to start your business varies depending on the size of the packages you plan to ship and how much warehouse space you’ll need, but $50,000 should be enough to get a small operation going.

You’ll be able to sell on Amazon to a large number of buyers with less work than selling on other platforms. It almost provides immediate gratification.

What to Do with $50,000 Beyond Real Estate

Investments Beyond Real Estate

Some people simply feel more comfortable investing money in things like Roth IRAs and 401(k)s, which allow you to defer taxes, instead of investing in real estate. Completely understandable.

Besides REITs and real estate mutual funds, it is not easy to invest in real estate and get tax benefits. If you want to do this, you will need a self-directed IRA or another type of account. This can take time and money to set up and manage.

Investing in stock index funds is a good way to get your money out of your savings account and put it to work for you. Brokerages, such as Vanguard and Charles Schwab, offer a variety of low-cost index funds that cover stocks from small cap to large, domestic to international, and every sector under the sun.

One way to ensure you have money available in case of an emergency is to keep some of your funds in low-risk investments that can be accessed quickly. Consider keeping your emergency fund in a money market account, high-interest online savings account, or even short-term government bond fund. Ideally the account should be FDIC-insured.

3 Investments to Avoid

Some types of “investments” aren’t really investments at all. You could lose your $50,000 if you put it into a risky scheme.

Here are some examples of what to avoid when learning how to invest $50,000:

Penny Stocks

Stocks that you can buy for less than $5 may seem like a great investment; however, you should be aware of the risks before investing. After all, with $50,000 you could buy a lot of assets. More often than not, they’re not profitable at all. Companies that offer penny stocks are usually very small and don’t need to disclose their financial information to the public. They may be trying to raise money to grow their business, but they’re not always successful in the long run.

Pyramid Schemes

You may have heard of businesses promising to make you rich if you can recruit others to join them. If a business asks you to pay to join them, be aware that it may be a pyramid scheme. These schemes rarely work out well for everyone involved.

Gambling

It’s possible to win a large sum of money gambling, but it’s rare. The odds are not in your favor when it comes to gambling. You’re more likely to lose money than to win it.

This is the case whether you are gambling in a casino or purchasing a lottery ticket. Gambling is not a good investment because the odds are not in your favor. However, it can be entertaining.

Final Thoughts

Real estate can be a good investment if you are willing to put in the time and effort to learn about it.

Investing in real estate indirectly, for example through a real estate investment trust, can help you to slowly get involved in the market as you learn more about it. This can be a good way to diversify your portfolio and reduce your risk. It’s a low-maintenance investment, but don’t expect to earn as much as you would if you were a direct investor.

Each of the ideas has its own advantages and disadvantages. There is no one-size-fits-all approach to investing in real estate. Instead, choose the option that best meets your financial goals and priorities.

Frequently Asked Questions (FAQs)

Q: What are some investment ideas for a $50k budget?
A: There are several investment ideas for a $50k budget, including buying a turnkey rental property, using the BRRRR (Buy, Renovate, Rent, Refinance, Repeat) strategy, investing in the stock market, mutual funds, or ETFs, investing in bonds or CDs, opening a high-yield savings account, trying peer-to-peer lending, starting your own business, or trying Fulfillment by Amazon.

Q: Are rental properties recommended as an investment option?
A: Rental properties are recommended as an investment option because they have historically offered high returns with low volatility. They can also provide a relatively passive source of income. Turnkey rental properties, ready to rent immediately and don’t require renovations, are particularly suggested.

Q: What risks or downsides to consider when investing $50k?
A:While there are many investment options, certain risks should be considered. For example, investing in the stock market can be volatile, bonds can lose value when interest rates rise, and peer-to-peer lending carries the risk that the borrower will default on their loan. Certain investments, such as penny stocks, pyramid schemes, and gambling, are advised against.