How to Invest One Million Dollars in Real Estate

Did you save up to the one-million-dollar mark, receive a lump sum from a business or work arrears, or get an inheritance worth that much? A million dollars in the bank is a financial milestone for many Americans. It’s a big deal! Now, what are you going to do with it? In this piece, we’ll cover the smart way to invest one million dollars in real estate.

Photo of a new construction home - How to Invest One Million Dollars in Real Estate

Of course, you may want to enjoy your fortune with a memorable birthday party or holiday at a top foreign destination. No doubt, partying and visiting your chosen vacation spot are beautiful. Of course, you may want to enjoy your fortune with a memorable birthday party or holiday at a top foreign destination. No doubt, partying and visiting your chosen vacation spot are beautiful.

However, if you were like more financially savvy folks, you’d likely consider the best way to invest a million dollars – and that’s why you’re probably reading this piece. Investing is excellent but investing one million dollars right is never a walk in the park.

First, you’re answering the literally ‘million-dollar’ question of where to invest a million dollars today – and there are plenty of options out there. Then, you’d either hire an investment advisor or work with an asset manager to show you how to invest one million dollars in your chosen field. 

Suppose you’re looking for how to invest one million dollars in real estate, we have all the answers. Read to the end!

How Much Could a Million Dollars Yield Annually?

A million-dollar investment in US Treasury Bonds would yield $33k interest yearly, effectively giving you a compound interest of about $13.5k after 30 years. Investing your lump sum in volatile stocks could generate a little above $90k interest annually.

Certificates of deposit would earn you a sparse 0.8% interest at best on your investment – and that’s too low if you asked us. However, investing in real estate is historically more profitable than other investments like shares, bonds, and mutual funds.

Real estate properties yield income year-round, are tax-rewarding, offer unlimited options, never get out of vogue – and never stop appreciating. For instance, homes appreciate by 14.5% annually, and the government could relieve individuals of up to $250k through tax breaks.

The annual interest on your million-dollar investment depends on where you place it. However, if Andrew Carnegie’s famous quote is anything to go by, 90% of Americans became millionaires through real estate investing. Did you read that? Scratch Carnegie’s assertions – nine leading advisors who made millions in real estate explained why real estate investments surpass other options in creating wealth. 

Where to Invest a Million Dollars in Real Estate

Real estate has many investment options, and we’ll touch on the most prominent options that could give healthy returns on your money. You’ll see options across the lines of passive and active investing in the housing market. Hopefully, you’d have a template on how to invest a million dollars in real estate at the end of the piece.

Photo of a new modern home

1. Buy a House

The most straightforward answer to the question of what you can do with 2 million dollars is to buy a residential property. Residential house prices across the US mostly lie below $1 million, with different property class options.

Buying the property outright would give you some benefits, such as immediate cash returns (if you’re renting it out) and the absence of mortgage interests. However, that doesn’t take away the potential benefits of getting a mortgage. 

A maximum of one million dollars in your coffers would get you mortgage financing for all but the costliest luxury homes in America. You’d most likely have some chance to spare and invest in other assets or save for the rainy day. 

Investing in different asset classes can be a great idea, so you don’t tie up your lump sum in one place. However, what residential investment path you take and how you invest in it boils down to your peculiar tastes and circumstances. Suffice it to say that you’ll need a good credit score to get the best mortgage offers.

2. Invest in Multifamily Homes or Multiple Houses

Since a million dollars could suffice as a down payment for a house, investing in several properties or purchasing a multifamily home could be a great idea. Multifamily properties are one of the best options for real estate investors because of their versatile nature and high-performing rentals in the US.

Moreover, it’s easier to hire a property manager when investing in a multifamily home than in multiple properties in different locations. On the flip side, investing in several homes lets you expand your portfolio across various asset classes and cities. For instance, you may invest in a rental property and a commercial outlet for personal use.

Sure, there’ll be more paperwork and more requirements to meet on different fronts. But you can rest assured that you’ll have a broader portfolio with your one million dollars at the end of the day – which might yield faster than single-asset investments.

3. Lend to Real Estate Investors

Perhaps the thought of multifamily, single homes, or multi-property investing doesn’t suit your preferences. You may want to become a lender and allow someone else to invest in the property market on your behalf.

Real estate lenders work with certified and experienced investors who need financing for their projects. You and the investor could agree on specific loan terms, including interest rates and fixed annual remittances. 

Most lenders fix their terms based on the property’s equity– which could offer more potential earnings if you expect the asset to multiply in value later. Being a lender gives you more hands-on control over your cash. It also supplies a more passive solution to how to invest one million dollars in real estate.

4. Investing in Real Estate Funds

Investing in real estate funds is another passive route to getting healthy returns on your million-dollar investing adventure. Real estate funds usually operate with larger organizations with a team of qualified investors and multiple asset types. Investors with real estate funds could readily gain exposure to newer asset classes that may be inaccessible to them – say expensive commercial properties or new developments.

In Summary

If you’re considering how to invest one million dollars in real estate, there are different options available. Besides investing in real estate funds, lending to an investor, or buying a property, crowdfunding, real estate investment trusts, and syndications add to the versatility of the housing market. With some adequate scheming and execution, it’s pretty straightforward to earn profitably from real estate.