This article is part of our guide on how to invest 1 million dollars for income, available here.
$200,000 might seem like a lot of money initially, but it’s a pretty reasonable sum to accumulate over time.
When you invest that sum wisely, however, you can significantly increase your profits beyond just the $200,000 in your savings accounts. So, what are the best ways to do so?
If you have savings of this amount and are interested in growing your wealth by investing it, continue reading to get some new investment advice and find out about all the investment options available. Here’s how to grow your wealth of $200,000 through investing.
Key Takeaways
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There are multiple ways to invest $200,000, although real estate is generally the safest and most profitable. Alternatively, you may feel comfortable investing your cash in art or creating your own business if you have higher risk tolerance.
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Purchasing real estate can be an excellent choice for those interested in investing significant capital.
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The best way to invest $200,000 is through a multifamily real estate syndication, thanks to the fact that it provides passive cash flow, upfront tax advantages, and appreciation over time. You can earn monthly or quarterly without managing tenants, just the capital through passive cash flow.
I Have $200,000 to Invest What Should I Do?
The first thing you should do if you have $200,000 to invest is to determine your investment horizon and your investor profile and figure out your risk and tolerance levels.
To figure out where you stand regarding these factors, you’ll need to know about the different types of investors. There are three main types of investors in the market:
- The conservative investor: This type of investor gives more importance to security and liquidity over profitability. These investors have zero tolerance for risks and possible losses, which is why they prefer to avoid risky investment proposals even if they promise a great return. The investment horizon of this profile is from 0 to 5 years.
- The moderate investor: The moderate investor is between an aggressive and conservative investor. These investors are more balanced, and although they have a risk tolerance, they seek a balance with security to obtain desired returns. The investment horizon of this profile is moderate, ranging from about 5 to 10 years.
- The aggressive investor: This type of investor prioritizes profitability regardless of the risk. These investors have a high tolerance for risk, are intelligent and strategic, and often have a more significant monetary capacity, allowing them to be a little more tolerant of losses. An aggressive investor may have a long-term investment horizon of longer than ten years.
If you get to know your investor profile, you can better understand what types of investments might make sense for your personal investment allocation. With this in mind, let’s look at a few options for investing your $200,000 in.
1.) Purchase Real Estate
Purchasing real estate can be an excellent choice for those interested in investing significant capital. However, there are many types of real estate asset classes that you can choose to invest in.
Two of the most common types of real estate investing include fix and flip strategies or making direct investments in single-family properties.
With a fix-and-flip strategy, the idea is that an investor buys properties, repairs them, and resells them at a profit. In this scenario, an investor must have extensive knowledge about real estate to negotiate and obtain properties at very low prices given certain conditions so that remodeled ones provide a profit.
Fix and flip is profitable when the properties to be remodeled are strategically chosen. Also, it’s a type of investing with very little competition since many real estate investors prefer to buy ready-to-rent properties to avoid repair jobs.
The other strategy is to invest in single-family real estate. This is one of the most common investments since the capital invested is recovered, and more wealth accumulates over time.
With this type of investment, an almost immediate return on the investment is obtained, and the potential for long-term appreciation will increase, guaranteeing that the rental business will not lose value.
However, this isn’t the only real estate investment you can make. Let’s look at passive investments into multifamily real estate syndications.
2.) Invest Passively into a Multifamily Real Estate Syndication
Investing in a multifamily real estate syndication involves a group of investors who put their capital together to acquire a large cash-flowing asset, in a solid real estate market, with a strong long-term value horizon and tax advantages.
Multifamily real estate is among the safest and most insulated real estate asset classes, even more so than a single-family rental property, as the capital is spread over many units, and is one among one of the best ways to invest 50k in real estate.
Additionally, with this type of investment, multiple investors can buy larger properties than a single investor could on their own. At Willowdale Equity, minimum investments into our multifamily real estate syndications start at $50,000, depending on the deal.
A person with this amount of money can start to reap the rewards of income investing without having to invest everything in their bank account.
Now, although real estate investments are an essential pillar when talking about investment, let’s see other useful alternatives that can generate passive income through initial capital.
3.) Invest in Art
If you enjoy art, investing in art can be a profitable way to increase your income through an initial investment of $200,000.
Investing in art is something like investing in corporate bonds or stocks in that it has unexpected fluctuations. However, this can be a good investment since it’s an investment with a long-term horizon of 10 years or longer.
However, this can be a bit risky, and it’s better to have previous knowledge and connections in the art world before venturing into any business that apparently, has more losses than profits.
Generally, art can be a small part of an investment portfolio since it can’t be depended on as a source of stable income.
If you’re looking for a less risky investment, you might want to consider starting a business. Let’s examine this as an investment strategy.
4.) Start a Business
$200,000 is a sufficient amount of capital to start a business if this is something you’re interested in. Current labor trends have forced many companies to reinvent their operating model and prompted many people to work independently or create their own businesses.
Raising start-up capital is usually a hurdle, but with this amount of money, creating a company to generate income can be a very appealing option for some since the investor is responsible for administratively and financially managing the company.
However, small business owners do face some significant risks. To start a business, you have a lot of background knowledge and key strategies to compete with what already exists in the market. Even then, there’s the possibility that the business will fail, resulting in a loss of capital instead of income.
5.) Invest in Stocks
One of the alternative investments that you can try include investing in stocks. This investment method is risky due to its fluctuation, but it, along with real estate, is one of the most popular for investors with any amount of capital.
Although stocks can experience large fluctuations, they still tend to be one of the safer and more popular investment strategies. This is becoming more true with the rise of online investing platforms that make investing in the stock market accessible even to beginner investors.
To invest in the stock market, you can make the arrangements on your own as well as make group investments in common funds, mutual funds, index funds, and real estate investment trusts, among others.
Now that you have a few methods for investing $200,000, let’s look at what amount of interest you can generate with these types of investments.
How Much Interest will I earn on $200,000 Calculator
This calculator assumes you're investing $200,000.
Simply enter the interest rate at what you expect to earn on your $200,000:
How Much Interest will I earn on $200,000
By understanding this example and the possible compound interest earnings on $200,000, you can make smart decisions on how to invest. It’s important to remember that how you choose to invest the $200,000 will significantly change how much you could interest you could earn on the money.
Below is how much interest you could earn on $200,000 on an annual basis, from 1% all the way up to a 10% interest rate:
- $200,000 x 0.01= $2,000
- $200,000 x 0.02= $4,000
- $200,000 x 0.03= $6,000
- $200,000 x 0.04= $8,000
- $200,000 x 0.05= $10,000
- $200,000 x 0.06= $12,000
- $200,000 x 0.07= $14,000
- $200,000 x 0.08= $16,000
- $200,000 x 0.09= $18,000
- $200,000 x 0.10= $20,000
Related Read: Living Off The Interest of 1 Million Dollars
What is the Best way to Invest 200000?
The best way to invest $200,000 is through a multifamily real estate syndication, thanks to the fact that it provides passive cash flow, upfront tax advantages, and appreciation over time.
You can earn monthly or quarterly without managing tenants, just the capital through passive cash flow. This means less work on the part of the investor for the same amount of profit.
Additionally, investors receive tax benefits by owning a portion of real estate. And, since real estate value increases over time, it also increases the return on your investment funds.
Finally, investing in multifamily real estate syndications allows for greater freedom and control. Investors have the power to direct where their capital gets placed to grow their wealth.
If you still have doubts about investing $200,000, keep reading for the answers to a few commonly asked questions.
Frequently Asked Questions About Investing $200,000
Any amount of money saved is good as long as you know how to manage it properly. With $200,000, you have an excellent starting point for investing, opening a business, or finding another way to use it to generate passive income.
You can double your money through investments and patience. The longer you can wait, the more profit you’ll be able to generate through investment.
The smartest thing to do with a large sum of money is to invest it in mutual funds, index funds, or real estate so that it can continue generating profits passively. When investing, choose a diversified portfolio to balance risk and improve your chances of receiving a profit.
Best Place to Invest $200k - Conclusion
There are multiple ways to invest $200,000, although real estate is generally the safest and most profitable. Alternatively, you may feel comfortable investing your cash in art or creating your own business if you have higher risk tolerance.
Whatever you choose, the key is to analyze your capabilities as an investor. From there, you’ll be able to make the right decision as to how to grow your earnings through investing successfully.
If you’re looking to invest your $200,000 into risk-adjusted, cash-flowing, tax-advantaged, hard assets like multifamily real estate, apply to join the Willowdale Equity investor club to access our resources and private investment offerings.
Sources:
- MoneyUnder30, “How To Invest In Art – Is It A Good Investment?“
The Willowdale Equity Investment Club is a private group of investors that are looking to passively grow their capital and share in all the tax benefits through multifamily real estate investments.
