Winning the Lottery and Real Estate : a friend questions me on what to do with the prize money

Last night, $20 Million was the prize money for the Saturday Lotto here in Sydney.  In a conversation with a friend, I was asked "If you won the lottery, what will you do with the prize money?"  I simply said,"I’ll invest it in a business." "So what is a good business to set-up nowadays?", he asked. I replied, "Something that has to do with real estate." He asked in surprise, "Are you sure?  The market is down and have you not heard about the real etate bubble?  Won’t you risk losing your money?  I’ve read a lot of articles about people getting their money burned with their real estate investment lately."  This time, I had a long response and here is what I told him…

"To keep the conversation short and make it more realistic, this is what I will do in case I win 10% of the subject $20,000,000.00

First thing, I will do is pay off our loan in our house.  Now that I am debt free, I can invest more of my prize money without having to pay a huge interest in my own residence. I will buy a residential unit in the city in cash, an office space in the city in cash, another house in cash (have several choice locations).  I will buy another rental property overseas still in cash. My goal is to buy at least 3 to 4 rental properties with a good potential capital growth taking into account my guidelines, "Securing a Good Deal during a Real Estate Bubble".  I will set aside a decent amount to invest in the stock market.   The remainder, I will put in the bank.

In the end, my goal is to have a rental property business with a good mix of properties. The income of the business is good, but it does not need a lot of manpower or hands-on management. The property managers can handle the day to day affairs of managing the property, while I receive the net rental money in my bank account.  This is what I call a lifestyle business.  My money and business is working for me, instead of me slaving to earn money and grow the business.  I can spend more time with my family while earning at the same time. To add, I was able to preserve my prize money by converting it into income generating assets.  Since I bought everything in cash, every rent I recieve is mine ( less  the normal expenditures associated with a rental property).  From the rental income and capital growth, I can continue to grow my property portfolio."

My friend asked me, "where did you get the idea?"  Then, I answered back "I have a lot of smart friends, relatives, associates and clientele, whom I have witnessed accumulate their real estate wealth through rental income and lived the life from literally the fruits of their investment."

My friend is still confused.  I just told him "Think of it as someone giving you some fruits.  You have the choice of enjoying it for the moment; by eating it or to invest for the future; by planting the seeds.  If you choose the latter, then you could find yourself with an orchard in the near future, where you can pick as many fruits as you can.  If you choose the first option, then you had a good eat for a day.  Tomorrow is just another day for you, earning a living to buy some more fruits."

My friend ended our conversation with "Now that you gave me a good idea, I really hope to win the lotto tonight! But, in case I don’t, can you teach me how to start a property rental business with minimal investments?".  I replied, "of course, but I’ll tell you another day…."

How about you?  What will you do with the prize money if you win the lottery?