Can real estate investing (actual properties) be relatively "hands off"?

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hudson4351
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Can real estate investing (actual properties) be relatively "hands off"?

Post by hudson4351 » Thu Jul 20, 2017 5:18 pm

Clarification: When I say "real estate investing", I am only referring to owning actual properties, not REITs, which do not allow you to benefit from leverage in the same way that owning actual properties do.

Can real estate be a nearly “hands off” investment in the same way that index funds are? I have friends who own investment properties and have tried to convince me to do the same, but the thought of having to deal with tenants, maintenance issues, etc. has really made me shy away from the idea of owning investment properties. It sounds like a very large investment of time compared to just owning index funds.

I understand that using a property manager can alleviate some of the hassle of being a landlord (for a price), but do they really get it to the point of being as passive of an investment as index funds? Don’t you still have to do a lot of upfront research before buying a property? Do the increased returns due to leverage really make up for the hassle factor? The thought of driving around town looking at potential investment houses doesn’t appeal to me at all.

Based on the above it sounds like I’m not a good candidate for real estate investment, but I’m wondering if anyone here owns properties that are as low maintenance of an investment as their index funds.
Last edited by hudson4351 on Fri Jul 21, 2017 11:29 am, edited 1 time in total.

skepticalobserver
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Re: Can real estate investing be relatively "hands off"?

Post by skepticalobserver » Thu Jul 20, 2017 5:33 pm

hudson4351 wrote:I’m wondering if anyone here owns properties that are as low maintenance of an investment as their index funds.
For my clients, as an attorney, not possible at all. If there's such real estate animal (other than a REIT) that's all turn key and hands off, I haven't seen it. It really is tenants, toilets and taxes. Some people enjoy the ride.
hudson4351 wrote:I have friends who own investment properties and have tried to convince me to do the same
Misery loves company?

PS: I'm not saying direct RE ownership is a bad investment, but you'll work for every dollar.

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Re: Can real estate investing be relatively "hands off"?

Post by boglerdude » Thu Jul 20, 2017 6:01 pm

> The thought of driving around town looking at potential investment houses doesn’t appeal to me at all

That settles that :)

Driving isnt even enough, you need to walk the areas at night

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avenger
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Re: Can real estate investing be relatively "hands off"?

Post by avenger » Thu Jul 20, 2017 6:10 pm

When I was an accidental landlord, I didn't want to be bothered, so I hired a management company.

I feel like I had to manage the management company.

Sold that condo two weeks ago (thank goodness) and will never voluntarily become a landlord again.

I invest in real estate - VTSAX.
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Re: Can real estate investing be relatively "hands off"?

Post by ThrustVectoring » Thu Jul 20, 2017 7:27 pm

IMO, there's very few reasons to be directly invested in real estate, other than wanting to become a landlord. It's very geographically concentrated, so you're exposed to risks that the US as a whole isn't (eg, Detroit).

The good reasons to be invested in real estate pretty much limit you to your primary residence. Local rents correlate with the price of your house, so you're cancelling out risk by purchasing an offsetting asset. Also, imputed rents aren't taxed in the US, so you've likely got a significant tax advantage. (OTOH, property taxes pretty squarely fall on landlords and are hard to pass through to renters.)
Current portfolio: 60% VTI / 40% VXUS

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Re: Can real estate investing be relatively "hands off"?

Post by Iliketoridemybike » Thu Jul 20, 2017 7:30 pm

I own a commercial building. It has large periods with not much to do followed by intense periods with lots to do.
But it is nice to have someone else pay off your investment. Bought in the depths of 2010 and have seen very, very nice appreciation. In the end, I think it's worth it.

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Re: Can real estate investing be relatively "hands off"?

Post by DVMResident » Thu Jul 20, 2017 7:54 pm

Former small time landlord. Really, it was super boring 99% of the time. There are punctuated moments of lots of work, mostly around tenant turnover (about 0.7 times year/unit was my average, YMMV).

Distance from the units makes a big difference. I imagine use of PM also makes a difference (although I didn't go this route...too much of a cheap sake).
I understand that using a property manager can alleviate some of the hassle of being a landlord (for a price), but do they really get it to the point of being as passive of an investment as index funds? Nope, you have to/really should check on PM at least once a year. Don’t you still have to do a lot of upfront research before buying a property? Yeah Do the increased returns due to leverage really make up for the hassle factor? Sure can. Even in this overheated RE market, 3-on-1 leverage can yield low double digit returns vs the projected S&P500 ~5% nominal returns. YMMV, of course. The thought of driving around town looking at potential investment houses doesn’t appeal to me at all.Doesn't sound you want to be a RE investor. Stick with your day job...and there's nothing wrong with that.

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Re: Can real estate investing be relatively "hands off"?

Post by abuss368 » Thu Jul 20, 2017 9:55 pm

hudson4351 wrote:Can real estate be a nearly “hands off” investment in the same way that index funds are? I have friends who own investment properties and have tried to convince me to do the same, but the thought of having to deal with tenants, maintenance issues, etc. has really made me shy away from the idea of owning investment properties. It sounds like a very large investment of time compared to just owning index funds.

I understand that using a property manager can alleviate some of the hassle of being a landlord (for a price), but do they really get it to the point of being as passive of an investment as index funds? Don’t you still have to do a lot of upfront research before buying a property? Do the increased returns due to leverage really make up for the hassle factor? The thought of driving around town looking at potential investment houses doesn’t appeal to me at all.

Based on the above it sounds like I’m not a good candidate for real estate investment, but I’m wondering if anyone here owns properties that are as low maintenance of an investment as their index funds.
Hi hudson4351 -

Real Estate is a challenge to invest in as there is no perfect strategy. There are advantages and disadvantages to all strategies. The main strategies to invest in Real Estate are:

* Direct Ownership
* REITs
* Private Equity

In my opinion, if you are looking for an additional job, direct ownership may be the best option. Personally we have invested in REITs for a long time and this has worked very well. Previously with individual REITs (thus we are familiar with many companies) and now simply the Vanguard U.S. & International REIT Index Fund.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: Can real estate investing be relatively "hands off"?

Post by magneto » Fri Jul 21, 2017 5:34 am

hudson4351 wrote:Can real estate be a nearly “hands off” investment in the same way that index funds are?
I understand that using a property manager can alleviate some of the hassle of being a landlord (for a price), but do they really get it to the point of being as passive of an investment as index funds?
Do the increased returns due to leverage really make up for the hassle factor?
Based on the above it sounds like I’m not a good candidate for real estate investment, but I’m wondering if anyone here owns properties that are as low maintenance of an investment as their index funds.
No; direct Real Estate holdings can never be "hands off" like index funds as you are surely aware ?
But a lot can be done to minimise workload by organising upfront.
For example a well thought out set of instructions, which among other things delegates to tenants the responsibiity to call in pre-approved tradesmen to rectify problems, then just pay the resulting invoices. This thought horrifies some landlords who want to stay in control on a daily basis, being unable to 'let go' after handing over the keys. But with experience and multiple properties, trust has to creep in (well founded or not).

As noted above periods of lull predominate interspersed with active periods; again as noted mostly associated with tenant change-over.

For us in retirement direct Residential Real Estate was a financial life-saver; but the numbers stacked up far differently in those days when we first went in.
Think we will always hold RE and then pass on to our heirs, as they seem to understand RE more easily than Stocks.
After all the world and his wife are apparent experts always ready to give an opinion on housing, but not so much Stocks.

A 'well balanced portfolio' would not IMHO be 'well balanced' without some significant exposure to RE, whether direct or through REITs.

Trust these jumbled thoughts assist.
'There is a tide in the affairs of men ...', Brutus (Market Timer)

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Re: Can real estate investing be relatively "hands off"?

Post by abuss368 » Fri Jul 21, 2017 7:24 am

David Swensen presented a very strong argument for real estate in an investment portfolio in his excellent book "Unconventional Success".
Last edited by abuss368 on Fri Jul 21, 2017 4:02 pm, edited 1 time in total.
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Re: Can real estate investing be relatively "hands off"?

Post by tibbitts » Fri Jul 21, 2017 7:48 am

abuss368 wrote:David Swensen presented a very strong option for real estate in an investment portfolio in his excellent book "Unconventional Success".
And that option was...??? In terms of options for the retail investor, obviously, not a pension fund.

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Re: Can real estate investing be relatively "hands off"?

Post by Pajamas » Fri Jul 21, 2017 8:20 am

hudson4351 wrote:Can real estate be a nearly “hands off” investment in the same way that index funds are?
Vanguard REIT Index Fund would seem to be what you are asking about.

https://personal.vanguard.com/us/funds/ ... IntExt=INT

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Re: Can real estate investing be relatively "hands off"?

Post by Rwsavory » Fri Jul 21, 2017 8:34 am

The simple answer to the question is, "no." You cannot treat a real estate investment the same way as an index fund. You might as well put your money in a paper bag and light it on fire.

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Re: Can real estate investing be relatively "hands off"?

Post by LarryAllen » Fri Jul 21, 2017 8:51 am

I have significant experience with real estate so can speak with some authority.

Yes, it can be relatively hands off... but you will have better returns if it's not hands off.

It's a choice. Many people put so much time in it is really just a second job.

I am in the middle. I have a full time job and am not looking for another job but I do invest some time in picking properties to buy (luckily I enjoy it like a hobby), I visit my properties occasionally (I have picked investments in cities I like to visit), and I invest time managing the property manager almost every month. I could spend less time if I chose to.

The other option, some people choose to do, is investing in a REIT, partnership, crowdfunding, etc.... There are tons of totally hands off options available.

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Re: Can real estate investing be relatively "hands off"?

Post by Abe » Fri Jul 21, 2017 10:03 am

Many years ago, when I was getting started, I invested in a few things that I probably wouldn't invest in now. One of those things was real estate, single family houses for the most part. Real estate is not hands off. I wouldn't say it's like a second job, but there are problems you will have to deal with. Knowing what I know now, I probably should have gone all passive (index funds) and saved myself a lot of headaches. Hindsight is 20/20.
Slow and steady wins the race.

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Re: Can real estate investing be relatively "hands off"?

Post by Meg77 » Fri Jul 21, 2017 10:25 am

It's never as low maintenance as an index fund, but it doesn't have to be much of a hassle once you've closed the purchase and hired the property manager. That part can be pretty time intensive, especially for your first property or two - finding a deal, negotiating an offer, getting a mortgage, getting insurance, hiring a property manager. But after that you may not have to do much at all other than make sure your mortgage and taxes get paid each year and review the monthly statements your manager sends you. The only other times I have to get involved are to file an insurance claim if there is hail damage or something.

The leveraged returns are nice, but in my experience they aren't dramatically different from stock market returns in the 11 years I've owned rentals. Of course, we've been in a historic bull market during that time too. When the stock market drops 20%, my rents will keep coming in at the same level.

I will say it took me years to get to where my properties really do feel like just another investment, like an index fund. I used to stress about every maintenance issue and vacancy, even if I wasn't the one dealing with the tenant or contractor directly. Now I just browse the emails and am like, "ok cool, whatever." This despite finding out in the last 2 weeks that one woman is 60 days late and being evicted and another unit needs a new HVAC. Just another month in the life of a landlord. I've owned them long enough to know this stuff evens out - and I own enough units that my cash flow is fairly steady regardless of these individual issues.

My mom bought a couple of condos near a university a few hours away which are 100% managed by alocal company, but just hearing about damage done by some student or the dishwasher flooding the kitchen or some high maintenance kid's parents who want the newly painted unit repainted makes her nuts. She's now trying to sell them, even though they are great investments that she never has to see, and even though they are a very small portion of her net worth. She just does not have the personality for it.
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Re: Can real estate investing be relatively "hands off"?

Post by lomarica01 » Fri Jul 21, 2017 11:28 am

my experience with a single family rental is it can be a lot of work in between tenants but once they are in it is not much work at all. I do have a handy man that does any actual work but maybe once or twice a year something might need to be repaired/replaced. The key is to get not good but great tenants by taking your time and screening.

good luck

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Re: Can real estate investing be relatively "hands off"?

Post by hudson4351 » Fri Jul 21, 2017 11:31 am

Pajamas wrote:
hudson4351 wrote:Can real estate be a nearly “hands off” investment in the same way that index funds are?
Vanguard REIT Index Fund would seem to be what you are asking about.

https://personal.vanguard.com/us/funds/ ... IntExt=INT
I've edited my OP to clarify that I am only talking about directly owning investment properties, which have the benefit of leverage that REITs do not.

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Re: Can real estate investing be relatively "hands off"?

Post by Pajamas » Fri Jul 21, 2017 11:43 am

hudson4351 wrote: I've edited my OP to clarify that I am only talking about directly owning investment properties, which have the benefit of leverage that REITs do not.
REITs make great use of leverage, without exception as far as I am aware, although there may be a few that don't. You can also buy REITs or REIT mutual funds using margin, which multiplies the leverage.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by arsenalfan » Fri Jul 21, 2017 11:49 am

I Echo Meg77s sentiments 100%. Also her mom's experience - you will quickly find out how thick your skin is!
Check out Paula Pant's blog at Afford Anything. She documents in great detail her ownership of rental properties and their monthly cashflow, and time invested.
http://affordanything.com/blog/

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by dave_k » Fri Jul 21, 2017 1:58 pm

I've done some private equity commercial real estate investing. Not quite direct, but as a fractional owner of LLCs that each own a property. The only effort I had to put in was up front to evaluate each deal and decide whether and how much to invest. The catch is that these deals required being an accredited investor, and they were by invitation only. The price for being hands off are the property management and asset management fees, etc. It's not liquid, and riskier than an index fund, but any real estate will be to a degree, especially a small set of specific properties. I'm only putting 10% or so of investable assets in this basket.

When I was younger I was in a partnership with family members and one of their friends that purchased and rented out a single family home. One of the family members did the management for a small fee, so it was pretty hands off for me, but there were times when I had to write extra checks when it sat empty or needed work. The "friend" sued to get bought out and it got messy, but we sold at a good time and managed to make some money. It was not structured well though, and it made it clear to me that picking the right partners and structure is critical.

All of these are/were leveraged, so they fit that criteria. The take away is that a partnership or private equity deal where you're not the manager may be an option that fits your criteria, if that's direct enough for you, but there's extra risk and cost.

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Re: Can real estate investing be relatively "hands off"?

Post by abuss368 » Fri Jul 21, 2017 4:04 pm

tibbitts wrote:
abuss368 wrote:David Swensen presented a very strong option for real estate in an investment portfolio in his excellent book "Unconventional Success".
And that option was...??? In terms of options for the retail investor, obviously, not a pension fund.
Hi tbbitts -

I adjusted my post. Essentially Dr. Swensen presents a great argument to include U.S. REITs. I am curious about International REITs as they were not as mainstream when the book was published.

Best.
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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by CurlyDave » Sun Jul 23, 2017 2:09 am

hudson4351 wrote:Clarification: When I say "real estate investing", I am only referring to owning actual properties, not REITs, which do not allow you to benefit from leverage in the same way that owning actual properties do.

Can real estate be a nearly “hands off” investment in the same way that index funds are? ... I understand that using a property manager can alleviate some of the hassle of being a landlord (for a price), but do they really get it to the point of being as passive of an investment as index funds? Don’t you still have to do a lot of upfront research before buying a property? Do the increased returns due to leverage really make up for the hassle factor? The thought of driving around town looking at potential investment houses doesn’t appeal to me at all.

Based on the above it sounds like I’m not a good candidate for real estate investment, but I’m wondering if anyone here owns properties that are as low maintenance of an investment as their index funds.
One of the beauties of owning investment real estate is that I can invest my own time and effort as well as my money. This increases my return, and diversifies my "human capital" into a new field of endeavor.

Sure, I can hire a property manager, but I have found that they will eat my lunch for me and ask for a beer to go with it.

If one is good at being a property manager real estate can produce some very nice returns. If you are not inclined to manage the property, it will probably not work out too well for you.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by msk » Sun Jul 23, 2017 5:16 am

I owned 30 rental units (including single family homes in various countries) over 3 to 4 decades. Looking back; yes, a great way to leverage when you are young and in your pauper days. You cannot entirely trust property managers. Some simply do not put in enough effort to earn their charges. You have to have the personality to realize early on that maintenance charges, vacancies, etc. will occur and you need to pay up without getting terribly upset. One tenant flooded the house over the Christmas break (switched off the heat in England and went to visit family in Holland, but how do you prove that the heat had been switched off?!), one set fire to the entire kitchen cooking French fries at midnight in Canada, etc. etc. Sold an 18-unit apartment building to a friend who claimed that he was better set up because he employed his own maintenance crew, etc. Checked his accounts a couple of years later. His crew cost him more than my rip-off property managers and handimen! What would I do different if starting today? Concentrate all my holdings within an hour's drive. Invest much more aggressively to own >>100 units so that I can employ my own crew, with a proper manager. Somewhere over 100 units you can justify that. If you just want to dabble a little bit, buy a duplex or a triplex. Live in on one side and rent out the other(s). You'll get the leverage and a taste as to whether you want to get seriously aggressive to pursue those 100+ units.

Even better: Save 30% of your current income and invest it straightaway in a stock index fund. You will be able to have a knowing smile when visiting your buddies 40 years hence :moneybag

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by Archimedes » Sun Jul 23, 2017 5:37 am

I own several properties directly. The properties I own are self managed. The work needed is minimal for the most part, but more when there is tenant turnover. I enjoy following the ups and downs of the real estate market, looking for good cash flowing deals.

Most months I simply track the electronic rental payments. It takes a few minutes to log and record everything. Occasionally there is a broken washer or range to be replaced. I go online, choose a new appliance, and it is delivered on a day that works for my tenant. Replacing an old appliance takes me 15 minutes online from the comfort of my study at home. I have a handyman, a plumber, an electrician and a painter that I trust. The tenants have their phone numbers as well.

My strategy has been to buy premium condo townhouses in high income areas. The tenants are upper middle class professionals. When first purchased, the properties positive cash flow by a small amount. As time passes, the rents go up and the property values appreciate, often very substantially. My tenants are nice people with great jobs and top credit scores. Awesome tenants are the key to a good landlord experience. In 30 years of landloring multiple properties, I have done one eviction, a wealthy divorced woman who treated her depression with shopping binges at Neiman Marcus and Nordstrom. Her kids had enough of her and didn't want to help resolve the situation. It cost me 2 or 3 months of rent but a small price to pay in the overall scheme of the investment value of my properties.

These investments earn in 4 ways. Cash flow, small in the early years but grows every year. Appreciation is a paper gain, but with 20 or 25 percent down, even 3 per cent annual appreciation is leveraged and represents 12 to 15 percent on the cash invested. Depreciation creates paper losses and this is valuable in my tax bracket, basically makes the cash flowing from rentals into tax free income. And then the tenants pay rent which covers the mortgage payments, so I build equity every year.

The returns on my real estate investments are much higher than those in stocks over decades. One example is 55k down payment many years ago, small positive cash flow in the early years. My equity in the property has grown to 900k, mortgage almost paid off. Rented to a professional tenant who is 2 years in and will stay for years. Monthly rent is 5k and positive cash flow is about 30 to 40k per year, tax free due to depreciation deductions. This will jump up even further once the mortgage is fully paid, or I can do a cash out refi and the rent covers the payments. Yes the condo fee is 700 per month, but the value of a manned gatehouse, pool, tennis, and exterior maintenance is worth it and the amenities lead to the very high rent that it generates. Any vacancy generates a huge amount of interest from people with good jobs looking for top schools.

So yes, it takes a bit of work, maybe an average of a couple of hours a month to own and manage multiple properties, but the returns are well worth it. Real estate made me wealthy, more than my stock investments. I invested tons of money in the stock market, and a small fraction of that amount into real estate, but real estate is half of my current net worth. At the same time, leverage in real estate is safest if used with caution. Caution is very important, you need to have enough assets or cash flow to cover for vacancies or a major repair or you could find yourself in big trouble in a down market or a recession. You also need to have enough market knowledge to buy smart.

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Re: Can real estate investing be relatively "hands off"?

Post by Valuethinker » Sun Jul 23, 2017 7:10 am

skepticalobserver wrote:
hudson4351 wrote:I’m wondering if anyone here owns properties that are as low maintenance of an investment as their index funds.
For my clients, as an attorney, not possible at all. If there's such real estate animal (other than a REIT) that's all turn key and hands off, I haven't seen it. It really is tenants, toilets and taxes. Some people enjoy the ride.
hudson4351 wrote:I have friends who own investment properties and have tried to convince me to do the same
Misery loves company?

PS: I'm not saying direct RE ownership is a bad investment, but you'll work for every dollar.
+1. Wisdom.

And "confirmation bias". Those predisposed to owning rental RE (as a passive investment, as opposed to a second job) will ignore testimony from those for which it was enormous hassle and issues, and focus on those who told them it was easy, simple, no hassles.

One bad tenant will convince most people that the latter view is incorrect. Owning rental RE is *work*. It can be profitable (Other People's Money + various tax deductions available) but it is work.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by KyleAAA » Sun Jul 23, 2017 10:00 am

What's your threshold for hands off? If it's to spend 4 hours or less dealing with the properties PER YEAR then yes, it's possible. You likely won't maximize your returns, but that's okay. I tend to spend that much time dealing with my index fund portfolio so it's on par. And yes, his includes the unfortunate bad tenant or two over your RE career.

I would argue that one can, in fact, benefit from leverage with REITs in the same way one can with physical properties. REITs are already conservatively leveraged in aggregate and you could rachet up to near 80% LTV fairly inexpensively if you were okay with a variable interest rate and call risk (the big disadvantage or margin vs a mortgage). Still, it can be done.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by columbia » Sun Jul 23, 2017 10:07 am

Perhaps TIAA real estate fund. However, i don't know if that is available outside of 403b accounts.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by Valuethinker » Sun Jul 23, 2017 12:51 pm

columbia wrote:Perhaps TIAA real estate fund. However, i don't know if that is available outside of 403b accounts.
My understanding (we have debated it much, but I am not US based) is that it's only available that way, mainly to workers in the higher education sector.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by Levett » Sun Jul 23, 2017 1:35 pm

TIAA's eligibility rules are somewhat more expansive than commonly thought. Note IRA eligibility, in particular.

https://www.tiaa.org/public/pdf/advisor ... -guide.pdf

Lev

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by Hogan773 » Tue Jul 25, 2017 11:49 am

Archimedes wrote:I own several properties directly. The properties I own are self managed. The work needed is minimal for the most part, but more when there is tenant turnover. I enjoy following the ups and downs of the real estate market, looking for good cash flowing deals.

Most months I simply track the electronic rental payments. It takes a few minutes to log and record everything. Occasionally there is a broken washer or range to be replaced. I go online, choose a new appliance, and it is delivered on a day that works for my tenant. Replacing an old appliance takes me 15 minutes online from the comfort of my study at home. I have a handyman, a plumber, an electrician and a painter that I trust. The tenants have their phone numbers as well.

My strategy has been to buy premium condo townhouses in high income areas. The tenants are upper middle class professionals. When first purchased, the properties positive cash flow by a small amount. As time passes, the rents go up and the property values appreciate, often very substantially. My tenants are nice people with great jobs and top credit scores. Awesome tenants are the key to a good landlord experience. In 30 years of landloring multiple properties, I have done one eviction, a wealthy divorced woman who treated her depression with shopping binges at Neiman Marcus and Nordstrom. Her kids had enough of her and didn't want to help resolve the situation. It cost me 2 or 3 months of rent but a small price to pay in the overall scheme of the investment value of my properties.

These investments earn in 4 ways. Cash flow, small in the early years but grows every year. Appreciation is a paper gain, but with 20 or 25 percent down, even 3 per cent annual appreciation is leveraged and represents 12 to 15 percent on the cash invested. Depreciation creates paper losses and this is valuable in my tax bracket, basically makes the cash flowing from rentals into tax free income. And then the tenants pay rent which covers the mortgage payments, so I build equity every year.

The returns on my real estate investments are much higher than those in stocks over decades. One example is 55k down payment many years ago, small positive cash flow in the early years. My equity in the property has grown to 900k, mortgage almost paid off. Rented to a professional tenant who is 2 years in and will stay for years. Monthly rent is 5k and positive cash flow is about 30 to 40k per year, tax free due to depreciation deductions. This will jump up even further once the mortgage is fully paid, or I can do a cash out refi and the rent covers the payments. Yes the condo fee is 700 per month, but the value of a manned gatehouse, pool, tennis, and exterior maintenance is worth it and the amenities lead to the very high rent that it generates. Any vacancy generates a huge amount of interest from people with good jobs looking for top schools.

So yes, it takes a bit of work, maybe an average of a couple of hours a month to own and manage multiple properties, but the returns are well worth it. Real estate made me wealthy, more than my stock investments. I invested tons of money in the stock market, and a small fraction of that amount into real estate, but real estate is half of my current net worth. At the same time, leverage in real estate is safest if used with caution. Caution is very important, you need to have enough assets or cash flow to cover for vacancies or a major repair or you could find yourself in big trouble in a down market or a recession. You also need to have enough market knowledge to buy smart.
Interesting post and gives me some encouragement

In general I have done a lot of reading about how much to do in "alternatives". Have a bit in Lending Club but honestly probably am just getting paid for the extra risk, or maybe not even.

Have a gut that doing RE crowdfunding is a loser's game. Too many fees and undisclosed risks.

I personally enjoy home repair projects etc so I could envision direct ownership of a property. However as I read White Coat Investor and others, it strikes me that "we" are spending lots of time and attention for a relatively small slice of our portfolios. So even if you can earn some incremental alpha, you are doing it on a small part of your portfolio AND you are working extra to get it. It was just something that struck me as I was reading White Coat's approach. Basically he said he wants "very simple" on 85% of his portfolio. So the "non traditional" investments are already like 10% of his portfolio max (he has REIT index and some other stuff too that I don't really consider as "non traditional"

So overall it strikes me that doing all this extra, and especially just for a small slice of the overall portfolio, really is just akin to "playing with your money" or creates an excuse to have a hobby. By the way, NOTHING WRONG WITH THAT as long as you are honest about it. For example I spent a lot of time reading about Lending Club several years ago, then more time doing all the work to get 100 bucks here and 75 bucks there invested, and I have $10K in total. If I'm being honest, whether that 10K generates a return of 7% or 9% or 10% will never move the needle on my overall portfolio where I have seven figures working in low cost index funds, both stock and bonds.

I could see myself, perhaps if my job situation changed or I was entering retirement, branching out to buy individual rental properties knowing that the management of same can give me some hobby outlet. But right now, with a job and lots of other family obligations, it doesn't feel right to saddle myself with the potential hassle of additional responsibilities involved with purchasing rental properties.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by wizzard » Tue Jul 25, 2017 1:33 pm

Let me give you my personal experience as owner of both, real estate and stocks.

In 2013, I bought a town home with a down payment of roughly $32,XXX. Today that investment has grown into roughly $75-80K (talking about equity, excluding any RE fees and taxes if I sold it right now). Not a bad return, especially considering tax advantages and the fact that tenants pay my mortgage (rent is higher than my mortgage and HOA combined, any extra income from rent I directly put back into the principal of the loan so this helps really cut down the term of the loan).

Are tenants a pain in the rear? They can be, I've had amazing tenants (literally called me once the whole year) and my current tenants are a bit more complex. I have had to fix a sink leak, toilet, and 2 roof leaks. I also buy a home warranty every single year to avoid major expenses, or at the very least the warranty company helps cover part of the costs (for example they covered up to $1,000 in roof leak expenses, the rest was up to me).

Get yourself a good RE agent, and run the numbers. Ask for a CMA, comparable market analysis, to see what the property is worth, and see what rents are going for in your area. It can be an excellent investment opportunity, but it certainly is not "hands off."

On the other hand, I have not received these kinds of returns on my stocks I own (my core is Vanguard's S&P500), but I like the fact that it is a hands off investment vehicle that pays dividends while also appreciating in value. Both are excellent choices, I would be more concerned with the mental composure of the landlord. How will you react if you get a call about a leaking toilet in the middle of the night? Can you cover the mortgage when tenants move out and you are on the hunt or new ones? Do you have a good RE agent to show you quality properties and handle the contracts? etc.

After being a licensed RE agent, I can tell you that RE is certainly not for everyone, but for those that know what they are doing and are willing to grow a thick skin, it can be an amazing investment opportunity.

Whatever you decide, think long-term and be patient. Good luck!
"In uncertain times, show equanimity. Otherwise you are an unfit shareholder" -Charlie Munger

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by Hogan773 » Tue Jul 25, 2017 3:01 pm

wizzard wrote:Let me give you my personal experience as owner of both, real estate and stocks.

In 2013, I bought a town home with a down payment of roughly $32,XXX. Today that investment has grown into roughly $75-80K (talking about equity, excluding any RE fees and taxes if I sold it right now). Not a bad return, especially considering tax advantages and the fact that tenants pay my mortgage (rent is higher than my mortgage and HOA combined, any extra income from rent I directly put back into the principal of the loan so this helps really cut down the term of the loan).

Are tenants a pain in the rear? They can be, I've had amazing tenants (literally called me once the whole year) and my current tenants are a bit more complex. I have had to fix a sink leak, toilet, and 2 roof leaks. I also buy a home warranty every single year to avoid major expenses, or at the very least the warranty company helps cover part of the costs (for example they covered up to $1,000 in roof leak expenses, the rest was up to me).

Get yourself a good RE agent, and run the numbers. Ask for a CMA, comparable market analysis, to see what the property is worth, and see what rents are going for in your area. It can be an excellent investment opportunity, but it certainly is not "hands off."

On the other hand, I have not received these kinds of returns on my stocks I own (my core is Vanguard's S&P500), but I like the fact that it is a hands off investment vehicle that pays dividends while also appreciating in value. Both are excellent choices, I would be more concerned with the mental composure of the landlord. How will you react if you get a call about a leaking toilet in the middle of the night? Can you cover the mortgage when tenants move out and you are on the hunt or new ones? Do you have a good RE agent to show you quality properties and handle the contracts? etc.

After being a licensed RE agent, I can tell you that RE is certainly not for everyone, but for those that know what they are doing and are willing to grow a thick skin, it can be an amazing investment opportunity.

Whatever you decide, think long-term and be patient. Good luck!
I must say there is something that I inherently like about owning some physical assets like that, and generating cashflow that can cover all the costs while also paying down a mortgage. Unfortunately where I live, in a suburb of a large city, I am skeptical that the rents vs market value are high enough to generate a significant excess cashflow, but to be fair I haven't looked closely.

I'm thinking that one day I would like to own some rental properties but just not sure when I will invest the time to do it properly.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by wizzard » Tue Jul 25, 2017 8:14 pm

^^^^ I couldn't agree more, I love tangible income-producing assets. For the rents vs. market value, I personally barely made any income my first two years of owning my rental property. After some time, rents naturally increase and I can even refinance to lower my mortgage and generate more free cash every month. My plan instead is to pay this property off as soon as possible, so really any "income" is immediately put back into the principal. Over time you generate more and more income as this gap between mortgage due and rent coming in widens.

Take your time and again run some numbers, even pretend to buy a property and see how you do in a few years (essentially running a simulation). Good luck!
"In uncertain times, show equanimity. Otherwise you are an unfit shareholder" -Charlie Munger

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by Hogan773 » Wed Jul 26, 2017 9:43 am

wizzard wrote:^^^^ I couldn't agree more, I love tangible income-producing assets. For the rents vs. market value, I personally barely made any income my first two years of owning my rental property. After some time, rents naturally increase and I can even refinance to lower my mortgage and generate more free cash every month. My plan instead is to pay this property off as soon as possible, so really any "income" is immediately put back into the principal. Over time you generate more and more income as this gap between mortgage due and rent coming in widens.

Take your time and again run some numbers, even pretend to buy a property and see how you do in a few years (essentially running a simulation). Good luck!
What is the "easiest" or "beginner" property to own? A nice condo unit? A single townhome? A smaller single family home in a nice neighborhood?

As I drive around I can see all these, plus our town also has a number of true "apartment buildings", some of which look pretty worse for the wear. I'm not talking about the really large apartment complexes with a pond and a fitness center and manicured lawns, but something that is like a two story brick building with a metal staircase on the outside and people's kids toys and a mini weber grill sitting outside their front door. I would feel less "proud" about buying an old looking building with 4 or 6 or 10 different apartment units, although it is possible that these would cashflow well too.

WIth the single condo, townhome or single family home, you are dealing with one tenant. One renewal each year. One dishwasher, one A/C unit, etc. With the apartment building you are multiplying the above by 4 or 6 or 10 or whatever. And I'm totally stereotyping but I have some concern about the "quality" of the tenants - those that would be seeking to pay $$$ for renting a nice condo vs one that can pay $ to live in a much smaller and older rental unit in an older building. I am envisioning a single young professional in the former, vs a different profile in the latter (perhaps a lower income family that is trying to shoehorn into the town's school system by renting a small apartment here)

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by Valuethinker » Wed Jul 26, 2017 10:14 am

Hogan773 wrote:
I could see myself, perhaps if my job situation changed or I was entering retirement, branching out to buy individual rental properties knowing that the management of same can give me some hobby outlet. But right now, with a job and lots of other family obligations, it doesn't feel right to saddle myself with the potential hassle of additional responsibilities involved with purchasing rental properties.
As one gets older, one gets more risk averse, and time seems more precious.

So I would be wary that if you don't start this thing in your 30s, that you will in your 50s. Maybe you will, and depending on how your career goes it might turn out to be a thing which saves you-- with the rise of machine learning/ artificial intelligence none of us can be sure about our jobs 20 years out, now. The human jobs that remain will surely include the "fixing things" one-- it's hard to build a robot that can wield a wrench behind a blocked toilet.

But just to warn you about that. A 30 year mortgage doesn't seem like such a thing when you are 28, it seems much more of a thing when you are in your mid 50s.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by Hogan773 » Wed Jul 26, 2017 10:24 am

Valuethinker wrote:
Hogan773 wrote:
I could see myself, perhaps if my job situation changed or I was entering retirement, branching out to buy individual rental properties knowing that the management of same can give me some hobby outlet. But right now, with a job and lots of other family obligations, it doesn't feel right to saddle myself with the potential hassle of additional responsibilities involved with purchasing rental properties.
As one gets older, one gets more risk averse, and time seems more precious.

So I would be wary that if you don't start this thing in your 30s, that you will in your 50s. Maybe you will, and depending on how your career goes it might turn out to be a thing which saves you-- with the rise of machine learning/ artificial intelligence none of us can be sure about our jobs 20 years out, now. The human jobs that remain will surely include the "fixing things" one-- it's hard to build a robot that can wield a wrench behind a blocked toilet.

But just to warn you about that. A 30 year mortgage doesn't seem like such a thing when you are 28, it seems much more of a thing when you are in your mid 50s.
Perhaps you and I will be fighting side by side in the resistance once the machines "go sentient" :)

Yeah it is hard to say how I will feel in 10 yrs, and whether if I truly retire with "plenty" of money, whether taking some slice of that to buy myself some tangible rental properties that I can visit and fix up and rent will provide me with psychological satisfaction and some excuses to go to Home Depot on a weekly basis (I like Home Depot), or whether I would see it as a "WHY BOTHER" if my "plenty" of money can kick off growth and income without me lifting a finger, other than clicking a mouse button here and there. I can say that mortgages in isolation don't bother me, as I would just see it as a tool to be used in connection with the acquisition of the rental.

The other angle could be rationalizing the purchase of a vacation home somewhere and then spending some time renting it thru AirBNB etc. Who knows.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by Valuethinker » Wed Jul 26, 2017 10:27 am

Hogan773 wrote: And I'm totally stereotyping but I have some concern about the "quality" of the tenants - those that would be seeking to pay $$$ for renting a nice condo vs one that can pay $ to live in a much smaller and older rental unit in an older building. I am envisioning a single young professional in the former, vs a different profile in the latter (perhaps a lower income family that is trying to shoehorn into the town's school system by renting a small apartment here)
Strangely, such families can be fine, and young professionals (students are worse) a total nightmare!

Often what you want is the sort of couple that just doesn't have the money to own, but needs a long term rental situation. A 50 year old nurse, say.

The problem is one bad tenant and it can all get really messy. Substance abuse issues**. And also, you get people living in the property who are not the people you rented it to. You find "references" from previous landlords aren't worth the paper they are printed on. Depending on your local law, eviction can become another nightmare. I had a friend in Boston, and his tenants were ringing up his parents with death threats (his number was unlisted).

Sigh. There are good people out there, and bad people out there. Money does not turn one into the other. Some people live like pigs or have such chaotic lives that one throws up your hands.

** friend of mine is renting the upstairs apartment in a duplex in a small city in Canada. Downstairs has guests who are either dealing, or buying-- 3am visits, engines running, doors slamming etc. It's all pretty unpleasant. There's a lot of drugs out there-- it's not just inner city crack dens.

Andrew Tobias

http://www.nytimes.com/1997/11/27/garde ... money.html

http://www.nytimes.com/books/business/9 ... rview.html

I don't know if the (very funny) magazine article he wrote about his experience as a Miami Beach landowner (Esquire? ) is available online, or it might be in his book about investing (still a classic).
Last edited by Valuethinker on Wed Jul 26, 2017 10:37 am, edited 1 time in total.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by Valuethinker » Wed Jul 26, 2017 10:32 am

Hogan773 wrote:
The other angle could be rationalizing the purchase of a vacation home somewhere and then spending some time renting it thru AirBNB etc. Who knows.
Vacation properties come and go into fashion. If there's no snow, skiing properties can lose value fast. Or if the town just turns lousy or taxes go up a lot. My sense is these are best bought for enjoyment, not for return, unless you can get a really desirable property. And they take a hard pounding, if you have rental guests.

I have heard of restrictions being brought in on AirBnB by local governments. I have no idea if that is constitutional. But I have certainly read of same.

I encourage you not to "dabble" but do a lot of homework before you make a commitment to this -- work with someone else who is doing this? It can, indeed, be a good way to get rich slowly-- Other Peoples' Money is used to make it happen*. And if you are handy as Mr Fixit, and don't mind doing that, then you save yourself one of the truly big hassles/ risks.

* you want to be very clear what you do if rental income is 20% below your expectations, or if housing prices fall 20%. The other poster's warning about conservative use of leverage is very true. When the next housing downturn comes in your area (and places like Detroit and Buffalo have never really had an upturn in the last 30-40 years) the overleveraged will get caught, they do every cycle.

Condos I worry about all the additional costs a bad Condo board can land you with.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by abuss368 » Thu Jul 27, 2017 11:42 am

Bogleheads -

Taylor has posted excellent advice on threads over the years related to his experience being a direct real estate investor.

I have learned much.

Best.
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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by tadamsmar » Wed Aug 02, 2017 1:13 am

I looked into it when I was selling a farm. Decided to not stay in real estate ownership.

The "hands off" or even "brain off" question is important because one of the benefits is to never get out in your lifetime so the heirs get the stepped up basis. But as you age it may get harder to manage the properties. You can possibly 1031 exchange into some kind of REIT-like partnership perhaps, but you cannot 1031 exchange into a real REIT.

I think real estate ownership is better if you have heirs that are willing to step in and you are comfortable working with them.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by abuss368 » Sat Aug 05, 2017 8:39 pm

Bogleheads -

Is anyone aware of websites or other areas of information for small apartment investment opportunities?

Best.
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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by boglerdude » Sun Aug 06, 2017 1:40 am

^ biggerpockets

Its a part time job, with short periods of high stress. Calculate what your time is worth & good luck :)

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by Lauretta » Mon Aug 07, 2017 6:04 am

In my experience it requires some work but not much. At the moment I am working much harder on understanding finance!! :D :D (I only invested in real estate in the past and stocks and bonds are a new world for me). Though once you understand it, it's true that investing in ETFs does not require any work, unlike rental property.
The most important part is without doubt selecting trustworthy tenants. Once I made the silly mistake of renting a property to a couple around Christmas time because they said they had to leave their former accomodation in a few days and hadn't found a new place yet. I know it sounds crazy, but I didn't make all the necessary enquiries and rented the house to them just because I felt for them (I think the Christmas atmosphere played a role too). After a few months they stopped paying, when I called to enquire I got very badly insulted and we had to go to court and I lost around a year rent: once they are in, at least in Europe, it takes a long time to evict them.
That taught me that in selecting tenants unfortunately you cannot follow you heart but you must be very careful and make many checks (in Paris for example they sometimes falsify documents - I don't know whether the same is the case for the US).
I haven't had problems since, and if you have trustworthy people to carry out the repairs it's not much work at all after that.
Having said that I am now switching myself from rental property to stocks and bonds, mainly because of greater diversification and also because it will be 100% hands off. 8-)
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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by staybalanced » Mon Aug 07, 2017 6:08 am

abuss368 wrote:Bogleheads -

Is anyone aware of websites or other areas of information for small apartment investment opportunities?

Best.
I think Bigger Pockets website would be the place to look/ask.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by abuss368 » Mon Aug 07, 2017 6:26 pm

staybalanced wrote:
abuss368 wrote:Bogleheads -

Is anyone aware of websites or other areas of information for small apartment investment opportunities?

Best.
I think Bigger Pockets website would be the place to look/ask.
Thank you. I will check it out.

Best.
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Re: Can real estate investing be relatively "hands off"?

Post by emoore » Mon Aug 07, 2017 7:27 pm

LarryAllen wrote:I have significant experience with real estate so can speak with some authority.

Yes, it can be relatively hands off... but you will have better returns if it's not hands off.

It's a choice. Many people put so much time in it is really just a second job.

I am in the middle. I have a full time job and am not looking for another job but I do invest some time in picking properties to buy (luckily I enjoy it like a hobby), I visit my properties occasionally (I have picked investments in cities I like to visit), and I invest time managing the property manager almost every month. I could spend less time if I chose to.

The other option, some people choose to do, is investing in a REIT, partnership, crowdfunding, etc.... There are tons of totally hands off options available.
+1. I have a rental for 3 years and I've spend more time rebalancing my 401k than managing the property. It's been nice.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by clutchied » Wed Aug 09, 2017 9:40 am

hudson4351 wrote:
Based on the above it sounds like I’m not a good candidate for real estate investment, but I’m wondering if anyone here owns properties that are as low maintenance of an investment as their index funds.
You would hate it. Direct investment atleast

I have 2 types. One I have a property manager that I pay significant sums to in order to maintain the property and not deal with it. It is more or less passive but the margins are slim... single family residence.

The other is a 4-plex and I'm over there atleast once a week doing something... the margin is huge though so I'm honestly considering tossing it over to management. If my cash reserves were higher I probably would so I don't have to worry about it.

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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by itstoomuch » Wed Aug 09, 2017 10:45 am

We let our Only handle it (them).
He's going to inherit it anyway.
He's daytime job is related to RE. He can do RE all day at work and no one is going to say anything and perhaps encourage it. However, he still better get his assignments done.
He is a SuperHost on Airbnb and has Airbnb experience for many years.
Only's home, our rental, and soon to be 2nd home/rental are in A list locations with good maintenance. Maintenance issues are minor. Son is on the Condo board of the rental, an instigator at his townhouse complex, and will probably be forced to be on the board of the new condo being purchased.
Keeping the business in the family :mrgreen: :annoyed :oops:
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Re: Can real estate investing (actual properties) be relatively "hands off"?

Post by dave_k » Wed Aug 09, 2017 12:38 pm

Valuethinker wrote:** friend of mine is renting the upstairs apartment in a duplex in a small city in Canada. Downstairs has guests who are either dealing, or buying-- 3am visits, engines running, doors slamming etc. It's all pretty unpleasant. There's a lot of drugs out there-- it's not just inner city crack dens.
Indeed. My wife and I came very close to buying a 4-plex in an ok part of town that needed work (mostly that I could do myself) and had questionable tenants at the time, but had potential and would have cash flowed very well (positive cash flow even after covering us living in one of the units). However, they had to disclose that there had just been a heroin bust in one of the units when we went to put in a final bid (two bidders on a short sale in 2009), and we opted out. We're very happy to have dodged a bullet on that one - don't need the headache of trying to fix up and turn around a drug den.

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