Real estate investing/advice/thoughts

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Wezzley77
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Location: Memphis, TN

Real estate investing/advice/thoughts

Post by Wezzley77 » Wed Mar 21, 2018 7:58 pm

I know this might be going off beaten path some, but hey, investing is investing. And there are very smart people here that are well rounded and have given me ample advice that I have taken. So I want to ask here the question or advice about starting or investing in my very first possible rental property. Have watched countless videos read the book poor dad rich dad and all kinds of literature on the subject.

to be a little more specific I'm looking at Smaller house $80-$140k range. Not looking to flip, but invest in a turn key or close to property. I would like to put down 20-25%. Also understand that buying from an individual (for sale by owner). is best way to get best deal plus skip the middle man agent. The negotiation is direct and with patience can allow you to find the right investment with the seller in a particular situation needing to sell. I know there so many variables and situations here but just wanted to get the subject started and bounce questions from people with real estate investing experience and so on . So any thoughts or comments or advice? thanks!

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abuss368
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Re: Real estate investing/advice/thoughts

Post by abuss368 » Wed Mar 21, 2018 8:31 pm

Real estate is the one asset class where there is no perfect investment vehicle. There are three ways to invest in real estate:

* REITs
* Direct Ownership
* Private Partnerships

Each has positives and negatives.

Have you considered the Vanguard U.S. REIT Index Fund and the Vanguard International REIT/RE Index Funds?
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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arcticpineapplecorp.
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Re: Real estate investing/advice/thoughts

Post by arcticpineapplecorp. » Wed Mar 21, 2018 9:06 pm

I agree with abuss368.

I believe investments should be passive, especially if you already have a full time job. Why do you want another? Ok, maybe not another "full time job" but part time, definitely. There are bills to pay monthly, rents to collect (hopefully, you better screen pretty well and even then people fall on hard times which are not their own fault. You do remember 2008-2009, right?), turnover to deal with, repairs, etc.

A single property won't usually net you much in the way of income. To be profitable in real estate it helps to have multiple properties with lots of cash flow. Also, multi-unit properties tend to be better in this regard than a single house rented out.

Many will tell you how well they have done, how much they make in real estate, etc. That's fine. It's still work. You can't say it's not. My dad did it for years and built up quite a portfolio. But it required his time and energy. It wasn't "free money." He loved it so I'm sure it didn't seem like work to him. How much will you "love" it? He would say, "It was free money. The banks gave me money and I made money off it". Fine. Of course he was out of real estate in the late 90s and didn't have to worry about getting money in the middle of a credit crunch (2008-2009) unfortunately during what may arguably be one of the best times to have bought real estate (because of depressed prices). So the stars don't always align when you need them to. Even Kyosaki admits often that there are good periods to buy real estate (like 2008-2009) and bad times (like 2005-2007). Real estate agents say it's always a good time to buy or sell a house. Good for them, that is. Real estate, unfortunately goes through cycles. And people forgot until 2008 that sometimes real estate can lose value. Sometimes, your investment may be in a down cycle for longer than you might expect.

Say you'll hand it off to a property manager instead to let someone else do the work? There goes your profits (or a healthy dose anyway).

Sure there are successful people in real estate (Kyosaki as you mentioned). The best deals by the way, aren't just from FSBOs, but actually foreclosures, sold at sheriff's sale. However, it's not as easy as you might think and you might have to bid sight unseen. But that's where the best deals are, because the township isn't concerned with getting the most money. They just want to get the back taxes paid up. Then the future taxes will (hopefully) be paid by the person taking the property off the township's hands.

How handy are you at making repairs/rennovations?

How much cash on hand are you planning on having for repairs/rennovations/paying the mortgage when in between tenants?

Have you considered that your investment is tied to your local economy? Have you considered owning 1 property is about as undiversified as it gets (more than 1 property would be better). Properties in different locations is even better. Have you considered you're taking sector risk by betting on the real estate sector instead of the entire economy (which includes real estate)? Have you considered you're taking on manager risk (that's you)? Have you considered that real estate hasn't been a great long term investment (when compared with the return on stocks and bonds)? Wouldn't you rather have diversification when it comes to your investments?

There are a lot of things to consider as you can see. I personally think there are easier/better ways to invest:

total U.S. stock market index fud
total international stock market index fund
total U.S. bond market index fund

You'll get the returns of the stock and bond market which have been pretty good over time. Wide diversification, low cost. With none of the following risks: manager, sector, size, style, country, stock. You will have market risk. But that's the risk you accept to get the return of the market. That's fair. With real estate, you may or may not get the return commensurate with the amount of risk you take.

hope that helps.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Altron
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Re: Real estate investing/advice/thoughts

Post by Altron » Wed Mar 21, 2018 10:21 pm

Agree with the above. I considered investing in rental properties for a variety of reasons. My conclusion is that you have to borrow substantially to make an acceptable return. If you’re going to pay cash you’re better off putting that money in the stock market. Of course leverage brings risks but it’s a major advantage of real estate vs other investments. No bank is going to loan you money to buy stocks.

If you crunch the numbers and you think there’s a 10% return you’re probably not accounting for expenses, taxes, or the cost of acquiring tenants. The exception is if you can snatch up a distressed property.

That’s my strategy. I’m waiting for a downturn in my area. In the meantime I’m happy to keep all my money in index funds.

Wezzley77
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Joined: Wed Dec 06, 2017 7:17 pm
Location: Memphis, TN

Re: Real estate investing/advice/thoughts

Post by Wezzley77 » Thu Mar 22, 2018 6:31 pm

Thanks for the reply. sheds some good light on some things for me for sure. Why I like this forum so much. I agree a lot with the idea of waiting until you find a distressed or real good deal on a property, so much that it may not even happen if the right opportunity its came about. With anything else in terms of investing its the same principle I guess, get in at right time in most cases. is intriguing some of the common people stories of the money these people have made just off the simple idea of doing it. the pros and cons are pretty drastic vs investing in the market however. Great responses. Thanks guys

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jfn111
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Location: Minnesota

Re: Real estate investing/advice/thoughts

Post by jfn111 » Thu Mar 22, 2018 7:02 pm

For my investors we've found the best deals through the Auction sites. You generally have to pay cash so you would need to arrange a line of credit ahead of time.

Hulu
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Re: Real estate investing/advice/thoughts

Post by Hulu » Thu Mar 22, 2018 7:19 pm

To me it's a lifestyle decision. Where either I'd have a lot of units or none. But everyone has their own preferences. It was just a lot of work and liability to get to a good size. Life is great now that I have property managers with vendors. Just needed to get used to the occasional issue. For instance a tenant recently died and wasn't found for a month. There's always something to learn.

brandy
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Re: Real estate investing/advice/thoughts

Post by brandy » Thu Mar 22, 2018 7:49 pm

Have you read any of the real estate forums? Biggerpockets.com is one.
There's a lot of interaction there, covers probably every aspect of real estate, buying, selling managing, etc...

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