MindBogler wrote: ↑Wed Dec 27, 2017 4:46 pm
jb1 wrote: ↑Wed Dec 27, 2017 3:56 pm
Are you a mind reader? Long term I want to do buy and hold real estate. BHs of course are against that also. I made a thread 2 days ago about taking out my Roth money and using it for a DP on a house. I also have 15k saved up, but I want to get at least 2 properties by the time im 30 (27 now). Was a big no no here.
It's not that its a big no-no here to invest in real estate. Plenty of members here do, some speak fondly of it and others do not. What is a big no-no is being young and idealistic; thinking real estate is "a sure bet" or that it won't require significant effort to find and retain solid renters, buy properties with the right cap rates, and pay for upkeep, maintenance and vacancy.
The problem I see with the crypto crowd, like so many other herds before it, is the desire to "get rich quick" because this is "the next big thing!" I'll tell you what was the next big thing once, MCI WorldCom, et. al. Do you remember how that turned out? You were about 10 years old at the time. The fact is that a few people will get rich "investing" in crypto currencies. Most people will lose their shirt. The way to get rich is slowly and deliberately. The principles espoused on this forum, if followed diligently, will have you well on your way assuming you have something else which this forum cannot provide for you: patience.
Do not liquidate your Roth IRA to invest in real estate. This would be a terrible move. If you want to invest in real estate, leave your Roth alone. Save up money and then invest in real estate. Life isn't a get rich quick scheme.
/rant off
Residential rental real estate is a great way to get rich slowly. Over time, rents have tended to rise with inflation, and that, plus a decent starting yield (cap rate i.e. net of expenses) well above cost of borrowing, means you can make money.
The reason being OPM - Other Peoples' Money. And no margin calls (unless you have commercial loan covenants). As long as you have enough liquidity to pay interest & principal as and when due, then you can hold on even if the value of the asset falls below its mortgage (the OPM).
It's also a business. Meaning real, hard, sweaty work. You can get lucky and find a good manager (but you'll be paying 10% of rental income to them? And most managers in that industry are, unless you have scale, pretty awful, let's face it). More likely for your first few years, you will have to do it yourself-- tenant calls in the middle of the night due to blocked toilet, or heating/ AC out, flooded kitchen etc. Tenants skipping out without paying. Tenants messy personal lives impacting on same.
You have to be able to drive to the property, you have to be able to resolve issues (or have people who can). You have to not be away for a month at a client site, with no easy way of flying back-- you have to have the sort of career that lets you deal with these problems after 5 pm.
And it's not a diversified risk in the way a REIT is, or a stock market portfolio. The wrong unit, the wrong building, the wrong neighborhood, the wrong city ... they can all hit you. So too can Code violations and what happens to you, the property owner/ landlord, if someone dies? (sorry for that one - my neighbor is working on just such a case, this morning).
I think as long as one is cognizant of all the above risk factors, then, generally, we are supportive, here.