Investment BS Thread - Stocks/Futures/Mutual Funds/Bonds/Commodities/Options/ETFs/401ks/Etc

Same, but only paid for 11 years before paying the house off. Great feeling having no HP.

 

have to look at inflation though. Pile an additional 15 years of inflation onto the loan and the "real dollars" are a lot closer.

 

Nice I owe $40k on my house, very tempted to write a check and pay it off

 

A retirement account IS an investment, that is actually exactly what it is.

I'm not saying your brokerage is wrong, but I would argue that real-estate is a much more powerful asset class regardless of the real estate market. I'm talking about actual real-estate investing and not necessarily purchasing a home and waiting for it to appreciate. Appreciation is a great thing that helps a lot of folks gain in net worth, over time, however, successful real-estate investing isn't relying on appreciation to turn a profit. I believe this to the point where I cashed out my CalPers and put it all towards real-estate investing and even with the penalty I haven't looked back and regretted it.

 

do you rent your properties? Do you have someone manage your properties for you or do you do it yourself? What was your first real estate investment?

 

I have 25% of my portfolio in REITs. That is my exposure, I'm not interested in actual ownership (even if the returns may be better).

 

Is there a generic FAQ or guide somewhere hidden in this thread? Before I ask dumb super-common questions...

 

Does this math make any sense?



So if assuming that a) you invest any free money you have left over that would have gone into a 15 year mortgage payment, and b) you average 10% returns each year on that free cash, you are ahead by well over $120k vs slaving away at a 15 year loan. Lots of assumptions here but as you can see, not as cut and dry as looking at the supposed "life of the loan" cost.

 

I would just ask it, plenty of smart people on here. I think most of us are B.S.ing on this thread at work.

 

Rentals yes. Started with single-family, but multi-family is what I am focusing on. Self-managed for now, but eventually that will change. It's budgeted into the costs so basically my LLC is paying me and giving me a 1099 for my services. I may eventually just start a small property management business as the local options are lackluster.

First property was actually a mobile home for 20k that was rented out for $600 a month. Not a lot of equity in something like a mobile home, but a NOI of 7,200 and a net profit of $3,600 represented an 18% COCROI (cash on cash return on investment) which isn't bad at all. $3,600 a month also goes to costs (CapX, utilities, repairs, vacancy, taxes, management, legal fees, etc.)

I've been really focusing on getting into the multi-family space, as the possibilities are really great there. Single family in my area don't cashflow well, but if the market continues to soften I will be looking for a C grade home in a B or A neighborhood. That is where the opportunity lies.

 

been watching several real estate investment videos that echo everything you said haha. Do you mean $3600 a year for costs?

 

I'm considering buying a house soon. I am also considering buying another (if possible) and renting it out, but what scares me off sometimes is the duties that come with being landlord. Not sure if I want the potential nagging responsibilities.

Any advice? Would it still be a good idea even if I use a company to manage it?

I'm 25 and never considered this until I talked to some guys at work that have houses paid off that they rent out and they seemed happy doing it.

 

What would you say you’re earning on your money per year? Just interested in the comparison to REITs that can return 10% with no effort (that 10% being cash flow in the form of dividends, not counting capital appreciation).

 

Go look up "house-hacking" it's getting more popular here and some people are doing it with larger multi-unit places too, it's not something that could fit for me, but it makes sense for certain people.

Being a property manager/landlord can be hell if you don't have systems and boundaries in place. If you have a set way to approach things then it's just training people and holding up your end of the bargain. If you don't follow your own rules then it can be a nightmare. I will tell you that half of your landlord problems will be taken care of with a good, fair and consistent screening process. Just trying to get a renter in quick as possible so you don't have to eat the cost of vacancy is tempting but rarely pans out. Knowing your state's renter laws is very important too.

 

anyone want to comment on this? say I'm wrong?

 

I'm over 10%, but that is a relatively small sample size, and I haven't had any misses, which will inevitably happen. I think a lot of it comes down to your own philosophical approach. If you want to go full-on passive, then REITs are a good ticket. I'm not necessarily creating a job for myself, but using this as a pathway to build some really good passive income, which will take time and work. The real value in real estate comes with the exponential leveraging that is possible through creative deals etc. There is something referred to as the BRRRR (Buy, Rehab, Rent, Refi, Repeat) method that highlights this potential power (key word...potential).

Say you found a run down, destroyed property for 50k in a neighborhood where the homes are typically worth 120-150k. The 50k home is in tragic condition so you can't get a conventional loan and need to purchase it in cash (this is a barrier of entry for many). The home is purchased in cash and it takes another 30k to rehab, so you are a total of 80k in. After you are done you can get that property appraised, which should come in close to your comps. and let's just say it comes in at 125k. Instead of just trying to flip it and net a quick 20k (after taxes, and other costs) you get the home refinanced and pull out the 75-80% of home value that is traditionally allowed. 80% of the newly appraised value of 125k is 100k, so now all of the initial capital investment is returned and usable again. If you get a renter in that house and ensure that it cashflows (with all expenses factored in etc.) then it doesn't matter that you now have a 30-year note on the house because your renters will cover that cost, plus other costs and you will be profiting maybe $150-350 a month on that home. Your capital is no longer tied up in one investment and you can rinse and repeat.

This isn't a cycle that can repeat forever because obtaining financing becomes an issue at a certain point (depending on your other sources of income) and then it becomes a game of networking and getting really creative with financing deals.

 

That is awesome, you are a wealth of knowledge, I appreciate the input. I am at a point where I do have enough capital to do creative things like that, just wouldn’t know where to start. I think my biggest fear in real estate is the illiquidity. I can come up with money in 48 hours (or maybe it’s 72) by selling shares of whatever, but to some extent, it is tied up with real estate ownership. I will keep reading and learning, it’s definitely something I’d like to try.

 

I had a pretty good talk with my coworker and he was saying you can sniff out people right in the beginning by being fair and stern with them.

Thanks for the info. I think I just need to lurk around here and read up before diving into it.

 

I'm not sure how you feel about podcasts but Bigger Pockets podcasts are awesome and their forum is where I really started learning about all of this. Lot's of good resources out there.

A few short-ish books that really hit the essence of investing are - Rich Dad Poor Dad and The Richest Man In Babylon. They are more or less business books but are easy to chew on and don't take all kinds of specific knowledge to understand the themes.

 

I read this a few times. Also a bunch of stock market books. I will check out that other one you mentioned.