Finally.... got the nerve to give this a shot....

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Finally.... got the nerve to give this a shot....

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Member since 2008 · 2 posts · 0 votes

So I finally have decided it is time to at least take a long look at investing some of the money I've been saving up for investments...

Here is my situation:
39 years old living in sf/bay area.

Super stable job earning approx $100k/year.

Savings of $100-150k (mostly cash)

$400k in equity in my primary residence (which was an investment unto itself as it is 5br and I am a single man) (have a 5 yr fixed interest only jumbo loan that comes due in 4/09 and is 4.5%)

I love Lake Tahoe and spend 2-14 days per month there (sometimes more during ski season...vacation rental?)

I guess I have a high tolerance for risk...
I am aware that although we may be in a buyer's market, there is a strong chance that home values will continue to fall...

I appreciate your input and thank you in advance...
cheers,
bob

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  • Account Closed
    Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
    18y

    Bob,

    I started my RE investing while living and work in the Bay Area.

    With the cash in the bank I am not sure I would say you are tolerant of risk. More likely I would just avoid the label for now as it does not matter much at this point.

    1. Figure out why you want to invest? What are the goals so that you can match the investment vehicle to the goals?

    2. Investing based on personal time and interest can be a disaster or a lucky coincidence. Rarely is it a model for success.

    If you are going to focus on vacation rentals in Tahoe then you need to focus on them as a business. They can be fine but they are not a good idea just because you enjoy the commute or otherwise find yourself in the area on weekends.

    There are many REIA groups in the Bay Area.

    Your best investments might be out of state. Places where the cash flow makes sense relative to the value of the property. Or you buy for short term gain rather than long term hold. Or you look for a property where you can personally force up the value (change of use, upgrade the condition, etc). You have a bit of cash for a project but in the Bay Area the cash is not all that much.

    Lots of options but lots of subtle things to consider.

    Lets continue the discussion so people can help provide a bit more focus.

    John Corey

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    Member since 2008 · 2 posts · 0 votes
    18y

    John, for taking the time to write such a comprehensive reply. In response to your post.
    1. One of my main goals is to retire at or around 55. At that time, my current job would pay me 70% of my salary at the time...I also have my 401k and IRA to supplement that to (hopefully) pretty close to 100% of that salary.
    Like I said, I just turned 39. I guess this is the reason I say that I have a fairly decent tolerance to risk...Like I said, I have great job security.

    2. I guess I understand what you are saying when you say "investing based on personal time and interest can be a disaster"...and "your best investments might be out of state"...actually I "get" everything you wrote in your post...

    But in reference to out of state investments, doesn't distance create management issues??? Not to mention the fact that I am unfamiliar with EVERYWHERE outside my own personal bubble here in Marin?
    So I guess I am falling into the "where do I start" category...

    One thing I might mention is that I have been in discussion with my girlfriend about moving in with her, which would leave my house vacant for rent or sale... I think I'd rather not sell in this market, and rent should be able to cover my mortgage at this current rate, but again, my 5yr fixed comes to term in about 15 months...

    Thanks for listening.
    bob

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  • Account Closed
    Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
    18y

    Bob,

    1. Investing at a distance does cause some management issues. Mostly because you can not easily do the work on your own when a property is some distance away. As you have a day job it might be best to not do the work yourself and therefore you have almost the same issue if you invest locally.

    Many investor make their money from finding good deals. They minimize losses through management (self-management or an external management). If you do make you money from your ability to do a good deal that is where you should focus. If you invest at a distance you still have possible issues investing time to find a good deal.

    You already said you want to consider Lake Tahoe. Hence you are talking about 4 or more hours from your home.

    Even if the property was local and you loved being the hands-on manager you still need to budget for an external property manager. The reason is your life could change (travel, illness, job relocation) and you may need to hire things out later.

    If you are moving in with your girlfriend it is just as likely you would end up moving out. Keep the house and rent it until you are clear where the relationship is heading. While it might not be the best rental it clearly keeps your options open. Remember that you have a limited amount of time to sell the place after moving out if you want to use the owner occupied tax exemption.

    In some ways your ability to find an out of state opportunity is similar to how you learned about Tahoe as an area. You put in time reviewing the information, you travel there or other things that gets you up to speed. You can co-invest with another person or you can go it alone.

    At a different level a deal out of the area does not have to be the single best deal. It just has to be a good deal and a better deal than you might find in the Bay Area or in Tahoe.

    As you have 16 years between now and when you want an increased passive income you are not looking at a lot of time for a RE investment. RE is normally not a short term investment when you are considering buy and hold. If you want income you really want a property that cash flows rather well as opposed to a property that appreciates but rarely covers its own running costs.

    I will stop here. We can go deeper into details. Before that lets get the general concepts clear.

    John Corey

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