We downsized our primary home and now have $500K spare.

Las Vegas, NV · Member since 2014 · 10 posts · 1 vote

We downsized from a mortgage-free $600K home in a pricey market to a $100K home in Las Vegas, and have the excess available for investing. These two homes are the only ones we have ever owned. I'm not comfortable with plunging that money into the stock market so I'm looking for a RE alternative. I don't think it's possible to even hit the 1% rule in the Las Vegas market currently. What should we be thinking about? Out of state investing seems like a huge leap given our lack of experience. I'm quite keen on dipping my toe in the water with a sub 100K place that has good cash flow. If we had a good experience we could quickly scale up, and learn as we went. I'd like to know if there are options I'm not thinking about but should be. For example, some type of private lending with the cash reserves we have.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

12y

@Alice B.

I wrote an e book on the do's and don'ts of out of state or country investing .. happy to forward it to you if you like.. will give you some good tips based on my 20 years of lending in the space and owning over 350 Mid west cash flow homes.

Just keep in mind when your investing out of state returns are directly proportional to RISK.

AS Elizabeth states she only invests in A type properties for a much smaller return or what return that is quoted on paper.. But has mitigated the management issues with the quality of the assets.. And Capital preservation and liquidity should come into mind as well.

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Joe O
Investor · Las Vegas, NV · Member since 2011 · 92 posts · 25 votes
12y
Hey @Alice B. , welcome!
Be cautious about mentioning money you have available - there's always people wanting to take advantage out there.
There's an upcoming BiggerPockets meetup next Tuesday down in Henderson, you may want to come check out and discuss with some of us locals some ideas. :)
http://www.biggerpockets.com/forums/521/topics/147107-las-vegas-area-meetup-september-2014
1 Reply
Alice B.
OP
Las Vegas, NV · Member since 2014 · 10 posts · 1 vote
12y
Oh cool! I am supposed to be babysitting my nephew that evening but I'm going to try to make it.
Thanks for the reminder to be cautious. I was a bit on the fence about whether to post that info but I figured that sometimes if you don't present the facts accurately you don't get good answers.
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Elizabeth Colegrove
Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
12y
@Alice B.
Congrats on your fantastic windfall. That is "very" exciting. We are buy and hold investors. I too am not very keen on the stock market. I know we all have our specialties but we focus on higher end properties, class A properties. They do not follow the 1%, 2% or 50% rule but have done very well for us. I self-manage all over the country and have done very well. We focus on keeping are margins down through great houses with low expenses, no to limited vacancies and no management fees because we self-manage. Because we buy higher end homes we don't have these worries.
The one thing about Biggerpockets is our similarities as a whole end at the fact we all invest in real estate. Everyone here has a different "spice" and way to approach things.Therefore, another great resource is to check out the signatures of those who comments you enjoy. My website/blog that I just launched is all about land lording, self management from long distance, buying class A properties and turning them into rentals with lots of other good stuff :)
I look forward to seeing you around the site and learning a lot!
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Walt Payne
Real Estate Investor · Sebastian, FL · Member since 2014 · 812 posts · 432 votes
12y
Long distance investing has all the fun stuff of local investing, such as tenant issues, late night repairs, property damage, evictions, etc and has the additional complication of not being there, and needing to trust someone local. I don't suggest that as a first step, personally. Many will tell you that essentially every market has good buys within an hour drive if you are willing to look hard enough.
You might look at note investing, also. Not for everyone, but it has some real advantages. I know @Jeff Brown and probably several others here can give you good guidance on that topic.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Alice B.
I wrote an e book on the do's and don'ts of out of state or country investing .. happy to forward it to you if you like.. will give you some good tips based on my 20 years of lending in the space and owning over 350 Mid west cash flow homes.
Just keep in mind when your investing out of state returns are directly proportional to RISK.
AS Elizabeth states she only invests in A type properties for a much smaller return or what return that is quoted on paper.. But has mitigated the management issues with the quality of the assets.. And Capital preservation and liquidity should come into mind as well.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Alice B.
When you make a post like this your putting a very big target on yourself as well.. So get ready for a lot of solicitations.
And for the post like
" Hey I only invest out of state and I believe you should live were you want and invest were it makes sense" careful of that come on.
ONe thing with Vegas that other out of state markets don't have is liquidity.. If you want to sell something in vegas you can list and sell it for what its worth.. As compared to many of the so called cash flow markets were liquidity only happens because of a well financed out of state marketing machine using West coast based agents...
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Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
12y
Welcome to BiggerPockets, Alice. Wouldn't the home you just bought for 100k rent for 1%? Maybe you could stay in your backyard for slightly less return.
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Brandon Hall
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
12y
If I were you, I'd look at sub $100k houses in your area (if possible) or within an hour drive. Learn the market well, get a feel for needed repairs, understand cash flow, taxes, and returns.
To get domestic or international exposure, I would look into high yield REITs. Some of them will nickle and dime you, but there are several solid REITs out there. And they generate truly passive income.
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Account Closed
Clinton, MD · Member since 2014 · 50 posts · 20 votes
12y
What I would do (and recently did myself) is to take that money as a downpayment on a large multifamily unit. The location wouldn't matter as much, since you could hire a no-kidding professional management company instead of the onesie-twosie type managers. I would shop for a $2M apartment building that had management already in place, in an area that has good cash flow. You could get a nice monthly income stream off that. I'm not a realtor or whosesaler or pitchman with anything to sell, but if you want the details of how we did it, I'd be happy to share in a message. It's just my story with all the ups and downs - nothing more. :-)
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Jassem A.
Investor · PA · Member since 2013 · 1k+ posts · 602 votes
12y
Just looking at the MLS, it appears there are single family homes in Las Vegas starting at about 25k that would probably rent for at least 750/mo according to rent z-estimate. Given 5k in repairs, you get 2.5% rule worst case.
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Jon Klaus
Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
12y
Originally posted by @Account Closed:

What I would do (and recently did myself) is to take that money as a downpayment on a large multifamily unit. The location wouldn't matter as much, since you could hire a no-kidding professional management company instead of the onesie-twosie type managers. I would shop for a $2M apartment building that had management already in place, in an area that has good cash flow. You could get a nice monthly income stream off that. I'm not a realtor or whosesaler or pitchman with anything to sell, but if you want the details of how we did it, I'd be happy to share in a message. It's just my story with all the ups and downs - nothing more. :-)
I like this strategy... for an aggressive and experienced investor. One who understands what to buy and what to pass on (most). One who also knows how to evaluate and manage the property manager.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Alice B.
Careful on the multi unless you buy CLASS A or strong B you will have a whole other set of management issues with low end apartments..
Like some posted there are probably nice deals in your market place. My daughter just bought herself a rental in vegas for under 100k that rents nicely. 25k houses in vegas will be pretty rough stuff
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Derrick Craig
Memphis, TN · Member since 2013 · 969 posts · 524 votes
12y
@Alice B.
Hold your money don't rush into anything!!
Listen @Jay Hinrichs he is a very experienced Real Estate Investor
Good Luck and Happy Investing
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Cal C.
Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes
12y
carefully vet anybody or anything you are told concerning re investing. Your post undoubtedly piqued the interest of a lot of people who don't have your best interest in mind.
1 Reply
Tim Soto
Realtor · Ventura County, CA · Member since 2012 · 126 posts · 61 votes
12y
@Alice B.
There's still a lot of opportunity their in Las Vegas. You should study and get to know your market very well before jumping into this type of commitment to minimize your risk. Network with area brokers, investors, and other professionals in the industry to get their insights on your market as well. Like Kelly & Jon mentioned in their response, your other option could be in the commercial sector, i.e. small retail center, office building, multifamily, self-storage. Think about what type of investment property you would feel more comfortable learning about and investing in, then network and learn from other investors or brokers in your area, who are doing those transactions and are successful at it. Good Luck!
Tim
1 Reply
Jeff Brown
San Diego, CA · Member since 2008 · 59 posts · 46 votes
12y
Hey @Walt Payne — In my personal experience, the addition of discounted notes has not only created a stand alone income source, but it's added multiple options and strategies that hadn't been available previously. Thanks again — Jeff
1 Reply
Alice B.
OP
Las Vegas, NV · Member since 2014 · 10 posts · 1 vote
12y
Some good advice here - especially the advice to be wary of sales pitches from folks ;)
Another piece of advice that has been useful to me from this thread is to clarify what we are interested / not interested in - In general I would like low to medium hassle and medium rewards. We aren't interested in taking on mortgages, although I understand the reasoning of those suggesting using leverage to increase returns. We're not interested in condos or anything with an HOA. I don't think we're keen to put a lot of eggs in only a few baskets either, so I'd rather have 5 x $100K properties than 1 x $500K property. We are definitely not the sort of people who want someone else to do everything for us, and have both run successful businesses so I'd hope we wouldn't fall for anyone's 'too good to be true' scheme. @Jay Hinrichs Is your daughter's property meeting the 1% rule? The home we bought was $90K + $10K of repairs and landscaping, and would only rent for around $750, which we knew going into it but wasn't particularly relevant as we don't plan to rent it out.
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Kenneth HynesPro Member
Rental Property Investor · Easton, PA · Member since 2013 · 359 posts · 92 votes
12y
@Alice B.
Welcome to BP. BP is a great resource. Full of great tips and reads. One tip that I picked up here is while you are starting out and saving money for your investments, start driving / visiting areas you would like to invest in so you get a feel for prices, rents , house conditions etc, and visit and look at lots of homes and open houses so your eye get used to looking at repairs / upgrades that are normal in a particular market. I really dont think you can look at too many properties, and the more you look, the more knowledge you will gain for that market. Dont know much about Las Vegas, but this is a great way to know your area.
Couple of other tips
Check out the freeBiggerPockets Podcast- A weekly podcast with interviews and a ton of great advice. And you get the benefit of having over 70 past ones to catch up on.
Check out some of the RE books mentioned in the PODcasts. BP has a Blog post about the Best 21 Real Estate books
http://www.biggerpockets.com/renewsblog/2013/04/14...
Ken
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
@Alice B.
Low to medium hassle and medium rewards.
Depends on if you WANT to be a landlord or not -- I know you said you're "hands on" but are you "hands on" and have the desire to invest the time in being a landlord.
The other option if you do want to be a landlord but want less hassle is to hire a PM -- less money in your pocket but less hassle.
Note investing is one way to go.
Investing in REITs is another way to go.
Direct/private lending.
You have a lot of options with the money that is available to you.
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Alberto Artasanchez
Real Estate Investor · Manalapan, NJ · Member since 2012 · 56 posts · 17 votes
12y
@Alice B.
If you are not familiar with RE investing, I would recommend to do two things
1) Start out small. It's better to make small mistakes than big mistakes. You will undoubtedly learn either way.
2) Diversify. As other posters mentioned, there are many investment vehicles in the RE space. Private Lending, Note Investing, Landlording, etc.
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Sonya Morgan
Contractor · Modesto, CA · Member since 2011 · 18 posts · 3 votes
12y
Alice,
I own a private lending company in CA. I have been helping investors place their money into private money loans for the past three years. My investors have collectively invested more than 40M. They are seeing average returns of 10-12%, much higher on a small percentage of the JV agreements. I would be happy to explain how investing in notes works and put you on a list to receive qualified investments.
Regards,
Sonya Morgan
[email protected]
1 Reply
David Begley
Investor · Atlanta, GA · Member since 2014 · 415 posts · 299 votes
12y
@Alice B. Congrats on your windfall Alice. I won't pretend to know any more than you since you've been able to successfully pay-off a rather large mortgage and are smart enough to downsize and invest your proceeds. You've already out invested 99% of us!
If I were you, though, I'd do my due diligence on about 5 of the top real estate crowdfunding sites and pick several investments that you like and understand and invest in 3-6 projects with shorter investment period horizons. I wouldn't put more than $25K in each but would study and follow the investments closely to learn different real estate financing structures, the lingo, etc etc. It will be fun and educational while your money is earning double digit returns. Send me a private message and I'll recommend several crowdfunding portals and pros/cons of each.
I would also find a reputable private or hard money lender to mentor you on providing financing to rehabbers. You can earn very good returns vis a vis the risk while getting to know the local real estate community.
With these two suggestions, you can spread your risk, limit exposure and tie your money up for only 6-12 month periods.
Good luck to you!
1 Reply
Marcus Maloney
Rental Property Investor · Queen Creek, AZ · Member since 2013 · 368 posts · 191 votes
12y
Trust your judgement and seek professional assistance in your own backyard. There are plenty of REI that have years of experience and can produce quality references if you intend to invest with them. If you are looking at passive income, take some time read and become familiar with your area. Since you have never been a landlord I advise that you do not try and self manage your properties. Experience is the best teacher so take your time and decide on what area you will like to invest in and conduct your own due diligence, and seek professional council. Go to your your local Real Estate Investors Association (REIA) meetings. That will put you in the arena of those who are actively investing in LV.
"Enjoying the Journey"
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Alice B.
OP
Las Vegas, NV · Member since 2014 · 10 posts · 1 vote
12y
@Dawn Anastasi previously I would've said there was no way I wanted to be a landlord but we ended up landlords of the first property for two years, managed to get the place rented at $400 a month more than the property managers we interviewed had estimated, choose to remote manage it ourselves, and had zero problems and zero days of vacancy. Sure some of this was good luck but it has also made me less scared of being a landlord. We wouldn't have changed anything except for needing to get out in time for the cap gains exemption. btw- I watched an interview you did on youtube. Very inspirational!!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Alice B.
I don't know if my daughters new acquisition hits the 1% rule.. But this is not a rule its just something made up on BP... some people get 2% or 5% on properties some people are happy at 0% if you have a nice appreciating market.
You could also look at Crowd funders offerings.. there are some nice PPM type investments out there that do well and these are totally passive.. you give up control of your funds and place that control with a sponsor or manager. So its critical that you Vette the sponsor very carefully.
I would postulate that something close to you in Vegas that gives you a decent rental return that you can watch over like a hawk will perform as well as something out of area that touts higher returns but your success or failure is 100% riding on PM... And if you watch the threads you know how important it is to pick the right PM.. its more important than the asset in many cases.
If you indeed get tempted to go out of your state for low end rentals IE any rental under 100k each I consider low end. Then first step to take is to talk with PM's in the area before you talk to any one else.. Remember those trying to sell you these properties are doing it for a reason they make money and sometimes lots of it.. The PM make money over time so they know were the easy to manage properties are and the ones that are bears.. Make sure they are completely independent and of course licensed RE brokers which you must be in most all states.. That will give you some good feedback.. Plus they may know of some of their clients that are sic of being landlords and want to sell. you by pass the layers of marketing profits and buy direct.. that's one way to start your hunt for lower end properties.
However I said you can do just about as good as anywhere right there in Vegas.. YOu can buy nice 4 plexe's for 150k or so that have gross rents of 2400 a month.. these are a little more management challenged but I have a buddy that has 4 of them and they are doing much better than they did 3 years ago with vegas rebounding. Hope that helps
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