Have $2 Million, what to do?
Denver, CO · Member since 2016 · 114 posts · 99 votes
Have $2 Million, what to do?
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Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
10yI'd be careful about disclosing such things on a public website ... I can just imagine the sharks starting to circle now that they smell the blood of fresh meat in the water. Your inbox is about to get a workout :)
I agree you should take a measured approach and don't blow your entire wad on a single deal. If you want to invest in apartments, you may consider finding a multi-family apartment syndication deal being offered by a highly reputable provider with a long term, verifiable track record of successful investments and putting $50k-$100k to work in the deal to get your feet wet. Understand that these investments are for accredited investors (which you qualify as), who are assumed to be capable of taking the risk and doing their own independent due diligence (which you should absolutely do); these deals are not generally advertised in the open market and I would not trust those who come to you unsolicited with such deals but rather seek them out through networking and referrals. Local REI meetups may be a good place to start. BP is another place to look, but always remember the saying "Never ask a barber if you need a haircut" and try to figure out who the "barbers" are.
From there, if you want to get active to acquire and manage these assets on your own, you could tag along with your syndication provider and learn from them ... many are open to educating those that invest with them. Otherwise, you can continue to invest passively this way, or some combination thereof.
94 Replies
- 10yIan WalshBusiness MemberLender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
If you learn to make it in this business by using none or a tiny fraction of the money you have, you will not only learn the best strategy for it, but you will also not put it at risk. I always suggest people learn how to survive in REI on a shoe string budget.
- Rental Property Investor · Doylestown, PA · Member since 2008 · 1k+ posts · 1k+ votes10y
Great point Anton. There are always "layers" in investing and each layer comes with a time cost and/or a $ cost. For instance, I have purchased properties from wholesalers. The wholesaler gets X thousands of dollars from me. Could I avoid wholesalers and find all of my deals myself? Sure. Would it take up more of my time to do the marketing necessary to find the number of deals I need/want per year? Yes. I feel my time is better spent vetting deals and working on adding value to the properties I own. Is it more expensive to eat out than to eat at home? You're paying to not have to cook or clean. Pretty much all aspects of life have a pro vs con, risk vs reward, convenience vs money and time component to them. If finding a large apartment/commercial deal to invest in yourself is what you want to do, great. But just realize if you want to find a good deal, it will definitely require time (RE education, networking, talking to sellers, talking to commercial brokers, talking to commercial lenders, viewing properties, analyzing the numbers, projections, negotiations, paperwork, inspections etc). Not trying to discourage you just make sure you go into it with the right expectations on time commitment. The equivalent would be someone on BP thinking they could take $2 million and buy a tech company....and make money without any time commitment. (besides @Levi T.). There are different "layers" or "levels" to RE investing and you need to find which is right for you.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes10y
Originally posted by @Jerry Shen:
@Brian Burke @Jay Hinrichs thank you so much for your advice. Funny enough one of my good friends called the RE crash in 07-08 to the YEAR and everyone made fun of her but I listened and saved myself a lot of headache in buying my first single family home. So I can see the wisdom in working with someone who has weathered the storm =)
As I'm processing all the valuable advice here, one thing that is turning me away from syndication is the fact that I'm not really taking advantage of the fact that I have more capital to spend than most in a syndicate.
My investment goals are two-fold:
1) Generate a 10% yearly cashflow to support my lifestyle (200K/year on 2M capital invested)
2) Be a relatively passive investor, as my time is much better leveraged doing technology (which is my passion and expertise) versus actively managing real estate.
With all the great options you guys are presenting, there definitely seems to be a continuum along both of those options.
With a syndicate, I wouldn't be getting the same returns as owning a property outright, but it's much more passive (sort of like being an LP in a VC fund to use an analogy to the tech world).
One BP member I talked to turned me on to the idea of commercial real estate, and I think this matches my investment philosophy in a lot of ways.
1) In larger deal sizes (Starting 1.5M - 2M down) the interest rates and management fees are lower, providing a better cap rate and CoC return. Why not take advantage of my capital and get into deals that have less competition because of the price?
2) Much more passive compared to a large apartment building. Instead of 100 individuals, you have one large business.
3) I get the satisfaction of 100% ownership of a particular piece of property. When I started my tech company I took no investment and had 100% ownership up till the exit, so I just have a natural affinity for total ownership.
Anyways, that's just some stream of consciousness thoughts that I have right now. Any feedback, as always, is appreciated.
Whether it's commercial retail, office, industrial, or multifamily, purchasing a $5-$8mm property as a sole owner is purchasing a business, not simply cutting an investment check. Getting up to speed and properly vetting opportunities in any of these spaces starting from a beginners guide is counted in months not weeks, even for those without a job. Once you have contacts and systems in place, you can likely take more of a hands off approach but the early stages, done properly, will be similar to a job and there is nothing passive about it.
Regarding STNL, you have identified one of the big benefits...less active management. You mentioned having to live of the cash flows; so, make sure your lifestyle can afford 6+ months of 0% occupancy should you lose the tenant. STNL may involve less active management, but there is a substantial amount of learning and due diligence in the early stages in selecting the right tenants and particularly the right locations. Great investment vehicle, a lot of work just like any of these business opportunities that you are vetting.
Regarding competition, $1-2mm in capital is a drop in the bucket and the competition for a $5-8mm MF property is about as intense as it gets.
All of this is very achievable with intellect and hard work and with your success in business already, you are a leg up on most. Good luck and keep us posted on your progress.
- Denver, CO · Member since 2009 · 131 posts · 22 votes10y
@Jerry Shen I agree with the sentiments already oulined so far. As with any investment vehicle, the same principles of diversification and starting small apply. It may be easier to just dump everything into one property/investment, set it and forget it. But much like the stock market, you're gambling on an Apple or a Google, and may end up with a Theranos;) If you diversify, and one of the deals goes south, your losses will be offset, and you can get out and move into another deal. Don't go all in, or you'll go broke really fast. There is a learning curve, and it's a financial one, and it can be harsh. You may not have the economies of scale from larger buys, but you can offset with all cash offers and rehabbing. Real estate is a long term play so you want to look at the roadmap and see where you want to be in 10 years.
That's my 2 bitcoins, anyhow.
- Real Estate Consultant · Atlanta, GA · Member since 2015 · 173 posts · 46 votes10y
Hello Jerry,
As another investor stated above be careful with what you put on social media. You never know who is lurking. However in response to use your post, do not put all of your eggs into one basket. If 2008 market happens again then you could very well be out of luck. That's not smart. So I recommend that you diversify. Start a property management company and get multi-family units as well as single family homes, consider Air BnB, and maybe even find some partners to JV with. I'm sure most of what I recommend, you know already. There is one thing I truly believe that REI should understand and that's investing in more than one avenue. Especially new investors. You already want to do that and that's spectacular. So when looking for other ways to grow your money, have you ever considered tax free investments such as FFIUL? It's a pretty good strategy for REI because its rather safe and they have the ability to over fund it with a portion of the profits from their deals and make a great return quicker than some other forms of investing. That's what I am doing personally. If when you get your profits from a flip and put it ALL into your BANKS savings account or hurry to find another project then you are missing a very important key to investing as a whole which is knowing how your money works. I work with a financial services company that does free financial education classes to the general public and teach basic 9 to 5 working individuals to do what I just told you. The issue is the lack of proper financial education for most people. Feel free to reach out and perhaps someone from one of our offices in your area can help you come up with more options.
- Denver, CO · Member since 2016 · 114 posts · 99 votes10y
Originally posted by @Mike Dymski:
Originally posted by @Jerry Shen:
@Brian Burke @Jay Hinrichs thank you so much for your advice. Funny enough one of my good friends called the RE crash in 07-08 to the YEAR and everyone made fun of her but I listened and saved myself a lot of headache in buying my first single family home. So I can see the wisdom in working with someone who has weathered the storm =)
As I'm processing all the valuable advice here, one thing that is turning me away from syndication is the fact that I'm not really taking advantage of the fact that I have more capital to spend than most in a syndicate.
My investment goals are two-fold:
1) Generate a 10% yearly cashflow to support my lifestyle (200K/year on 2M capital invested)
2) Be a relatively passive investor, as my time is much better leveraged doing technology (which is my passion and expertise) versus actively managing real estate.
With all the great options you guys are presenting, there definitely seems to be a continuum along both of those options.
With a syndicate, I wouldn't be getting the same returns as owning a property outright, but it's much more passive (sort of like being an LP in a VC fund to use an analogy to the tech world).
One BP member I talked to turned me on to the idea of commercial real estate, and I think this matches my investment philosophy in a lot of ways.
1) In larger deal sizes (Starting 1.5M - 2M down) the interest rates and management fees are lower, providing a better cap rate and CoC return. Why not take advantage of my capital and get into deals that have less competition because of the price?
2) Much more passive compared to a large apartment building. Instead of 100 individuals, you have one large business.
3) I get the satisfaction of 100% ownership of a particular piece of property. When I started my tech company I took no investment and had 100% ownership up till the exit, so I just have a natural affinity for total ownership.
Anyways, that's just some stream of consciousness thoughts that I have right now. Any feedback, as always, is appreciated.
Whether it's commercial retail, office, industrial, or multifamily, purchasing a $5-$8mm property as a sole owner is purchasing a business, not simply cutting an investment check. Getting up to speed and properly vetting opportunities in any of these spaces starting from a beginners guide is counted in months not weeks, even for those without a job. Once you have contacts and systems in place, you can likely take more of a hands off approach but the early stages, done properly, will be similar to a job and there is nothing passive about it.
Regarding STNL, you have identified one of the big benefits...less active management. You mentioned having to live of the cash flows; so, make sure your lifestyle can afford 6+ months of 0% occupancy should you lose the tenant. STNL may involve less active management, but there is a substantial amount of learning and due diligence in the early stages in selecting the right tenants and particularly the right locations. Great investment vehicle, a lot of work just like any of these business opportunities that you are vetting.
Regarding competition, $1-2mm in capital is a drop in the bucket and the competition for a $5-8mm MF property is about as intense as it gets.
All of this is very achievable with intellect and hard work and with your success in business already, you are a leg up on most. Good luck and keep us posted on your progress.
Thanks for the input Mike. It's always valuable to hear the other side of the coin. I'm pretty overwhelmed by the sheer amount of disparate advice on this thread. I love all the differing opinions.
Slightly off topic, but one of the things I've learned in the business world is that everyone dispenses advice based on their own personal experiences, which can be skewed. When I started in the tech business, all of the advice I got was to go big and raise a lot of VC funding. But I chose to go the opposite route, bootstrap my own company and travel the world while coding. Did I end up creating the next facebook? No. But I did end up doing decent and I enjoyed the process. What I ended up doing is quite unusual in the tech industry, forming a one person company and then being acquired by a public technology company. There are probably only a handful of others.
Point being, I like assimilating all available information on a topic but at the end of the day the main question I ask myself is: What is the ROI on life for this decision? I don't seek the maximum ROI for my money, or even my time, but how will this benefit the lifestyle that I want to create? When I started my company, I wanted to travel the world and meet interesting people. I did that for seven months and my decision to bootstrap and be a single founder company allowed me to do that, even if the eventual end result wasn't a silicon valley super-unicorn or whatever they call it these days.
In terms of RE investing, my lifestyle goal isn't to become a great investor and make my bones in RE. It's a means to an end of achieving my lifestyle goal: to start more tech companies at my own pace, work with my friends, be able to have maximum flexibility and freedom, and essentially have an infinite financial runway for the quality of life that I want.
That being said, while I really appreciate some of the advice on this thread about getting my hands dirty and starting small to learn the ropes, I'm not sure that's the best approach for me. Any complex field, be it politics, finance, technology, medicine, or real estate always comes down to a few core principles that successful people follow. Everything else is either 1) a corollary of a core principle or 2) noise and artificial barriers to entry.
While I certainly appreciate being scrappy and hustling and trying to get into deals with nothing, it's just not something I'm interested in doing. There are plenty of very successful investors in high tech that have not built their own companies but understand the principles of high tech investing. I have to imagine the same thing is true of real estate.
- Denver, CO · Member since 2016 · 114 posts · 99 votes10y
Originally posted by @Shaniqua Dupree:
Hello Jerry,
As another investor stated above be careful with what you put on social media. You never know who is lurking. However in response to use your post, do not put all of your eggs into one basket. If 2008 market happens again then you could very well be out of luck. That's not smart. So I recommend that you diversify. Start a property management company and get multi-family units as well as single family homes, consider Air BnB, and maybe even find some partners to JV with. I'm sure most of what I recommend, you know already. There is one thing I truly believe that REI should understand and that's investing in more than one avenue. Especially new investors. You already want to do that and that's spectacular. So when looking for other ways to grow your money, have you ever considered tax free investments such as FFIUL? It's a pretty good strategy for REI because its rather safe and they have the ability to over fund it with a portion of the profits from their deals and make a great return quicker than some other forms of investing. That's what I am doing personally. If when you get your profits from a flip and put it ALL into your BANKS savings account or hurry to find another project then you are missing a very important key to investing as a whole which is knowing how your money works. I work with a financial services company that does free financial education classes to the general public and teach basic 9 to 5 working individuals to do what I just told you. The issue is the lack of proper financial education for most people. Feel free to reach out and perhaps someone from one of our offices in your area can help you come up with more options.
Appreciate the advice Shaniqua. But I haven't revealed anything that you couldn't gather from a quick google search anyway, comes with the territory when you are part of a high profile silicon valley tech acquisition.
Re: other forms of investment yes I have considered quite a few options. You won't believe the amount of free inbound advice from top financial firms (Goldman, etc) you get when a tech acquisition becomes public. From that I became pretty good at filtering inbound requests. 95% of advice I got was pretty worthless, but 5% were absolute gems. I'm doing the same thing re: real estate.
At the end of the day, I believe that real estate fits my investment/risk/lifestyle goals the best. There are certainly safer investments, and there are much more lucrative investments that I've been offered (albeit with much more risk). But there is nothing I've come across that matches my own personal goals.
Cheers!
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes10y
Be very careful on multifamily. It has been topping out for awhile.
I have clients all the time that buy their first asset in commercial. They do very well. That is because I like maybe 10% out of the 1,000 properties or so I look at a week. I am very picky on what looks like a winner.
Lot's of crap to just okay properties out there in every asset class. C multifamily product is very intensive and if a market downturn happens they can get hit hard first. Any little blip happens to a lower income tenant and their world falls apart pretty fast. National corporate retail businesses build up reserves during the boom times so they can stay in business during the downturns.
As far as sourcing properties that is what a commercial broker is used for. Not all brokers are equal.
If people haven't transacted a 5,10,15 million dollar deal then they are speaking from a place of the unknown with experience in smaller deals. Different lenders, different underwriting, different capital requirements, different quality of the asset and break even occupancy.
Make sure whoever you work with is standing behind the deal all the way with the purchase and beyond.
Multifamily has looming issues such as rent growth is starting to go down, vacancy is rising, developers are putting the breaks on some projects, owner pays property taxes which have been reassessed higher lately, utility companies even with no leaks are raising per gallon water usage rates in some areas impacting annual operating costs and cash flow. Additionally renters are starting to peak out with their income versus their rent ratio.
Someone making 40,000 a year paying 40% of their income in rent is hitting a ceiling with how far rents can keep going up. Not all multifamily is bad but those buying into multifamily is hot,hot,hot with blinders on are in for a rude awakening. Lot's of MF deals these days just do not pencil long term. The sellers are selling on bubble numbers for the last 12 to 18 months and not decades of historical performance for that industry and asset class. Great for the sellers but not usually for the buyers. I just do not like thin deals where everything has to go perfectly to have a decent outcome with an asset.
- Investor · Georgia, GA · Member since 2015 · 29 posts · 21 votes10y
If I was in your position, i would buy up small real estate properties in a desirable neighborhood and below market price. I've never invested in apartments, so i dont know. I find them hard to sell. You should be able to hire a property managment company, if you decide to buy in bulk. It's a good passive income. Another great thing is if your city allows Airbnb you can double your expected income to 400k or more.
I would not spend a huge lump sum on an investment property.
- Denver, CO · Member since 2016 · 114 posts · 99 votes10y
Originally posted by @Anh Truong:
If I was in your position, i would buy up small real estate properties in a desirable neighborhood and below market price. I've never invested in apartments, so i dont know. I find them hard to sell. You should be able to hire a property managment company, if you decide to buy in bulk. It's a good passive income. Another great thing is if your city allows Airbnb you can double your expected income to 400k or more.
I would not spend a huge lump sum on an investment property.
Thanks for the advice Anh, but this doesn't seem like a good leverage of my time.
- Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes10y
I think you're going to have to think your objectives through much more thoroughly then what I've seen here: merely wanting a 250k return on $2mil, well why RE? You could lend out as hard money, invest in a syndication/private projects/businesses (not necessarily even RE), or stocks for that matter. RE is generally not a passive investment, especially if you're not experienced in it. So,
A- I think you will need to get experience in the specific RE segment you get interested in. This will take time and effort.
B- I don't like syndications. You have zero control and are relying on others to make critical decisions. Who do you trust?
C- you need to consider a host of other factors: tax implications, liability, qualifying for loans, property appreciation, etc.
after you consider those, if RE still seems like an option, I'd look at possibly acquiring a quality assert in your local market of Denver. Having your assert nearby is a huge advantage, especially in a decent market like yours. You need to know your location! Which areas are moving up, what projects are getting built where. Zoning changes, public projects coming in, demographic trends. Might as well get to know your local market where you can drive and walk the streets and talk to locals!
So, it's not really going to be passive on the front end. But you could focus on a commercial property (you'll need a loan to get something decent). A good commercIl broker or two in your area can give you ideas of what's available. Try to narrow it down between multi-family, commercial, industrial. Not sure they will yield 12.5% cashflow, but how will the tax write offs help you? How will future appreciation help you? If you're not up for a turn around/value added project your returns will be lower. Also focus on quality locations and quality buildings. Again, returns will be lower, but your risk profile is reduced, and steady appreciation is usually more assured.
Like it or not, if you do buy RE you will become a mini expert in your area of endeavor. But that's not such a bad thing. Trust me, you make your money when you know what you're doing! Otherwise proceed with caution.
- Denver, CO · Member since 2016 · 114 posts · 99 votes10yGood advice Amit M. I agree with a lot of your sentiments I don't mind doing upfront work
- Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes10y
Jerry
If you agree w Amit then its difficult to understand what you want or should do. You say u want to start another tech company, ok, then why do you want to not focus on that if that is what you are good at? Why would the advice to go into stocks, single business equity investments that IMO are significanrly more risky than stable, cash flowing RE?
Yes, you should educate yourself, but the vast majority of savvy investors will diversify and have solid exposure to value add MF apts in growth markets. You get scale, cool things you have never heard of called forced appreciation that you cant find in most investments.
Go passive, get 10% CoC and high teens on sale of value add approaches with proven syndicate operators and go do what you do best. I bet much of the advice above including Amit are FT investors. That is not what you are telling us you want to be so don't think you need to make this hard or DIY unless you put starting a tech cimpany in the back burner.
I can show you a deal that we recently did and only then can you appreciate what syndication can do.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes10y
I believe my feedback is consistent with others here and that your are underestimating the complexity and work involved in purchasing a $5-8mm real estate investment as sole owner and operator. A tech guy making an investment in a tech company is different than a tech guy making an investment in a real estate company. And even investments in your wheelhouse require a fair amount of due diligence.
We don't have to start small but we have to start smart. Can you grab a good broker, go out and purchase a large commercial property in a month or so? Sure. The outcome will be one of three things (1) gave money to fraudsters (2) purchased a bad business (3) or got lucky. Owning a failing commercial property as your sole source of income will not only prevent you from inventing, you will have to get a job.
I'm not anywhere near as well read as most on BP and I'm an action first, roll with punches and figure it out investor; so, I'm all about taking intelligent, calculated and swift action but there is more time in that than you appear to understand. I'm taking some liberties in reading between the lines; so, I may be misinterpreting your position but felt compelled to pass it along.
Commercial and residential real estate is a great investment and you are poised and positioned to do well. Good luck and keep us posted.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes10y
I have spoken with Jerry on the phone before.
I have another tech client that sold his company that had never purchased any kind of real estate ever in their lives.
They own 2 retail centers now for the last 2 years. We are thinking of placing on the market later this year.Profit is in the multiples and multiples of millions. Already have buyers lined up wanting the asset.
These properties you do not need to be an expert. You need to WORK WITH experts who will be there through the acquisition and disposition of the asset and beyond. If you have a seasoned commercial broker, commercial real estate attorney, and professional commercial management team it can be passive.
It's all about buying right. Buying right takes a team of people with experience to vet the asset and look for any issues today and down the line.
People that stay in smaller spaces and diversify everything just see risk with larger properties. You can also diversify and own a lot of mediocre stuff as well.Their equity growth tends to stay smaller as well. I know some that started out in residential and have built up to 3 million over 20 years. I know other investors who moved on to commercial as part of growth and over the same period are worth 20 million. We are talking about commercial properties that are NNN where the tenants run their businesses,pay all the expenses, and then give the rent to the landlord. I am specifically talking about retail centers.
You get into self storage, hotels, etc. then yes those can become a job fast and require more hands on and management of people.
So it's not just about the asset class but what sub-type and scale you are talking about.
Additionally I want to say I enjoy picking up new clients but I am doing great right now. So I do not need to hard sell anyone. From my talk with Jerry he enjoys creating tech startups etc. He doesn't want to do a lot of grinding to eek out higher returns.
I see this on BP a lot. People say I am getting 10% return with this, 15%, 20%, 25% etc. Yeah but how much crap are you going through, how hard are you working for that return, how long is it taking? People with millions tend not to want headaches. They want a solid return on a quality investment that meets their goals.
I talk to these people on the phone almost daily across the country.
Jerry should talk to various experts in their fields and decide what is best for him. Different states across the country are at various levels of cap rate compression for varying asset classes. Each state has it's positives and negatives with things such as income tax versus no income tax etc.
Owning in your backyard can be good if it meets your investment goals and criteria. That might not be possible locally where you live for the asset class you want to invest in. Larger properties have scale and are easily manageable out of state with the right location and tenant base.
- Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes10y
you can easily hit the $250K/ year just going all in cash on 40 units, I like Single family because it is liquid, and tenants feel like its a home not just an apartment. in many parts of the country you can buy Sub $50k homes that bring north of $700/mo. figuring taxes, insurance management and capX, generally you can use 10 months worth of rent, at $50K all in you can buy 40 houses with $2MM and that should return you at least $280K/year, im using $700/mo rent as a low figure, in my market if i was willing to spend $50K/door, i can get $800 or more a mo, for 3 bed with garages, and keep them full all day every day.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes10y
@Joel Owens Well said. How long do you think it would take to research, vet experts and deploy this amount of capital with proper geographic, tenant and property diversification to have a stable income stream? I am asking both in terms of this post and my own personal situation as the verdict is still out for me on asset class (currently have MF and STNL).
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes10y
Mike first it depends on if the money is in a 1031 exchange or apart of partnership. When additional steps are in play the timeline can be increased.
The other part is where they want to buy and expectations.
There are some local investors in GA who could have bought a strip center for a 9 cap 1.5 years ago but messed around. Now those centers are at an 8 cap to 8.5 at best. The local guys complain sometimes but buyers doing a 1031 out of California that sold their multifamily at a 5 cap are all over the properties and happy with that return.
Helping commercial buyers for the first time is my specialty. On a property that size typically 1 to 3 months to locate the right property and 2 to 3 months to close. It can be done faster with a 1031 if someone did poor planning and has 2 to 4 weeks left on an exchange etc. You will have rush fees on all the reports and lender processing though which will drive costs up.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes10y
Thanks; so, 3-6 months and then managing the manager begins, which will have varying degrees activity/passivity.
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes10y
Jerry, this was a great post and connected you and everyone with many successful experts in the area you are researching. I have only been on BP for two or three months but whenever Joel replies, he is very helpful and on point. You get a lot of nonsense here as well but great help too and Joel, a month or so ago, gave me one of the most valuable pointers I have received on the site, it made joining worthwhile and was a game changer for me on a deal.
- 10yJohn CasmonPro MemberCincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
Serious answer: If I just wanted the benefits of real estate investing without wanting to actually own/manage property I would go into syndication or lending.
Not serious answer: Bet it all on the Cleveland Browns winning the Super Bowl. - Real Estate Investor · Marysville, OH · Member since 2014 · 242 posts · 196 votes10y
@Jerry Shen agree with those who said why RE? If the primary goal is $ there are other ways. That said, if you are passionate about real estate, even as a secondary interest to technology, I find it to be a rewarding topic and goal.
IF you are definitely set on RE: Take it slow and watch out for sales pitches. I started out once before in RE while in the tech world, and didn't do enough absorbing of information. While it was great to jump in with both feet, I made early mistakes that I should have avoided. I consider that period a learning phase where I was paying for education.
I am working on it again in a new location and took a more measured approach. I'm investing where I am 1.) local or 2.) have reason (other than RE) to visit regularly. I am working with established partners to deal with the aspects I don't want to deal with (like... tenants:) I am sticking with "boring" classes of RE: SFH 3/1, 3/2 bread & butter that I can get cheap relative to what they will bring in rental wise. Not trying to chase 20% returns in rougher neighborhoods. Not dealing with apartments / commercial yet that may be hard to sell at times.
If you are really keen on apartments, I might consider something like smaller 8 unit buildings. Do one where it isn't going to use up too much of your $ so you can work out the kinks. If you get a year into it and its just not working out how you hoped, your $ is not all tied up in it.
Good luck this is a great place to learn and see what others are doing. Also great to connect with people in the area you are interested in.
- Investor · Dallas, TX · Member since 2014 · 112 posts · 83 votes10y
I would get some training on Multifamily investing is Syndications. There are two groups that I am involved with that I would recommend. Most of the passive deals coming out of there memberships seem to me to pay better yields that a lot of other syndications.
They also provide training and mentoring in purchasing your own if your interested. Both the owners and students have won National Apartment Association awards. DM me if you are interested in learning more.
I have invested in two multifamily investments personally. One has paid 10% annualized cash on cash return as well as going from a value of 2.4 million on purchase in June 2014 to 4.2 million today. The other has paid 10% cash on cash return and have had a few set backs but expecting 15% cash on cash by end of year. Both of them being b- to solid c class properties.
I would just caution you to be very care full with the numbers that syndicators are using because we are close to the top of the market and I expect a change in the market in multi family, especially class multi family in a 1 year to 18 months in Dallas.
- Investor · Dallas, TX · Member since 2014 · 112 posts · 83 votes10y
All so I have a friend doing a deal that has what I expect to be a similar back ground to you. If your interested in an introduction.
- Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes10y
David,
Where do you see the change coming from? All my analysis points to continued job and population growth in Dallas. This is a trend that has been in place for a long time and just because prices of gone up and cap rates are compressed does not signal a top IMO. Yes, you need to buy value add deals. Yes, you need to have conservative underwriting and bake in a realistic increase in cap rates to adjust to expect interest rates increasing in the next few years. Let me know what you are seeing because I'd be interested in what facts / figures are pointing you to state there will be a change. Agree, things don't go up forever but that is why smart syndicators don't just buy cash flow.
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