Investor · Santa Cruz, CA · Member since 2017 · 61 posts · 50 votes
So, my wife and I have been have been saving for a while, which isn't really easy. (Two kids, tuition, CA prices..) But we do live a pretty thrifty lifestyle. 2001 ford truck for me and 2010 Pilot for the Mrs. All paid off and very little CC debt. Mortgage on our PR is $1500/mo.
That said, where would you park your $40k? Strongly feeling this bubble is near the popping point, and don't want to make the same mistake I've seen so many make. I'm really getting interested in MF syndication.
I'm not you so I'm answering this from my perspective. I had around $60,000 to invest.
I bought 3 cheap/low income houses paying cash. I'm bringing in $1,650/month and own the properties free and clear. Used that money and just put a 4th one under contract that will close those week which will bring my monthly income to $2,350/month. Once again I own everything free and clear. Already have my 5th one lined up as well. Just going to wait another month to save up another $2,000 that I can use towards repairs on the 5th house.
Yes, Sidney Torres is actually one of my role models! If you've never visited New Orleans, he highlighted a lot of areas that aren't shown a lot but Make New Orleans "New Orleans"! These areas are also great investment areas!
@Jasmine Bakewell-Barre' Yeah he seems like a good guy. I know he also got into the trash removal business as well and did very well with that too. It sounds like he started from the bottom working on construction sites and stuff so it's cool to see someone do really well like that.
I've been to New Orleans once , but it was a long time ago. Would love to go back sometime. Sounds like there is some interesting things happening in the city. Sounds like the tech scene there has been growing fast too.
I'm no tech person but it's exciting to hear! Lol. You should come back to visit! We welcome you! Even think about investing in a property, AirBnb it when you're away that way you always have somewhere to stay! Mardi Gras, JazzFest, VooDoo Fest, Essence Fest, French Quarter Fest, a weekend you just wanna fest lol, we celebrate Everyday here so investing is never a bad idea!
Note investments, cash flow, better returns than rentals without the hassles of tenants and property maintenance. Works great for IRA investors as well.
Note investments, cash flow, better returns than rentals without the hassles of tenants and property maintenance. Works great for IRA investors as well.
Tim, what kind of returns do you see on note investments?
Note investments, cash flow, better returns than rentals without the hassles of tenants and property maintenance. Works great for IRA investors as well.
While I don't disagree with you, I'd probably add you should probably not go this route without a seriously experienced mentor/partner ... this really is the deep end of the REI pool, in fact it could be argued it is really more finance than REI, but you also need to know RE as well as finance to succeed. Once mastered, though, and I'm not saying I have at all, it does seem even more passive and easier to extend OOS than rentals. I suspect the returns would likely be lower too, though, unless you are really jacking up the risks with stuff like non performing seconds, which I personally wouldn't touch ... non performing 1st or performing 1st where you could foreclose and recoup if they don't pay and you can't work out seem more palatable, at least for the beginner. You likely have more experience than me on the subject though, Tim, so I welcome any feedback on this view. Shout out to @Dion DePaoli if he wants to add anything also ... he is a great resource IMO for the newbs looking to get into notes, myself included at least so far as RE notes are concerned.
Aaron, investing in the mid-west is not parking your money. Investing in a D class asset that doesn't increase in value is. I have invested in the mid-west and have turned $20k into over many times over 7 figures. It's about strategy, location and buying right. Somehow in California when times are good everyone forgets that their real estate could soon be worth half of today's value. Investing in the Ghetto in California cities is also a sure way to park your money.
If someone lives here in California and is thinking of buying out east based solely on price or bubble fears, compared to Southern California, all real estate in the Midwest is D class assets. You'll work a lot harder turning your $20K into 7 figures out there than you will here.
And 7 figures isn't anything to brag about. Well, maybe where houses sell for 5 figures it is. That's ghetto rich. A million dollar net worth puts you in the middle class at best. How many typical rentals do you have to buy and manage to get to $1m? Ten? Fifteen? I can do it right in my backyard with 2-3 typical, crappy, 1950 stucco boxes.
A wise real estate investor once told me (paraphrasing), "Make offers on cheap houses, buy cheap houses. Make offers on expensive houses, buy expensive houses." Work hard or work smart.
And if you think California real estate will ever be worth half of what it is today based on a one time event during a global depression that saw entire countries go bankrupt, you're view of history is very limited. Even if our real estate did drop 50%, it would still be worth 25% more than the crap between the Rockies and the Appalachians. Also, rents wouldn't suddenly drop 50% so it would make even more sense to stay and play locally. But of course, if all our real estate goes down, so does everyone else's because the California economy is the coal that fuels this entire country.
Wow! That was the most arrogant response I've ever read! You obviously know very little of the rest of the country other than you small area that you live in California.
Aaron, investing in the mid-west is not parking your money. Investing in a D class asset that doesn't increase in value is. I have invested in the mid-west and have turned $20k into over many times over 7 figures. It's about strategy, location and buying right. Somehow in California when times are good everyone forgets that their real estate could soon be worth half of today's value. Investing in the Ghetto in California cities is also a sure way to park your money.
Wow! That was the most arrogant response I've ever read! You obviously know very little of the rest of the country other than you small area that you live in California.
Arrogance is making exaggerated claims about one's own importance or abilities. I've done neither. My comments are based on facts. You made a ridiculous claim that CA real estate is poised to drop 50%. And that is a statement based on nothing. Absolutely zero data. You literally just reached your arm up your rear, sliding it by your head, and dragged it out. And for what purpose? To make it sound risky to invest in housing in the 6th largest economy in the world? The only other state that even makes the top 10 is Texas, where I also own real estate. Unfortunately, their property taxes are so expensive I'm getting out of that market and moving the money back here where we have Prop 13, which keeps our property taxes absurdly low. Which in turn fuels the outrageously high prices.
When the above poster claims he is "parking his money" he doesn't know it, but he means permanently. I don't care what those Midwest houses appraise for. Just cuz some guy with a clipboard and fancy paperwork tells you the house is worth $65K doesn't mean you'll find a buyer ready, willing and able to pull the trigger on that deal and when the dust settles, that sales price is likely to be much lower than fancy clipboard guy claims it should be. That house will be on the market, vacant, along with lots of other on the market, vacant, houses all looking for the same low income, subprime buyer who is most likely more happy being a renter. I've got two of those awesome deals left in my holdings. Awesome deals I did when I didn't know what I was doing. Now they are anchors producing crappy returns and I almost can't give them away. As they say; when you lie down with dogs, you get up with fleas.
If I only had $40K to work with, I'd find a proven flipper in a market very close to me and I'd lend him/her the money secured by real estate, using escrow and getting a lender's title policy. I've done lots of these exact small loans when I was starting out and they were the only early on deals that paid off very well again and again.
Spoken like a real investor with a good eye. Never be fooled by the men in fancy suits and clipboards. I have avoided many a deal where I just knew the numbers weren't good, and the true numbers were in my head.
Hey now, don't be dissing all guys with clipboards! Appraisers use them and some of those guys are pretty bright. Sometimes.
I can speak with experience to @Aaron Mazzrillo's comment in re the Midwest. Those $30-40K homes are in class D/E neighborhoods. Yeah, not C. D usually, E on occasion but some homes there are still in the $10K price range.
IMO a newbie should probably buy turnkey homes. The homes probably have had a rehab and most systems usually operate as intended. If the seller provides access to management and you understand the risks (credit losses from slow/no pay tenants, major repairs on move-out, etc) tied to that high cap rate then go for it.
@Aaron Mazzrillo my claim that California will crash was not pulled out of thin air. California has a history of large ups and downs and it will happen again. A quick internet search will show that. The point of my original post - which you glazed over during your rant is that buying in the midwest is not parking your money. If you buy a solid cash flowing property in a good area you have a great investment. My portfolio has performed extremely well in the mid-west. If you buy a building in a terrible part of town in the midwest or California you will have a bad investment.
California, by the way is #10 on the list for per capita GDP. It may be #1 in overall GDP, but it is a huge state with a large population. I would buy in California while the prices are low and you can cash flow, but right now prices are high and I would guess it's difficult to cash flow in a decent part of town.
@Joseph M., I own 1st lien notes on several houses in the Midwest and, though the house values are around $40K-60K, they are NOT in bad neighborhoods. There are many $50,000 houses in the Midwest. They can't all be in bad neighborhoods. Many are in solid blue collar neighborhoods.
I invest in non-performing notes and, since you asked about the returns, most of my associates only keep as cashflow the ones that are returning 25% or more. They sell the others for an even bigger one-time ROI.
Having money to invest is a good problem. I have found that in my area the real estate prices are at a premium, which makes it difficult to cash flow on a property. I have found success in buying single family homes and renting them out by the rooms. When I rent it out by the room to individual tenants, I am able to cash flow 3 times what I would have collected on the property, so it allows me to have good profits in an inflated market. It took me a while but I was able to figure out how to get good tenants that don't cause problems and clear tenant screening and expectations to that it truly is an investment rather than a full time job. My friends are lucky to get an 8% ROI on their properties. I routinely am able to get 25%+ ROI
I second everything in Anthony Venturini post above. Detroit is a gold mine and $40k goes much further there than it does anywhere in the United States right now. In addition to East English Village, I would also suggest looking into Islandview, Morningside, and anything along the Jefferson Corridor.
Most people do not realize you can invest that money, limit your risk, do it at very good interest rates and in some cases ear it all tax free. Most do not know how to structure real estate deals inside their IRAs using option contracts. You can only invest so much annually in your IRA, but there is no limit to the amount of profit you earn inside that IRA. I had a finance degree and was a registered investment adviser for 10 years. I had no idea how to do any of that until recently. It's amazing what the super wealthy can teach you about investing. I've been in real estate full time since 1994. I wasn't around the right people until the last few years. That changed everything.
@Joseph M., I own 1st lien notes on several houses in the Midwest and, though the house values are around $40K-60K, they are NOT in bad neighborhoods. There are many $50,000 houses in the Midwest. They can't all be in bad neighborhoods. Many are in solid blue collar neighborhoods.
I invest in non-performing notes and, since you asked about the returns, most of my associates only keep as cashflow the ones that are returning 25% or more. They sell the others for an even bigger one-time ROI.
@Joseph M. Gail gave a good response. I usually determine my bid price based on a model ROI of 20-25%. This is based on projected costs using info gathered in the due diligence phase. Of course real life can often throw curve balls and costs can be higher, or lower, than predicted which will affect the final profits (or losses).
@Jared K. great post. If you have other income streams that you can personally strengthen it's likely best to focus on those streams while continuing to invest in professionally managed BIG deals! Bigger IS better IF you do it with the right team!
@Aaron Mazzrillo, while I too have done very well by being lucky with timing in a high value market, not everyone has the ante for that game, especially in areas with low or negative cashflow. If I could buy a property for $15k that rents for $600 like @Derrick E. I'd jump on it. At that cashflow who cares about appreciation?
@Mike Dymski Great point on my poor phrasing. My invested capital is at risk. A better way to put what I like about it, is that I am not the one guaranteeing the note.
Didn't look at this thread the last few days. It has blown up!
@Ivan Barratt Agreed. I will continue to develop and strengthen other streams, and my investment in real estate are almost entirely because I know and trust the team I do it with. We can all do the math on investments, the bigger decision making point for me on any investment or asset is the people behind the investment.
@Aaron Mazzrillo, while I too have done very well by being lucky with timing in a high value market, not everyone has the ante for that game, especially in areas with low or negative cashflow. If I could buy a property for $15k that rents for $600 like @Derrick E. I'd jump on it. At that cashflow who cares about appreciation?
That's how I feel with all the homes I buy. With the cash flow I am getting I don't care if it ever appreciates as long as I can keep it rented (which has been EXTREMELY easy to do.)