Frustrations With RE Investing

Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes

8y

Old wisdom shows years of experience from mistakes learned. I am on your dad's side. You can find positive cash flow properties in Alabama, Ozarks, and Tennessee with little upside potential buying at close to apex price. What does positive cash flow do to a 20 year old? Is $250-400 dollars a month income raise your eye brow vs pains and trips taken to another state worth the trouble? Many will take 6 months to unload. My suggestion is putting some in REIT ETF or REIT mutual funds. They are less recession sensitive. Your dad probably knows that we are closer to a recession and higher inflation-higher interest rate than people realize.

11 Reply

Roger Poulin

Realtor · Hermitage, TN · Member since 2014 · 125 posts · 93 votes

8y

When you are in your 30s, you will realize how wise your dad is. You can find a deal in any market unless it is a dead market. Los Angeles is expensive, that means you need to look in the suburbs, knock on more doors, and offer more creative funding plans. If you really want it, you will go out and get it.

9 Reply

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

8y

It’s the lack of ability to invest out of state here that’s really hampering. He’s right in that LA is to hot right now. If you can’t convince him to let you do that, then I’d try harder to find deals or wait until there’s a correction. The coasts will likely seethe correction first or more so than the central part of the country

2 Reply

Terry Miller

Akron, OH · Member since 2015 · 178 posts · 189 votes

8y

If I were hired to mediate your "dispute" I would propose that he sell you one of his properties, and carry the note. This way, if he is 100% correct in his estimate of the future, at least it minimizes the damage.

19 Reply

Aron D.

Rental Property Investor · San Diego, CA · Member since 2008 · 89 posts · 65 votes

8y

I would trust your father's advice. He has been through 2-3 real estate cycles. I know of a couple families in CA and NY that have bought and held for 20-30 years and every downturn, they picked up properties. They have healthy portfolio of properties. I am surprised that your father hasn't shown you how to find these cherry deals. Deals are out there, you just have to uncover them. Work your network. I think a good play for you would be to find multifamily zoned properties that can be fully rehabbed for value add options. Since your father is a developer, then it should be easier to do than the average investor. Follow his lead and put in as many low-ball offers that you can until a few get accepted.

I would avoid investing out of state, unless you have family or friends that can look out for your best interest. As other CA investors have mentioned, investing out of state is where CA equity goes to die. Market is hot now since investments and job market are stable, but it is hard to predict when the next downturn will be. If you find out the time and date, then let me know. Look up Robert Campbell and Bruce Norris for their predictions on the market. The problem with investing in a downturn is that most renters will have trashed credit and job market will be bad. It takes time to wait for the appreciation to build. Another recommendation is to look up member Swanny's story on investing in SD downturn and going from school teacher to full-time investor with apartment complexes in OH.

3 Reply

Aron D.

Rental Property Investor · San Diego, CA · Member since 2008 · 89 posts · 65 votes

8y

Originally posted by @Account Closed:

I'm with your DAD! Prices are terrible. EVEN SAM ZELL says so. Its time to sell not buy!

All this funny Fed money floating around is just distorting things. Can you explain the stock market rising with no wage growth, no inflation, etc. I surely cant.

Someone paid $700,000 a room for a Waikiki Hotel recently- its absolutely not make sense.

It is most likely foreign investors that bought up the property. We sold a condo on Oahu 2 years ago and it was a Chinese investor. They are parking their money in U.S. assets as the foreign investors don't trust their own government's with their money.

4 Reply

Arlen Chou

Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes

8y

@Account Closed it is always difficult to follow in the steps of parents who have been successful. Been there, done that and got the T-shirt... What you need to learn to do is to see him as a business man, not your father. By mixing the two you create conflicts of interest on both sides. If he is an investor, then you need to approach him as such with the same detail (maybe be more) to planning and presentation as any outsider. If he says "no", accept it as a business decision. It is his money... There maybe some "fatherly" advice thrown in, but you mentally need to accept it on face value as a denial from one business person to another. Also keep in mind that he has been successful and you are just starting out, so weigh what he says accordingly. I promise you that once you do this, dinner conversation will be much better. But at the end of the day, it is your business decision. If he does not invest in you, go out and cut your own path. But make sure he understands that you are doing this while respecting his advice and concern. If you go down your own path and become successful you will win respect. What ever you do, remember that deals come and go, but family is what counts the most.

30 Reply

Christine Kankowski

Real Estate Broker · Temecula, CA · Member since 2014 · 992 posts · 782 votes

8y

Its tough not to listen to someone with all the years of experience he has.

Keep an eye out for a property that you might flip. They are out there and there is competition for them, but if you are ready with cash and jump on it with an easy offer for the seller, you will get a deal.

I just sold a house in Santa ana for 675K and its worth 800 after rehab. (maybe 45-50K to put into it) Someone is going to make some money on this deal. Sellers just wanted a quick easy sale. These are the types of deals you can bring your dad and show you will make money now

Best of luck.

Another avenue is saving your own money for long-term buy and holds out of state where you only need $50-100K to buy a house in full. No loan needed, and they cash flow nicely.

2 Reply

Andrew Johnson

Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes

8y

@Account Closed So my personal opinion is that a lot of people got lucky in terms of timing the market. It's not like everyone who bought it 2005 is an automatic moron nor is someone who bought in 2008 an absolute genius. Not to mention that those 2008 buyers were aided by refinancing as interest rates dropped to literal historic lows. For all I know the market will increase for the next 3 years, plateau for 2, and then "drop back down to 2017 levels". Or 2015 levels or who knows. I don't, you don't, your dad doesn't, etc.

That said, in fairness to your dad, it sounds like he has a preferred strategy. He builds cash reserves, waits for a recession, and makes "low-ball" cash offers. It's worked for him and you can't knock the strategy. However, it's much easier to embrace that strategy when you already have money, income properties, and are operating on a timeframe of "decades" rather than years. It's harder to emotionally handle when you're looking for your first step.

All of that aside, you have a pragmatic issue to deal with. Namely, he's the person who looking at the fund your properties. His money, his rules. There's no other way around it. If there is one argument for buying now (and looking at a long time frame) it's locking into a very low mortgage rate on a 1-4 unit property. You never know what the future holds for interest rates but I'd wager they're more likely to go up than go down.

One another side note, actual real developers to have longer timeframes and more risk associated with that. If you're buying a plot of land it could take you 3-5 years to develop something and have it ready to sell. It's a lot different than a rental yield-play where you can make some cash-flow in the meantime and can at least model what happens with your ability to service debt if we go into a recession and you have to lower rents 5% vs. 10% vs. 20%.

6 Reply

Bettina F.

Investor · Post Falls, ID · Member since 2016 · 606 posts · 699 votes

8y

Your Dad is right about California. Lots of growth potential in other markets. Why do you need your Dad's approval? Aren't you using your own money?

2 Reply

Account Closed

OP

Los Angeles, CA · Member since 2017 · 73 posts · 56 votes

8y

Originally posted by @Aron D.:

I would trust your father's advice. He has been through 2-3 real estate cycles. I know of a couple families in CA and NY that have bought and held for 20-30 years and every downturn, they picked up properties. They have healthy portfolio of properties. I am surprised that your father hasn't shown you how to find these cherry deals. Deals are out there, you just have to uncover them. Work your network. I think a good play for you would be to find multifamily zoned properties that can be fully rehabbed for value add options. Since your father is a developer, then it should be easier to do than the average investor. Follow his lead and put in as many low-ball offers that you can until a few get accepted.

I would avoid investing out of state, unless you have family or friends that can look out for your best interest. As other CA investors have mentioned, investing out of state is where CA equity goes to die. Market is hot now since investments and job market are stable, but it is hard to predict when the next downturn will be. If you find out the time and date, then let me know. Look up Robert Campbell and Bruce Norris for their predictions on the market. The problem with investing in a downturn is that most renters will have trashed credit and job market will be bad. It takes time to wait for the appreciation to build. Another recommendation is to look up member Swanny's story on investing in SD downturn and going from school teacher to full-time investor with apartment complexes in OH.

Thank you all for the great advice, it is truly appreciated!

I do currently work with my dad mostly generating any leads for properties that he might be interested in as well as residential properties for myself. While he's largely against investing in anything right now, he's open to anything he feels is a great deal (he's got very strict qualifications for what passes as a great deal) but I've yet to find anything.

I've made many low-ball offers on both commercial and residential properties that haven't worked out and brokers have stopped calling me. That's what lead me to start questioning my dad's strategy/advice. I guess I have to just keep casting out my net, make more calls/offers, and get better at finding good deals. I'll check out Robert Campbell and Bruce Norris too!

Bettina, my dad is willing to help fund any properties I find for myself. I don't need to turn to a bank or a private investor for loans when my dad can provide a loan (at zero interest). While I do have my own money and can get loans, my savings are limited. The caveat is that he has to approve of the property; if he doesn't think it's a good investment, if the price isn't right, etc. then its a no go.

0 Reply

Levi T.Pro Member

Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes

8y

Originally posted by @Account Closed:

Hi everyone!

Some quick background info on me. I've been involved with REI since I was a child through my dad. He's a very successful real estate developer here in California and over the past 20 years, he's developed several dozen commercial and residential properties. I would visit all the sites with him when I was a child and saw all the properties go from an empty patches of land to fully operating businesses. I then later managed all his residential properties when I was in college.

I've saved for years and now that I'm in my late 20s (should have started much sooner), I'm ready to invest my own money and start my own business in RE. My dad is a great angel investor that I can used to fund my deals, and I've already learned a tremendous amount from him.

Problem is, I'm not seeing eye to eye with my dad. He's insisting that now is a horrible time to enter the market as prices are very high and that a recession is coming soon which will cause prices to drop, creating a great opportunity to buy. As such, I can't really convince him to fund any properties I'm finding. Furthermore, all his properties are in California (we live in LA) and he’s not keen on investing outside of CA.

I can't help but question my dad's strategy/advice. He acquired all his properties in the 90s and then again during the recession, so he's used to buying RE when prices are VERY low. He’s also an all-cash buyer, so his acquisitions were all done on a cash basis at times when cash really could knock off a tremendous amount from asking prices. He’s made many “low-ball” cash offers in the past and most have worked out; I don’t think it’s possible to do that anymore, at least here in California/LA.

Perhaps I’m wrong and I’m just being inpatient, I don’t want to wait anymore, I want to take action and I’m open to investing out of state, not just here in CA.

My question is, do I listen to my dad and sit tight, or do I go against his advice and get into the RE market now?

Low-ball offers work in any market, anywhere, top or bottom. You just have to know when and where to apply it. If you get good at it, you will be king of your market!

1 Reply

Brian H.

Carolina · Member since 2017 · 519 posts · 222 votes

8y

Only thing I can add to this is that you can always use your money for cash purchases and fund the rehabs yourself (if you have enough reserves) or you can use your cash as downpayment and leverage with a lender other than your father and do this yourself. If you really feel confident about a property and have done all of the appropriate research talk to a conventional or hard money lender and move on it yourself.

Then, when you turn it around as a flip or get it succesfully rented with a positive cashflow, you can say "See, dad?" ;-P

3 Reply

Account Closed

OP

Los Angeles, CA · Member since 2017 · 73 posts · 56 votes

8y

Originally posted by @Account Closed:

Don't read if you are Squirmy Wormy type.

I don't know many employerS who would keep an employee with ZEROOOOOOOOOO productivity unless that person is a relative..............lol.

Shotgunning in a hot market exhibits bad judgement. This bad judgement is why your DAD has to approve your deals, you need to show him something first.

It could be RE is not your thing.

I trying to be polite!

Haha I understand your perspective. My dad operates two businesses: he's a CPA with a large firm centered around small businesses and REI and he has his real estate development company on the side. I'm taking over the accounting firm and that is where I work full time (six days a week, 12+ hours a day so I'm VEEEEEEEERY productive) but I'd ultimately like to do RE developing and investing full time. Any and all free time I have left goes to RE and generating deals. He's in no hurry to buy properties at the moment so me not landing any deals yet in no way hurts business.

0 Reply

Michael Plante

Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes

8y

Your dad is right CA is overvalued

forget about your dad

Make your own way

You have been mentally relying on your dad too long already

You are frozen

Get out in the world and invest where you want. Which to me is outside CA

5 Reply

Account Closed

OP

Los Angeles, CA · Member since 2017 · 73 posts · 56 votes

8y

Originally posted by @Account Closed:

Originally posted by @Michael Plante:

Your dad is right CA is overvalued

forget about your dad

Make your own way

You have been mentally relying on your dad too long already

You are frozen

Get out in the world and invest where you want. Which to me is outside CA

I think you are right especially if pops doesn't own the accounting firm.

Something doesn't add up. Why don't you have any money if all you do is work? Girls?...............lol. Dealing and accounting for deals are not the same skill set, compatible but still different.

Dad does own the firm and it's very lucrative and it's what has provided him with plenty of income to develop properties.

I was pre-med for seven years before I decided to take over the family businesses, which wasn't until a few years ago. I do have money and no, I don't spend it on girls.

2 Reply

Al D.

Investor · San Francisco, CA · Member since 2017 · 303 posts · 327 votes

8y

I think it’s too late for Dave Ramsey to weigh in. This conversation has been in the Dr Phil territory for some time.

6 Reply

Al D.

Investor · San Francisco, CA · Member since 2017 · 303 posts · 327 votes

8y

I don’t know. Putting my Dr Phil hat on, I think the OP actually has pretty good self-assessment, and a healthy sense of self-worth. What he needs professional help with is in assessing the economy and out-of-state investing pros and cons for someone in Southern California. At “worst,” he is impatient - that should be cured with age. P.S. Hotteenia, thank you for keeping this fun.

3 Reply

Anthony GaydenPro Member

Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes

8y

Wesam Saghir Using your father's money to invest sounds like it is more a burden than it is worth. As others have said, I strongly suggest you step out on your own. Find other real estate mentors aside from your father. There are a lot of ways to invest in RE, and it may benefit you to learn more about them. I think one of the greatest gifts many of us received was the fact that we had to learn a lot about investing on our own and start with little or nothing.

Podcast Guest on Show #21

9 Reply

Account Closed

OP

Los Angeles, CA · Member since 2017 · 73 posts · 56 votes

8y

Originally posted by @Anthony Gayden:

Wesam Saghir

Using your father's money to invest sounds like it is more a burden than it is worth.

As others have said, I strongly suggest you step out on your own. Find other real estate mentors aside from your father. There are a lot of ways to invest in RE, and it may benefit you to learn more about them.

I think one of the greatest gifts many of us received was the fact that we had to learn a lot about investing on our own and start with little or nothing.

You could be right Anthony. Perhaps there is a fine line between having it as a great opportunity and it being a burden, and maybe it's become more of the latter. Either that or I'm just not putting in the work and being patient.

I definitely do want to find other real estate mentors who can provide a different perspective on REI and I'm definitely learning as much as I can on my own aside from what he has taught me (this is not a post about me wanting to get a mentor).

0 Reply

Adriel Liwag

Specialist · Los Angeles, CA · Member since 2016 · 165 posts · 88 votes

8y

@Account Closed - I didn't read through all the responses you've gotten but from what I've seen, I would definitely heed your dad's advice about not buying in LA/Cali right now. We are at the peak of the market and it's very very tough to find a good deal here. I just closed on my 4th flip in Highland Park and I'm gonna sit it out unless something falls on my lap. When it comes down to your dad willing to fund your deals or help with them, my mom is also willing to help fund my deals even though she has no clue about RE and she also has the old school mentality. She actually thinks I can still find something for $85k here in LA if I waited for the right time. LOL But the same as your dad, if she doesn't like the deal she won't lend the money. I've come to realize that I shouldn't rely on her help then. That I should know her money is an option if a super good deal came up but she wouldn't be my first go-to lender. If you have different ways of funding deals like your own money, I definitely would look into other markets. All this to say, listen to your dad about not buying here in the local market right now but don't just sit and wait and do nothing at all, definitely put your money to work elsewhere.

I'd be more than happy to grab coffee sometime if you'd like to chat in person.

2 Reply

Simon Ruiz

Glendora, CA · Member since 2016 · 106 posts · 21 votes

8y

@Aron D. @Account ClosedAnother recommendation is to look up member Swanny's story on investing in SD downturn and going from school teacher to full-time investor with apartment complexes in OH.

I second this.. This is probably one of my favorite podcast from bigger pockets and places a lot of value on timing and understand how markets can be leveraged in your favor the key thing I got from the podcast is if used correctly a 1031 exchange can be an extremely powerful tool>>>>> Becoming a Real Estate Millionaire on a Teacher’s Salary with Michael “Swanny” Swan | BP Podcast 238

1 Reply

Account Closed

OP

Los Angeles, CA · Member since 2017 · 73 posts · 56 votes

8y

Originally posted by @Adriel Liwag:

@Account Closed - I didn't read through all the responses you've gotten but from what I've seen, I would definitely heed your dad's advice about not buying in LA/Cali right now. We are at the peak of the market and it's very very tough to find a good deal here. I just closed on my 4th flip in Highland Park and I'm gonna sit it out unless something falls on my lap. When it comes down to your dad willing to fund your deals or help with them, my mom is also willing to help fund my deals even though she has no clue about RE and she also has the old school mentality. She actually thinks I can still find something for $85k here in LA if I waited for the right time. LOL But the same as your dad, if she doesn't like the deal she won't lend the money. I've come to realize that I shouldn't rely on her help then. That I should know her money is an option if a super good deal came up but she wouldn't be my first go-to lender. If you have different ways of funding deals like your own money, I definitely would look into other markets. All this to say, listen to your dad about not buying here in the local market right now but don't just sit and wait and do nothing at all, definitely put your money to work elsewhere.

I'd be more than happy to grab coffee sometime if you'd like to chat in person.

Yea LA/California is pretty crazy at the moment. I wish $85k was still possible!

Thanks Adriel! I'll shoot you message about grabbing coffee/chatting!

0 Reply

Ian WalshBusiness Member

Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes

8y

Your dad is a smart man. If you don't see what he is saying, you shouldn't put your money in play. Gain experience. Learn through the next cycle and you wouldn't have to ask us that question.

2 Reply

Jonathan Bowen

Real Estate Broker · Stoughton, MA · Member since 2012 · 109 posts · 96 votes

8y

I’ve been selling real estate since 1999. I see what the successful real estate developers have been doing. I’ve seen what the unsuccessful real estate developers have done. Your dad is spot on with his thought process.

2 Reply

Frustrations With RE Investing

Frustrations With RE Investing

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