Frustrations With RE Investing

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Frustrations With RE Investing

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

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? 

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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.

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  • Korie Apgar
    Real Estate Investor · Coopersburg, PA · Member since 2017 · 120 posts · 61 votes
    8y

    I didn't have time to read all the responses so if this was mentioned you're seeing it again.  I think you're antsy and impatient but that shows your persistence and you need it to be in RE investing.  Your father is the bank and for great reason he has strict qualifications on where he puts his money.  Get to know his strict qualifications a bit better, use his years of advice and wisdom, or venture out on your own and let a bank tell you no.  At the end of the day, he wouldn't be in business if it weren't for his knowledge and strict criteria business practices.  You wouldn't be sitting pretty working for him right now so trust in his advice.  Find other mentors and discuss their criteria.  Just hold tight.  Your father's trying to stop you from making a mistake and he's def not going to let you do it with his $. 

    2Reply
  • Michael Swan
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    8y

    My two cents on this one, I would wait until you can get cash flow, without needing to put 50% down to do so.  If you can cash flow, at least $300.00-$400.00 a front door on single family, then it is the right time in California.  I sold 10 condos here in San Diego from 2015-2017.  My return on Equity was way too low.  I now have 7 apartment complexes and 7 single family in NE Ohio now.  Also we have 109 front doors now, instead of 10 front doors.  Don't get me wrong, it is not easy and we are downsizing to 88 front doors as we speak and are right now getting rid of an 8 unit and a 10 unit that we don't see the David Lindahl Multifamily Millions style repositioning potential and focusing on acquiring more that meet David Lindahl's parameters for a repositioning apartment complexes and exponentially increasing the value of the properties in an 18 month period.  I learned the hard way by buying a few yield deals that turned out to be dogs!!  Although the remaining 88 front doors are doing remarkably well. 

    if I would not have made those first two mistakes, I would have been cash flowing at least $200,000 a year, instead of $160,000 a year.  Although, it sure beats the heck out of working for a living and I will never make bone head mistakes again.

    Swanny

    2Reply
  • Joseph M.
    Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    8y
    Hi Michael Swan , good to hear things are going well with your investments . Are you still teaching too ?
    0Reply
  • Michael Swan
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    8y

    Hi @Joseph M.

    Yes.  Still teaching and managing my property manager too.  How are you doing Joseph?

    Swanny

    0Reply
  • Michael Swan
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    8y

    Hi @Joseph M.

    Yes.  Still teaching and managing my property manager too.  How are you doing Joseph?

    Swanny

    1Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    8y
    Originally posted by @Account Closed:

    Thank you all for the great advice! Some good stuff here that definitely lends perspective.

    @Joseph M. I lived in Kansas City, Missouri for a bit so I am familiar with housing there. Houses in the area I am most familiar with go for around $350,000 with rent going for $1,200 - $1,400. I have enough saved up to put 20% down on one and use the rent and my income from work here to help pay for the rest.

     You mention repeatedly that your dad is successful, has repeatedly made money on RE through multiple down cycles, has created 2 successful businesses.  Basically all indications are that he is a smart, successful man that you can likely learn a lot from.  

    I have done RE through multiple down cycles and do not have confidence that I can accurately forecast the next down cycle.   It is a very difficult thing to do and if your dad can do it he has a great talent that can lead to great wealth.  

    So I still am making purchases in coastal So Cal.  

    If the investment in your post is an example of the type of purchase that makes sense to you 1) you have a lot to learn (price to rent ratio is absurdly bad and should only be considered in the historically highest appreciation markets) 2) it could be a very good thing you have someone as successful as your dad providing some oversight.  

    I would spend time to learn more about RE investing especially if you plan on going out of state, appreciate your dad’s success and the knowledge he has demonstrated with his success, appreciate that if you find the right deal that satisfies your Dad’s criteria you have an incredible financing option, but most importantly look to cut the apron strings at some point and forge your own path to success (and working at your dad’s accounting firm is not cutting the apron strings).  

    I may have the assets that my son may never need to work.  There is no way I would allow that to happen.   I teach him about money, RE investing, investing in general; basically I teach him my perspective of the lessons from rich dad, poor dad.  I will help my son in life but I expect him to forge his own path even if the path does not provide for great financial rewards (currently he wants to be a herpetologist - my fear is him being able to be consistently employed as a herpetologist).  

    Good luck

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y
    Originally posted by @Account Closed:

    Did pops pay for 7 years of med school?

     while I find some of your post mildly amusing .  the inference that someone grew up in a family that could afford collage for them is off base.

    I put my kids through collage so they were not burden with student loans.. and even bought my daughter a brand new car when she graduated so she would not be burdened with student deb t or a car debt.

    so just because there are dads like me out there that take great pride in being able to pay for our kids collage education does not mean that this person did not deserve whatever he has gotten.. CPA is one of the toughest licenses to get far harder most feel tougher than passing the Bar.  

    Bruce Norris is not predicting a melt down or retrench in prices in LA anytime soon.. And he is one of the most respected investors in that area.   

    I grew up in a real estate family myself.. So I understand the OP situation.. at the end of the day I did go out on my own.. but my basic training came from my Dad.. No financial aid I worked on commission my whole life.. But I went in a direction that was different than what my dad did in real estate. 

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    3Reply
  • Sam Josh
    Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
    8y
    You are lucky to have your dad give you such great and time tested advice. Market cycles are real and for sure we should not expect another big boom in property values from current levels but can we expect a drop? Yes eventually and it will happen. Kudos to your dad for sticking to his investment philosophy
    1Reply
  • Joseph M.
    Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    8y
    Michael Swan that's great , I can tell you have a real passion for teaching . Doing well thank you for asking .
    0Reply
  • Marc Imhof
    Investor · Tampa, FL · Member since 2014 · 23 posts · 3 votes
    8y

    Hi Wesam, neither of you are wrong, its all about strategy and which to use when and leverage multiple niches.  There are literally thousands of transactions going on all around you.

    You mentioned above that you have leads that it sounds like you guys are passing on. If you have real seller leads that you guys have passed on and you are not doing anything with, please consider sending them my way and I'll see if we can do anything with them and figure out a way to circle the wagons. Specifically, residential off market leads (non-MLS). Not sure if that is what you have because your reference to leads mentioned brokers are involved. Are you generating leads or having agents send you listings? There is a difference. Anyways, keep me in mind if you have a owner/seller leads come in that you guys pass on!!! Send it to my contact info below!

    1Reply
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