So what's holding you back?
Rental Property Investor · East Providence, RI · Member since 2018 · 1k+ posts · 1k+ votes
When I help new investors with buying their first property I often want to know what is holding them back from pulling the trigger.
So I'll ask here. What is holding you back?
Having just recently bought my first property, I know for myself what was holding me back was the fear that I would overpay, especially in this type of a market. I would get analysis paralysis and basically talk myself out of every property I looked at.
@Frank Patalano
I’ve been analyzing a number of properties in Miami ($180k and below) and finding a few deals that yield 5%-7% cash on cash, or $150 net profit per month.
What holds me back is wondering whether just investing in the market at 7% return is easier and yields the same over the same period of time.
If there is an excel or a calculator that can compares essentially (i) cash on cash returns plus RE market appreciation plus after tax analysis (assuming S Corp or SM LLC with flow through profits and losses) with (ii) the opportunity cost of 7% stock market returns taxed at LT capital gain rates, it would really make my decision to pull the trigger so much easier.
Is this too much to ask? 🤦🏻♀️
@Frank Patalano
I’ve been analyzing a number of properties in Miami ($180k and below) and finding a few deals that yield 5%-7% cash on cash, or $150 net profit per month.
What holds me back is wondering whether just investing in the market at 7% return is easier and yields the same over the same period of time.
If there is an excel or a calculator that can compares essentially (i) cash on cash returns plus RE market appreciation plus after tax analysis (assuming S Corp or SM LLC with flow through profits and losses) with (ii) the opportunity cost of 7% stock market returns taxed at LT capital gain rates, it would really make my decision to pull the trigger so much easier.
Is this too much to ask? 🤦🏻♀️
I haven't seen one.
I will says that I NEVER figure in market appreciation. I always analyze only for CashFlow.
Don't forget you have a lot of benefits when you own property compared to owning in the stock market. Tax benefits, depreciation, etc.
Maybe someone else has seen a calculator.
@Jacob Gelinas what did you do to overcome that barrier?
I would not say anything is holding me back per se but I do not have an investment property yet. I am learning a lot and gaining confidence and determination. Narrowing my criteria has been a little difficult lately though. I was set on a single-family home as my 1st property, with simple plans of renting it out. I talked to two investors lately, well three, because the one chat was with two partners at once, and they both simply kind of shunned it. One party, a recent triplex owner (I believe it is a home divided into three spaces, he said ~$1,700 in rent and a $700 mtg so it's cash flowing nicely. I did not know what was all included in that mtg expense, there could be some other monthly fees), called the SFH investment strategy "a grind" and deemed it to be slow. The other party of two, kind of shook their heads, and jogged down a small list of why they don't like them. They had some experience with them, but these two guys are duplex owners for many years, decades in fact. They said single-family homes are much bigger and basically more maintenance. They talked of pets and children to be much more common, meaning damage. They were real sticklers on the whole pet thing, cats and dogs, which I was a bit surprised by. I guess, thinking about how some people care for their pets though, I am not so surprised now. Anyway, narrowing my criteria is now more concerning than originally thought. This is also good because I never had a real reason for SHF units other than that it is what was talked about a lot in Keller's Millionaire Real Estate Investor which I listened to a few times. I figured SFH's appreciate pretty well and if I keep it filled with tenants and don't even get the "1% rental rate" I would probably still make money. Of course, I would run the numbers across many properties to get a better sense for this, which I am yet to do in a lot of detail.
I reside in a small rural town in OH. There is rural area around me. My surrounding area has solid schools, many rank very high among the state. Crime is low and the small communities in the area are friendly and tight nit. Overall, I would label it as steady and consistent. That label, I believe, applies to my areas schools, athletics, and local businesses. Some kids relocate back toward their hometowns after college because we don't have big universities within a 70-90 minute drive from me in particular. My brother who has one investment property touched on that fact. Simply, there are young adults consistently relocating back home, many of who will look to rent or buy. The guy with the newly acquired triplex (I am eager to see how it goes), said he had 120 responses on Facebook Messenger in about a 4-day span when he originally posted his "for rent" ad on the FB Marketplace. The demand was there in that instance. That triplex is in one of the bigger towns in my area though, about 10,400 people there.
So, I tried to give you a little bit of a background on where I currently am. Some of it may have almost no bearing on my potential investment property. I just wanted to give you some background. Do I target a duplex/triplex or a SFH?
I have a lot more questions and I wrote a whole story to ask one :). It's ok though. I accept that I am still in the learning and absorbing phase. My actual pursuit of a deal has not happened.
I know investors in CA looking at OH. The price difference is just so dramatic. We all think that there are hard to find deals in my area. OH is the most undervalued market in the country. It has it challenges but buy and hold investors are looking out of state.
I would target properties that meet your objective, what ever it is make sure that it is in alignment with fundamentals. A property that will cash flow you can not go wrong.
Target property that you have the ability to purchase. ie: you can buy a 2-4 unit as owner occupy with just 3.5% down and the rents help you qualify.
Keep out it
I agree that you should house hack a 3-4 unit if you can. Ohio is an interesting market.
@Frank Patalano If life was measured in ROI as Brandon Turner would say I would. But, I'm in a comfortable home with my family. I think we would all be depressed if we left our current residence for a downgrade. It's paid in full :)
Ok cool just holler out if you need any help.
If you are in OH you most likely looking for long term cash flow.
keep researching and comparing deals and get your house in order and make a plan.
You are in a great area to get a deal done.
I saw a house for sale in Elyria OH that was $29k, fix it up and rent out seems like a no brainer to me.
@Frank Patalano If life was measured in ROI as Brandon Turner would say I would. But, I'm in a comfortable home with my family. I think we would all be depressed if we left our current residence for a downgrade. It's paid in full :)
No I fully understand. That's actually awesome. You can start investing with virtually no debt. I had the opposite problem. Bought our single family at the top of the last cycle. I still like OH as a market. Probably visiting Columbus in the fall to maybe buy.
@Frank Patalano
Hey Frank!!! My first home was in Pawtucket RI. Had to sell it as My husband received orders ( Military) to move overseas and at the time we weren't educated on REI. Kinda regret it now seeing that the house went up from 2015- now. However since then we have purchased another home in FLORIDA ( which is where we want to make home permanent ). Planning to make this our last tour in the military. And really want to start investing in the real estate world howvwe we still have 2.5 years out here. We really wanna start looking into another property to buy but being overseas idk where to start! Any advice ???
Most people that have been 'studying' and 'getting their business ready' for long periods of time are using it as a comfort zone to not proceed. They are in paralysis analysis and don't know it. It's fear based which is a safety mechanism. They are afraid of what they don't know. #learnyourmarket
@Frank Patalano I wouldn’t say I’m new to this. But in the grand scheme of things I’m fairly new. I bought my first property two years ago after working for a year and a half and put on most of my entire savings into my first property. I have $1000 left in the bank but I knew I still had a job and just had to be frugal the next couple months. Fast forward two years, The property I had bought for $275,000 just went under contract for $335,000. Now again I don’t count the money until it’s in the bank. But it’s a good sign. So to people who are new reading, Listening to the BiggerPockets podcast, and trusting your self should give you the ability to say I can do this and work hard at it and you will see results.
@Frank Patalano
Hey Frank!!! My first home was in Pawtucket RI. Had to sell it as My husband received orders ( Military) to move overseas and at the time we weren't educated on REI. Kinda regret it now seeing that the house went up from 2015- now. However since then we have purchased another home in FLORIDA ( which is where we want to make home permanent ). Planning to make this our last tour in the military. And really want to start investing in the real estate world howvwe we still have 2.5 years out here. We really wanna start looking into another property to buy but being overseas idk where to start! Any advice ???
Do you know anyone if Florida? If so make them your contact. If its family, great. Have them help you. If a friend offer to pay them something if they find you a property. If you don't know anyone, start here on Bigger Pockets to build a network. You will find an agent who can hunt for you even if you are not here.
I've bought properties before that I have never been to and never met the tenants.
Most people that have been 'studying' and 'getting their business ready' for long periods of time are using it as a comfort zone to not proceed. They are in paralysis analysis and don't know it. It's fear based which is a safety mechanism. They are afraid of what they don't know. #learnyourmarket
I agree. Sometimes you just have to take action.
@Frank Patalano I wouldn’t say I’m new to this. But in the grand scheme of things I’m fairly new. I bought my first property two years ago after working for a year and a half and put on most of my entire savings into my first property. I have $1000 left in the bank but I knew I still had a job and just had to be frugal the next couple months. Fast forward two years, The property I had bought for $275,000 just went under contract for $335,000. Now again I don’t count the money until it’s in the bank. But it’s a good sign. So to people who are new reading, Listening to the BiggerPockets podcast, and trusting your self should give you the ability to say I can do this and work hard at it and you will see results.
Nice job. Purely investment or were you living there?
@Mike Roy
I so concur.
What helped me finally pull the trigger (override the fears) recently on a triplex, was due to what you shared:
1) Education - read lots of books, attended lots of RE Meetups, RE seminars, etc.
2) Experience - I volunteered to build for free at Habitat for Humanity (2-4 times per month)
3) WHY - I'm passionate about building safe and quality homes on the challenge of a tight budget and NOT cut corners. In my city which is facing a massive housing shortage, I discovered only recently that over 90% of the secondary suites are not legal.
Even if it was legal as in meeting the building codes and the fire codes, most people do not understand that's the bare minimum acceptability - not the standard.
I will not accept renting out any unit I will not have my own family live in. That's my benchmark.
@Frank Patalano it was purely an investment.
still in the process of trying to fix my credit, but now i have the cashflow to buy, so just need the mentor to buy first rental or flip.
I will not accept renting out any unit I will not have my own family live in. That's my benchmark.
Originally posted by @Daniel Wang:@Mike Roy
I so concur.
What helped me finally pull the trigger (override the fears) recently on a triplex, was due to what you shared:
1) Education - read lots of books, attended lots of RE Meetups, RE seminars, etc.
2) Experience - I volunteered to build for free at Habitat for Humanity (2-4 times per month)
3) WHY - I'm passionate about building safe and quality homes on the challenge of a tight budget and NOT cut corners. In my city which is facing a massive housing shortage, I discovered only recently that over 90% of the secondary suites are not legal.
Even if it was legal as in meeting the building codes and the fire codes, most people do not understand that's the bare minimum acceptability - not the standard.
I will not accept renting out any unit I will not have my own family live in. That's my benchmark.
Awesome rules to live by.
@Frank Patalano it was purely an investment.
Nice
still in the process of trying to fix my credit, but now i have the cashflow to buy, so just need the mentor to buy first rental or flip.
You really don't need a mentor. But you are most likely to find one at your local real estate investors group. Don't just throw out that you are looking for a mentor. Go for a few months and learn about a few people. Offer to help them if you can. That will build your experience.
@Frank Patalano Need to rollover $ out of my 401k and first wanted to do so via a comoany and that took a long time to learn and i.d. possible cos. Then I compared fees and found its too expensive. Then I discovered that the Solo401k is best way to do this (I think).... so now I need to get that underway (its taking me longer than I prefer but due to competing priorities its been on backburner). I also need to establish a corp to work out of the rollover.
@Frank Patalano Need to rollover $ out of my 401k and first wanted to do so via a comoany and that took a long time to learn and i.d. possible cos. Then I compared fees and found its too expensive. Then I discovered that the Solo401k is best way to do this (I think).... so now I need to get that underway (its taking me longer than I prefer but due to competing priorities its been on backburner). I also need to establish a corp to work out of the rollover.
Yeah Solo401k is a cool option. Establishing an LLC (why a corp?) is a quick, easy, and inexpensive option. You could pull that off in one day. #NoExcuses
Having just recently bought my first property, I know for myself what was holding me back was the fear that I would overpay, especially in this type of a market. I would get analysis paralysis and basically talk myself out of every property I looked at.
Jacob I agree with you.
@Frank Patalano I wouldn’t say I’m new to this. But in the grand scheme of things I’m fairly new. I bought my first property two years ago after working for a year and a half and put on most of my entire savings into my first property. I have $1000 left in the bank but I knew I still had a job and just had to be frugal the next couple months. Fast forward two years, The property I had bought for $275,000 just went under contract for $335,000. Now again I don’t count the money until it’s in the bank. But it’s a good sign. So to people who are new reading, Listening to the BiggerPockets podcast, and trusting your self should give you the ability to say I can do this and work hard at it and you will see results.
I’m an expat, so my first investment property is going to be long-distance.
This is what’s going in my head:
I can never seem to finish researching, they all seem to contradict each other. I’ll do it my own way then, I found online tools to help me gauge different markets. Damn the country’s big.... which city do I choose....? I’m limiting myself to CAD 130,000 for down payments for a bunch of properties or 1, should I do 5% down and get more or 30% down and less... should I find something in a large city or 2 hours out? Will people even rent that far away? Let me research, ah, it seems like rent is really low that far... obviously... I was looking to make a bit more though... oh, there’s a blog post saying rentometer is not accurate and never to rely on it... ok so scratch that then... real rent prices will have to be a call at some point. Let’s just research more then. Damn! there’s an extra 25% tax for non-resident investors? I’ll need an accountant in my “core-4” to help me lower that... more like “core-5” now... Ok, so I need much bigger to breakeven then.... should I just buy an 8-plex? Which city though? Google “best city to invest in 2019”, ok... so number 1 is not a city I know at all... should I do it anyways? I need more research, maybe not an 8-plex to start, seems too big... maybe a triplex... oh seems like people are saying 2-3 multi families are way overpriced and that’s what beginners usually buy to get skin in the investing game, the competition is fears... maybe I should go bigger then, I have enough capital to outpace them.... maybe in the suburbs of that unknown city... do people even rent there? Is there even a bus that goes out there? What’s the local bus called and what’s the scheduling for work like from suburb of unknown, towards unknown? Damn! People in my imaginary building would have to wake-up at 4:30AM to get to work downtown of unknown on time... do they do that? Is it just a bunch of people staying and working at mom-and-pop shops...? No idea, how would I know that..? Eurgh, let me play a couple of games online of Rich Dad’s CashFlow to motivate myself... I win again... damn this game is too easy... maybe it’s a sign I’d actually be good at judging costs in real life...? No... that’s stupid, it’s a board game. Back to BiggerPockets podcasts.... ok, so this guy says go big or do nothing... so maybe 8-plex after all... another podcast... what the hell! Where do these guys find these $90,000 properties??? How old is this podcast? Do they invest 2 hours away from unknown cities too...? Screw it, should I just do it? We all die one day, and all this worry is useless, right...? Should I just jump into it already and screw everything? I won’t even remember all of this fuss once it all goes dark. No! What am I talking about?! I’m doing this so I DON’T fail, what am I thinking? I saved so much to mess it up even once! I’m doing it so I can quit this stupid job and spend more time with my unborn child, pass down wealth at some point! Ok, let’s just do it... start a long-distance team then... expat tax accountant emailed, check. Bank called, check. Now which city to choose my agent from...... eurgh.... Google “real estate investor advisor”....
If you’ve read this far, I salute you.