Providence, RI · Member since 2018 · 29 posts · 409 votes
7y
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.
For myself, it’s time. I work to jobs and my time is very limited. Next week I have time off from one job and I’m going to take advantage of the time to “Drive for Dollars” and aggressively work towards my first deal.
I have my fears and concerns but I have to jump into the water. My time depends on it...
Sounds like a great idea. If you have money but not time perhaps you can invest in someone else's deal.
If you make $200,000 a year, buying a single family home or a 2-4 unit apartment building is actually NOT worth your time. I have one of my staff members (engineer by training) actually calculate the number of hours an active investor needs to spend to find, analyze, negotiate, finance and manage a small deal (SFH to 2-4 family) and if you make $200K/yr or $100/hour, the paltry $200/month cashflow you make on an SFH does not make it worth while if you pay yourself for the time you spent doing all that work.
I've acquired over 1,000 apartment units and and some of my investors are high earning commercial real estate brokers, lawyers, doctors, business owners and other high income earners. A lot of them are probably smarter than me but they would rather invest passively than do it actively because it's not worth their time.
Hi Michael,
Can you please elaborate more on "invest passively"? What strategies/ways to invest passively?
Thanks.
Vince, there are several ways one can invest passively in real estate:
1. Syndication - you invest in an apartment deal (or commercial property) as equity or part-owner of the building together with other investors. You profit without you doing any work on the building, you didn't find the deal, didn't manage it, etc. but you receive the benefits of ownership together with the active partner (syndicator or sponsor).
2. Private lender/Note Holder - you lend money to an active investor and in exchange, you get a mortgage lien on the property. So if the active investor/borrower defaults, you get the property.
3. Joint Venture Money Partner - this is like syndication but you're the only one (there could be a couple) partner in exchange for you providing the funds.
4. Joint Venture Credit Partner - like #3 but you qualify for financing in behalf of the active investor and in exchange, you get an ownership interest in the deal.
5. Joint Venture Asset Partner - like #3 and #4 above but you contribute, say the land or the property and the active partner does all the work
6. Joint Venture Expert Partner - You can also "invest" labor/expertise in exchange for an ownership interest in the deal. You do the work once and you become part owner of the building. This is how we were able to get ownership interest in some commercial properties: we help in the construction, did it at "cost" and instead of getting paid the typical GC profit, we get equity. Some commercial real estate agents do this as well, as well as some real estate attorneys. They get a small piece of the pie but over many pies, their cashflow becomes substantial and is truly passive.
Rental Property Investor · San Francisco, CA · Member since 2015 · 236 posts · 156 votes
7y
@Frank Patalano great topic!
For me it's Capital. Whether your raise capital, borrow from friends and family, or take out a bank loan, you need capital to close deals. Once closed, you need capital to operate the deal to pay the mortgage and expenses.
Analysis paralysis. Fear of getting myself into unescapable debt. Fear of hiring the wrong people (especially contractors). Fear of being unsuccessful once and quitting.
I am in the beginning stages. I have a RE agent that I am comfortable with. I have a CPA I am comfortable with. I'm working on choosing lenders and then I am going to attempt to find a contractor. Looking to maybe purchase a SFH for BRRRR or buy and flip towards the end of the year.
For me it's Capital. Whether your raise capital, borrow from friends and family, or take out a bank loan, you need capital to close deals. Once closed, you need capital to operate the deal to pay the mortgage and expenses.
You need capital to scale bigger.
You don't need capital if you are the deal finder or if you are putting in all of the work but I do agree that capital is a major factor for most people. There are ways around it. I have met up with people with money but no time or experience. They are often putting money into deals instead.
Analysis paralysis. Fear of getting myself into unescapable debt. Fear of hiring the wrong people (especially contractors). Fear of being unsuccessful once and quitting.
I am in the beginning stages. I have a RE agent that I am comfortable with. I have a CPA I am comfortable with. I'm working on choosing lenders and then I am going to attempt to find a contractor. Looking to maybe purchase a SFH for BRRRR or buy and flip towards the end of the year.
Any help would be appreciated.
Slow and steady is fine.
If you know someone in the business, partner on your first deal. Besides that learn as much as you can and then take the leap of faith. Don't just wait around for the perfect deal. Pick one that looks good and then go for it. You can only learn so much through analysis. Taking action will give you the real education.
Rental Property Investor · Member since 2019 · 21 posts · 6 votes
7y
@Frank Patalano I would also say analysis paralysis. I am just starting to learn about real estate investment and would like to approach it like everything else; I work in finance and analyze credit (quality and risk) for a living, so I like to be thorough and really know my numbers (particularly the cost side of the equation). The more I read and listen to podcasts, the more I realize I have a lot to learn. So I’m a bit overwhelmed. On the other hand, I realize that if I don’t act, I’ll never truly learn. A checklist of what to look for and where would be extremely helpful, so I’m working on that.
@Frank Patalano I would also say analysis paralysis. I am just starting to learn about real estate investment and would like to approach it like everything else; I work in finance and analyze credit (quality and risk) for a living, so I like to be thorough and really know my numbers (particularly the cost side of the equation). The more I read and listen to podcasts, the more I realize I have a lot to learn. So I’m a bit overwhelmed. On the other hand, I realize that if I don’t act, I’ll never truly learn. A checklist of what to look for and where would be extremely helpful, so I’m working on that.
I have a friend like you who has a background in engineering and wants to see every number before buying. I agree that action is key. It is the best way to learn. My suggestion is to start with something small and invest from there. If you have the money you could lend to an experienced investor. Perhaps they could let you look at the numbers.
Fort Collins, CO · Member since 2017 · 110 posts · 69 votes
7y
A lack of direction. I have been toying with the idea of becoming financially independent through real estate for a few years and even gave a crack at becoming an agent last year, but never took the time to figure out exactly what direction I wanted to go. Now I have a job that allows me to put away a couple extra hundred every check and am about to turn 30 and decided that I’m going to spend my 30’s doing whatever it takes to own as many rental doors as possible so I won’t have to sell my time in my 40’s. Aside from aggressively paying off my credit card and car debt, I’m not too sure how I can get my feet wet, especially since I live in Northern Colorado where the market is insane right now.
Set some goals. Read about real estate at least 20 minutes a day. Listen to at least one podcast everyday. If you can continually do that you will grow. I can recommend a few books if you need them. A few podcasts too.
Rental Property Investor · East Providence, RI · Member since 2018 · 1k+ posts · 1k+ votes
7y
Originally posted by @Account Closed:
A lack of direction. I have been toying with the idea of becoming financially independent through real estate for a few years and even gave a crack at becoming an agent last year, but never took the time to figure out exactly what direction I wanted to go. Now I have a job that allows me to put away a couple extra hundred every check and am about to turn 30 and decided that I’m going to spend my 30’s doing whatever it takes to own as many rental doors as possible so I won’t have to sell my time in my 40’s. Aside from aggressively paying off my credit card and car debt, I’m not too sure how I can get my feet wet, especially since I live in Northern Colorado where the market is insane right now.
I would narrow down to two types of real estate investing and study both at the same time. I would also be reading everyday and networking. Some of that networking will open up other opportunities.
First thing you don't need a mentor. If you want to you can spend the money on one. Second thing. Lack of knowledge? There is so much free and low-cost information out there about real estate that you can spend every waking moment for the rest of your life learning. You just need to set some goals on what you are going to accomplish every single day in regards to real estate. You should be reading at least 20 minutes a day every day. You should listen to one real estate podcast everyday. I can recommend some if you need me too.
Real Estate Agent · Manhattan · Member since 2018 · 9 posts · 3 votes
7y
Understanding how any of this is worth it in 2019.
Seems like a LOT of work to have a couple hundred dollars of passive income a month plus the risk that your tenants might break lease. Add that to the rent control movement sweeping the country, already sky high real estate values, and it seems like a lose-lose-lose. Why not invest in a REIT, or in a Vanguard account?
Understanding how any of this is worth it in 2019.
Seems like a LOT of work to have a couple hundred dollars of passive income a month plus the risk that your tenants might break lease. Add that to the rent control movement sweeping the country, already sky high real estate values, and it seems like a lose-lose-lose. Why not invest in a REIT, or in a Vanguard account?
There's nothing wrong with investing in a REIT or a vanguard account. I have 6 figures in stock accounts. I like to diversify my investments.
Real estate gives you opportunities that the stock market just can't. Especially when you consider Leverage.
When you buy an ETF how much more can you actually sell it for one hour later? I've made tens of thousands of dollars in less than 20 hours worth of work and in less than two months time.
Being small and sleek gives me opportunities that are not available to a multiple billion dollar fund.
On another note, besides REITs you can also passively invest in crowdfunded Investments and syndications. I have done both.
You may have to pay an local attorney to write up your first contract. Or some REIAs have a list of free docs that you can use. If you find a deal you might be able to partner with someone experienced to learn.