I want to get in RE but...

Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes

Hi Everyone,

I’ve been lurking for a few months now and this is my first post here after trying to get a lay of the land. Apolgies if it’s long, just a lot on my mind.

About me:

- Live in the East Bay Area

- Wife and I are both 27 and make good money for our age I believe ($315k combined) with room to increase it in the coming years. Hoping that doesn’t come across as bragging, just want to be honest.

- Want to buy a house in either the East Bay or Sac in 2-3 years.

Now to my question:

- After all expenses and maxing out our Roth 401k’s, we currently still have ~$7,500 left over to save for our downpayment which is great, but fast forward 3 years down the road after we hopefully own a home, where should that extra money go? Either RE or mutual/index fund.

- I really would like to get into REI, but I'm having a hard time wrapping my head around taking on a lot of debt and potential worry when owning multiple homes and not just taking the 7-10% return over a 25-30 year period in the mutual/index funds.

- I'm also in the Bay Area so REI is tough from what I've read on here and at this point I don't feel comfortable investing out of state since I'd like to have a little more control and visibility into my properties. This could be my naivety talking here.

- I feel like if I were able to max out two 401k's (mine and the wife's) and then add another $7k each month towards, we'll be sitting pretty 25-30 years down the road and we wouldn't need to take on the risk of REI.

Would love any help or first hand experience if there’s anyone out there that has had a decision like this before!

Thanks ahead of time,

2 Reply

133 views

Most Popular Reply

Account Closed

Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes

If you’re able to invest $7k/month in the stock market plus maxing out 401ks, that’s basically $115k+/year you’re able to throw at the S&P. You’ll definitely have over $10M in 25-30 years, which would be great. And you wouldn’t have to lift a finger really.

But.... you might have $50M in Bay Area real estate by then.

Tough choice, but if I were you, I’d buy apartments over houses. And keep the 401Ks as an insurance policy.

12 Reply

See this reply in the discussion

72 Replies

Jump to latestLatest

Sort by

Account Closed
Rental Property Investor · Oakland, CA · Member since 2014 · 730 posts · 1k+ votes
6y
If you’re able to invest $7k/month in the stock market plus maxing out 401ks, that’s basically $115k+/year you’re able to throw at the S&P. You’ll definitely have over $10M in 25-30 years, which would be great. And you wouldn’t have to lift a finger really.
But.... you might have $50M in Bay Area real estate by then.
Tough choice, but if I were you, I’d buy apartments over houses. And keep the 401Ks as an insurance policy.
12 Reply
Ryan A.
OP
Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes
6y
@Saj S.
Thanks for responding and for your tip! I never thought of buying apartments. Is this something you have experience with in Oakland or do you own some outside of Oakland?
0 Reply
George W.
Investor · NJ · Member since 2018 · 869 posts · 921 votes
6y
Real estate is great to invest in as well. If used some money for a downpayment on a multifamily that cashflows monthly, in 30 years you'd have a building that the tennats paid for and 30 years of cashflow. Plus real estate generally appreciates as well.
Reinvest your cashflow and some of your monthly savings and you can scale very smoothly but safely. When you reach the point where you get a few multifamiles that are paid off you then have cash cows.
Biggest con is the management side of owning property. Finding tennats, repairs, vacancies etc.
0 Reply
Michael K GallagherBusiness Member
Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
6y
@Ryan A. Congrats on jumping in and welcome! I totally relate to the stress of not wanting to be over-leveraged. What I've found is that if you start small and bite off a couple little chunks and let yourself get comfortable you'll feel better and better about adding properties. I think a great option for you guys starting out is a house hack! either a duplex, or even triplex or up to a quad. This 1, allows you to get some rental income form the other units, 2, allows you to dip you toe into property management slowly and gradually, and 3, gives you some street credit with the banks to get further loans down the road.
With regards to your "extra" 7500 a month. If it were me, I'd find a really nice well rehabbed duplex, that you don't have to worry about making a bunch of repairs on. Now these won't probably have the best looking short term returns because you will have paid a premium in most cases because it's already rehabbed. But that premium is worth the ease of operation if you aren't having to replace a roof for 15 years, or put in a new HVAC system or electric panel. But move into that Duplex ( or tri or quad whatever is the best option for you) put down the 20% so you don't have to mess around with PMI or anything, and then just take that 7500 extra a month after you have your reserves built up and dump that into an extra principal payment on that duplex. Get that thing paid off and cash-flowing like crazy and then either rinse and repeat, or at that point find a nice "forever" home for yourself and your family and let the cashflow from the duplex pay for that mortgage.
I think you'll find after you get into it and do it yourself, you'll know what questions to ask and what you are looking for and will feel more comfortable looking out of state. I'd keep that in the back of your mind because taking costal money and putting it into midwest REI is a killer way to grow your portfolio...just to give you an idea theres a property I'm looking at, on the MLS for 98K, already been nicely rehabbed, so with about $25K all in you could buy a cute little Single family, rent it out for 1200/mnth all day long, and after all expenses, clear about $450 bucks a month. My long rambling point is get comfortable locally, and then start looking elsewhere where your money will go further, if you want to grow.
[email protected]614-362-2231
2 Reply
Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
6y
There is always going to be a "but...." you have to decide if you have the fortitude to take the risk- in my opinion, REI is much less risky than investing in stocks; you have a tangible asset that you control and can influence the value of, at least to a certain extent.
You don't really have a defined strategy, which is fine for now, but I'd start thinking about what you want your investment to do for you 5 or 10 years down the road and work backwards to what you need to do today to make that happen. Your market is going to be a tough one- you're competing with a high point of entry and big money on good deals, it's tough for a newbie to get rolling on something like that.
There are LOTS of people from the Bay Area that invest in my market because their cash goes a lot further and appreciation is solid and reliable, just food for thought.
Best of luck!
0 Reply
Bill Goodland
Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes
6y
@Ryan A. Hey Ryan, the important thing is the practice of saving and investing money. Honestly, the exact place it goes is one of the last things you need to worry about when it comes to S&P vs. REI. If you're buying RE strictly for cash flow, this is going to be an unpopular opinion, but I would almost rather go with an index fund. The real wealth creation of real estate is buying properties below market value, using leverage while gaining a big chunk of equity, still having it cash flow and rinsing and repeating multiple times over. If you want a quick and easy way to invest every month than the S&P is a good option, but if you want to achieve the best returns I would prepare to treat REI like a business that requires work to systematize things which on top of what is likely a demanding full time job with a family can be tough. Not where near impossible though so keep learning and get after it man. Buying a live in flip would probably be a great way to start
3 Reply
Joe Cassandra
Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes
6y
Congrats on having a solid income!...definitely great to have the cash if you're looking at REI.
---
I'm going to take a gander, though...
You're looking at REI because:
1) you know someone or someone told you it's a great investment
2) You've heard the quote about 'most millionaires came from RE"
If you like the idea of stashing money fro 25-30 in a 401k and finally being a multi-millionaire when you're 65 (as you can't withdraw your funds without penalty...so it's all paper money)
Then REI is probably NOT for you.
REI takes a lot of time, effort, it's a pain in the butt...and your real goal is to find great deals where you're 'buying' huge chunks of free equity at one time to leverage into something else.
If you don't like the idea of leverage...then this is probably not what you want to be doing.
Don't read this with a mean or snobbish tone...but more as a heads-up.
You can invest in RE passively as a lender or in a syndication of type. In a syndication you're probably looking at making 5-8% on your money each year which could be more stable than the stock market (if the properties maintain their values).
Just depends on what your goal is and if you're willing to put in the work.
Stocks you buy in 5 minutes and go about your day (unless you do what you should and research the right companies...unless you're just buying an index fund)
RE can take many hours of your week...or more if you're looking for deals and funding.
RE could definitely allow you to retire in 10 years rather than 30...but it requires a ton of work and scrapping.
0 Reply
Ryan A.
OP
Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes
6y
Originally posted by @George W.:
Real estate is great to invest in as well. If used some money for a downpayment on a multifamily that cashflows monthly, in 30 years you'd have a building that the tennats paid for and 30 years of cashflow. Plus real estate generally appreciates as well.
Reinvest your cashflow and some of your monthly savings and you can scale very smoothly but safely. When you reach the point where you get a few multifamiles that are paid off you then have cash cows.
Biggest con is the management side of owning property. Finding tennats, repairs, vacancies etc.

I actually haven't researched multifamily properties in the Bay Area before, but it appears there are quite a bit and they range quite dramatically in price. For example, here is one of the cheapest properties that based on my calc's isn't cash flow positive. https://www.redfin.com/CA/Vallejo/209-Contra-Costa-St-94590/home/2241888
I guess I'm hesitant because there doesn't appear to be many cash flow positive multifamily opportunities in the Bay Area and from what I've read relying solely on appreciation isn't enough/worth it to invest.

0 Reply
Ryan A.
OP
Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes
6y
Originally posted by @Michael K Gallagher:
@Ryan A. Congrats on jumping in and welcome! I totally relate to the stress of not wanting to be over-leveraged. What I've found is that if you start small and bite off a couple little chunks and let yourself get comfortable you'll feel better and better about adding properties. I think a great option for you guys starting out is a house hack! either a duplex, or even triplex or up to a quad. This 1, allows you to get some rental income form the other units, 2, allows you to dip you toe into property management slowly and gradually, and 3, gives you some street credit with the banks to get further loans down the road.
With regards to your "extra" 7500 a month. If it were me, I'd find a really nice well rehabbed duplex, that you don't have to worry about making a bunch of repairs on. Now these won't probably have the best looking short term returns because you will have paid a premium in most cases because it's already rehabbed. But that premium is worth the ease of operation if you aren't having to replace a roof for 15 years, or put in a new HVAC system or electric panel. But move into that Duplex ( or tri or quad whatever is the best option for you) put down the 20% so you don't have to mess around with PMI or anything, and then just take that 7500 extra a month after you have your reserves built up and dump that into an extra principal payment on that duplex. Get that thing paid off and cash-flowing like crazy and then either rinse and repeat, or at that point find a nice "forever" home for yourself and your family and let the cashflow from the duplex pay for that mortgage.
I think you'll find after you get into it and do it yourself, you'll know what questions to ask and what you are looking for and will feel more comfortable looking out of state. I'd keep that in the back of your mind because taking costal money and putting it into midwest REI is a killer way to grow your portfolio...just to give you an idea theres a property I'm looking at, on the MLS for 98K, already been nicely rehabbed, so with about $25K all in you could buy a cute little Single family, rent it out for 1200/mnth all day long, and after all expenses, clear about $450 bucks a month. My long rambling point is get comfortable locally, and then start looking elsewhere where your money will go further, if you want to grow.

Hey thanks for responding! Really appreciate it.
To be quite honest, I don't believe I have the appetite to house hack by buying a duplex/triplex/etc. I think my wife and I have grown pretty accustomed to living in a SFH on our own and not sharing walls. That's a luxury we've decided to pay a premium for.
What's your experience with OOS investing? I've read stories that are mixed. Where did you start w/r/t OOS investing?

0 Reply
George W.
Investor · NJ · Member since 2018 · 869 posts · 921 votes
6y
Originally posted by @Ryan A.:
Originally posted by @George W.:
Real estate is great to invest in as well. If used some money for a downpayment on a multifamily that cashflows monthly, in 30 years you'd have a building that the tennats paid for and 30 years of cashflow. Plus real estate generally appreciates as well.
Reinvest your cashflow and some of your monthly savings and you can scale very smoothly but safely. When you reach the point where you get a few multifamiles that are paid off you then have cash cows.
Biggest con is the management side of owning property. Finding tennats, repairs, vacancies etc.

I actually haven't researched multifamily properties in the Bay Area before, but it appears there are quite a bit and they range quite dramatically in price. For example, here is one of the cheapest properties that based on my calc's isn't cash flow positive. https://www.redfin.com/CA/Vallejo/209-Contra-Costa-St-94590/home/2241888
I guess I'm hesitant because there doesn't appear to be many cash flow positive multifamily opportunities in the Bay Area and from what I've read relying solely on appreciation isn't enough/worth it to invest.

Understandable. NJ is the same way as a whole. Good deals are found off market here. Good deals on the MLS sell very quickly and usually something that's turnkey doesnt cashflow well here either.
Its a more competitive market but theres always options like finding a place off market that needs rehab work.
You shouldn't rely just on appreciation. I was saying that if you found a great deal on a cash flowing property, the tenants end up paying your mortgage off. any appreciation is just icing on the cake.

0 Reply
Ryan A.
OP
Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes
6y
Originally posted by @Bill Goodland:
@Ryan A. Hey Ryan, the important thing is the practice of saving and investing money. Honestly, the exact place it goes is one of the last things you need to worry about when it comes to S&P vs. REI. If you're buying RE strictly for cash flow, this is going to be an unpopular opinion, but I would almost rather go with an index fund. The real wealth creation of real estate is buying properties below market value, using leverage while gaining a big chunk of equity, still having it cash flow and rinsing and repeating multiple times over. If you want a quick and easy way to invest every month than the S&P is a good option, but if you want to achieve the best returns I would prepare to treat REI like a business that requires work to systematize things which on top of what is likely a demanding full time job with a family can be tough. Not where near impossible though so keep learning and get after it man. Buying a live in flip would probably be a great way to start

Thanks for the guidance. Much appreciated. I guess my worry comes from down the road (let's say 15 years from now) and I'm $X millions of dollars in real estate debt after buying multiple homes in NorCal and I'm essentially relying on everyone paying their rent and all my chess pieces to be working for me and not against me. After thinking about this more as I read y'alls responses, I guess I currently don't have that much faith that everything will go according to plan and I want to make sure I'm not being spread too thin, but at the same time capture the gains of long term growth whether it be index funds or REI.

1 Reply
Ryan A.
OP
Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes
6y
Originally posted by @Joe Cassandra:
Congrats on having a solid income!...definitely great to have the cash if you're looking at REI.
---
I'm going to take a gander, though...
You're looking at REI because:
1) you know someone or someone told you it's a great investment
2) You've heard the quote about 'most millionaires came from RE"
If you like the idea of stashing money fro 25-30 in a 401k and finally being a multi-millionaire when you're 65 (as you can't withdraw your funds without penalty...so it's all paper money)
Then REI is probably NOT for you.
REI takes a lot of time, effort, it's a pain in the butt...and your real goal is to find great deals where you're 'buying' huge chunks of free equity at one time to leverage into something else.
If you don't like the idea of leverage...then this is probably not what you want to be doing.
Don't read this with a mean or snobbish tone...but more as a heads-up.
You can invest in RE passively as a lender or in a syndication of type. In a syndication you're probably looking at making 5-8% on your money each year which could be more stable than the stock market (if the properties maintain their values).
Just depends on what your goal is and if you're willing to put in the work.
Stocks you buy in 5 minutes and go about your day (unless you do what you should and research the right companies...unless you're just buying an index fund)
RE can take many hours of your week...or more if you're looking for deals and funding.
RE could definitely allow you to retire in 10 years rather than 30...but it requires a ton of work and scrapping.

Thanks for the reply. Definitely some food for thought.
I can definitely put in the work (only usually need 5hrs of sleep), so I spend my late nights looking into all of this stuff. That will definitely change as kids come into the picture. I think I have a unique benefit in that my FIL is a real estate agent in Sacramento area and most of his retirement is in the form of rental income. To no one's surprise he's been pushing me the REI way, but from my perspective I'm just worried the gains he's now realizing are/will be long gone in NorCal since we shouldn't be investing in properties just due to appreciation speculation. Correct me if I'm wrong please.

0 Reply
Ryan A.
OP
Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes
6y
Originally posted by @George W.:
Originally posted by @Ryan A.:
Originally posted by @George W.:
Real estate is great to invest in as well. If used some money for a downpayment on a multifamily that cashflows monthly, in 30 years you'd have a building that the tennats paid for and 30 years of cashflow. Plus real estate generally appreciates as well.
Reinvest your cashflow and some of your monthly savings and you can scale very smoothly but safely. When you reach the point where you get a few multifamiles that are paid off you then have cash cows.
Biggest con is the management side of owning property. Finding tennats, repairs, vacancies etc.

I actually haven't researched multifamily properties in the Bay Area before, but it appears there are quite a bit and they range quite dramatically in price. For example, here is one of the cheapest properties that based on my calc's isn't cash flow positive. https://www.redfin.com/CA/Vallejo/209-Contra-Costa-St-94590/home/2241888
I guess I'm hesitant because there doesn't appear to be many cash flow positive multifamily opportunities in the Bay Area and from what I've read relying solely on appreciation isn't enough/worth it to invest.

Understandable. NJ is the same way as a whole. Good deals are found off market here. Good deals on the MLS sell very quickly and usually something that's turnkey doesnt cashflow well here either.
Its a more competitive market but theres always options like finding a place off market that needs rehab work.
You shouldn't rely just on appreciation. I was saying that if you found a great deal on a cash flowing property, the tenants end up paying your mortgage off. any appreciation is just icing on the cake.

Does finding a deal off the market just involve befriending an RE agent? Or are there other avenues?

0 Reply
Joseph CacciapagliaBusiness Member
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
6y
If you're pretty sure you're going to be happy working for the next 25-30 years, then maybe the stock market is the right answer. I don't think you'll get the same returns, but that doesn't really matter, because you have plenty to invest. A lot of people look at real estate investing as a way to retire earlier. I have several clients in the bay area that buy small multifamily properties here in San Antonio, TX. They buy relatively new properties and use our management team. Overall it's a pretty passive strategy. Some of them use as little as 50% LTV financing, which makes them relatively conservative investments. You almost never see your portfolio drop 30% in a week, which takes away some of the worries with stocks.
[email protected]979-218-2286
Joseph Cacciapaglia powered by Morty
Website View Page
1 Reply
George W.
Investor · NJ · Member since 2018 · 869 posts · 921 votes
6y

When trying to find an offmarket deal there are a ton of options. What helped me find mine off market was being in a service industry and working alot and knowing people in small town. So I guess you'd say networking. A real estate agent might be able to help you. keep a eye open for "for sale by owner signs". You could just drive around your neighborhood and find places that need improvement and take notes try to find owners and reach out from tax records etc. In my county you can even go on their website and see what properties and who are in the forceluser process.
Also you can find a local wholesaler. Good wholesalers are basically people that have mastered the art of finding absentee owners and getting them under contract at a lower price to sell to a cash buyer and make a quick buck.
Most real estate agents I've met tend to sell houses that are more turn key and aren't investor friendly. But it's still good to network. You never know.
0 Reply
Ryan A.
OP
Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes
6y
Originally posted by @Joseph Cacciapaglia:
If you're pretty sure you're going to be happy working for the next 25-30 years, then maybe the stock market is the right answer. I don't think you'll get the same returns, but that doesn't really matter, because you have plenty to invest. A lot of people look at real estate investing as a way to retire earlier. I have several clients in the bay area that buy small multifamily properties here in San Antonio, TX. They buy relatively new properties and use our management team. Overall it's a pretty passive strategy. Some of them use as little as 50% LTV financing, which makes them relatively conservative investments. You almost never see your portfolio drop 30% in a week, which takes away some of the worries with stocks.

I think I'll want to work on something new in the next 25-30 years and RE could scratch that itch.

I'll poke around your site a little bit, so thanks for sharing. Do you find that most RE investors you're working with buy these properties turnkey or moreso index on properties that need some work and then rent them out. I'm unfamiliar with the San Antonio area.

0 Reply
Ryan A.
OP
Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes
6y
Originally posted by @George W.:

When trying to find an offmarket deal there are a ton of options. What helped me find mine off market was being in a service industry and working alot and knowing people in small town. So I guess you'd say networking. A real estate agent might be able to help you. keep a eye open for "for sale by owner signs". You could just drive around your neighborhood and find places that need improvement and take notes try to find owners and reach out from tax records etc. In my county you can even go on their website and see what properties and who are in the forceluser process.
Also you can find a local wholesaler. Good wholesalers are basically people that have mastered the art of finding absentee owners and getting them under contract at a lower price to sell to a cash buyer and make a quick buck.
Most real estate agents I've met tend to sell houses that are more turn key and aren't investor friendly. But it's still good to network. You never know.

Got it. Makes sense. Thanks for the tips.

1 Reply
Joseph CacciapagliaBusiness Member
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
6y
Originally posted by @Ryan A.:
Originally posted by @Joseph Cacciapaglia:
If you're pretty sure you're going to be happy working for the next 25-30 years, then maybe the stock market is the right answer. I don't think you'll get the same returns, but that doesn't really matter, because you have plenty to invest. A lot of people look at real estate investing as a way to retire earlier. I have several clients in the bay area that buy small multifamily properties here in San Antonio, TX. They buy relatively new properties and use our management team. Overall it's a pretty passive strategy. Some of them use as little as 50% LTV financing, which makes them relatively conservative investments. You almost never see your portfolio drop 30% in a week, which takes away some of the worries with stocks.

I think I'll want to work on something new in the next 25-30 years and RE could scratch that itch.

I'll poke around your site a little bit, so thanks for sharing. Do you find that most RE investors you're working with buy these properties turnkey or moreso index on properties that need some work and then rent them out. I'm unfamiliar with the San Antonio area.

Most of the investors that I work with that are in a similar situation to you buy fully occupied fourplexes. Sometimes they'll buy ones with a little rehab needed upon turnover, but they're not buying any serious rehab projects. These are people that are looking for a decent return, but not an entrepreneurial type return that comes with some of the more aggressive strategies. Many use it as a way to build up their experience, knowledge, and track record, and expect to trade up to larger multifamily somewhere down the road. Some just see it as a solid long term investment that's not tied to the market.

[email protected]979-218-2286
Joseph Cacciapaglia powered by Morty
Website View Page
0 Reply
Stone Saathoff
Investor · San Antonio, TX · Member since 2019 · 576 posts · 307 votes
6y
@Ryan A.

Just to chime in, there are more properties that need work here in San Antonio than almost any other city my company operates in. That being said, it is much more hands on than what @Joseph Cacciapaglia offers, and in my opinion what he does is great for out of state investors. Managing rehabs out of state can be extremely profitable but expect to spend a lot of time on the phone, doing video calls, and really you should have someone you trust local to be able to check up on/manage things too. If your options are real estate or stock market, I would always pick real estate.
1 Reply
Ryan A.
OP
Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes
6y
Originally posted by @Joseph Cacciapaglia:
Originally posted by @Ryan A.:
Originally posted by @Joseph Cacciapaglia:
If you're pretty sure you're going to be happy working for the next 25-30 years, then maybe the stock market is the right answer. I don't think you'll get the same returns, but that doesn't really matter, because you have plenty to invest. A lot of people look at real estate investing as a way to retire earlier. I have several clients in the bay area that buy small multifamily properties here in San Antonio, TX. They buy relatively new properties and use our management team. Overall it's a pretty passive strategy. Some of them use as little as 50% LTV financing, which makes them relatively conservative investments. You almost never see your portfolio drop 30% in a week, which takes away some of the worries with stocks.

I think I'll want to work on something new in the next 25-30 years and RE could scratch that itch.

I'll poke around your site a little bit, so thanks for sharing. Do you find that most RE investors you're working with buy these properties turnkey or moreso index on properties that need some work and then rent them out. I'm unfamiliar with the San Antonio area.

Most of the investors that I work with that are in a similar situation to you buy fully occupied fourplexes. Sometimes they'll buy ones with a little rehab needed upon turnover, but they're not buying any serious rehab projects. These are people that are looking for a decent return, but not an entrepreneurial type return that comes with some of the more aggressive strategies. Many use it as a way to build up their experience, knowledge, and track record, and expect to trade up to larger multifamily somewhere down the road. Some just see it as a solid long term investment that's not tied to the market.

Yea I see myself going closer to the passive route when starting and then potentially increasing my appetite for more projects later on as I become more comfortable. If you don't mind, I'll message you as I get closer to thinking about doing this.

0 Reply
Ryan A.
OP
Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes
6y
Originally posted by @Stone Saathoff:
@Ryan A.

Just to chime in, there are more properties that need work here in San Antonio than almost any other city my company operates in. That being said, it is much more hands on than what @Joseph Cacciapaglia offers, and in my opinion what he does is great for out of state investors. Managing rehabs out of state can be extremely profitable but expect to spend a lot of time on the phone, doing video calls, and really you should have someone you trust local to be able to check up on/manage things too. If your options are real estate or stock market, I would always pick real estate.

Good to know re: San Antonio. From what I've read over the past couple months, finding that person you trust is the most important/valuable thing.

0 Reply
Bill Goodland
Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes
6y
Originally posted by @Ryan A.:
Originally posted by @Bill Goodland:
@Ryan A. Hey Ryan, the important thing is the practice of saving and investing money. Honestly, the exact place it goes is one of the last things you need to worry about when it comes to S&P vs. REI. If you're buying RE strictly for cash flow, this is going to be an unpopular opinion, but I would almost rather go with an index fund. The real wealth creation of real estate is buying properties below market value, using leverage while gaining a big chunk of equity, still having it cash flow and rinsing and repeating multiple times over. If you want a quick and easy way to invest every month than the S&P is a good option, but if you want to achieve the best returns I would prepare to treat REI like a business that requires work to systematize things which on top of what is likely a demanding full time job with a family can be tough. Not where near impossible though so keep learning and get after it man. Buying a live in flip would probably be a great way to start

Thanks for the guidance. Much appreciated. I guess my worry comes from down the road (let's say 15 years from now) and I'm $X millions of dollars in real estate debt after buying multiple homes in NorCal and I'm essentially relying on everyone paying their rent and all my chess pieces to be working for me and not against me. After thinking about this more as I read y'alls responses, I guess I currently don't have that much faith that everything will go according to plan and I want to make sure I'm not being spread too thin, but at the same time capture the gains of long term growth whether it be index funds or REI.

I hear ya man and understand the fear, but all of your fears can also be mitigated by having adequate reserves and renting out places in a high demand area. Honestly, if I lived in a more expensive area I would live in flip. Especially if you do work yourself, materials are cheap it’s the labor that is pricy. Paint and flooring can add let’s say 10% of the value to a house. Add that with buying below market, some natural appreciation and you can make a good profit and sell tax free in 2 years and throw that towards the next place and index funds.

1 Reply
Ryan A.
OP
Walnut Creek, CA · Member since 2020 · 23 posts · 8 votes
6y
Originally posted by @Bill Goodland:
Originally posted by @Ryan A.:
Originally posted by @Bill Goodland:
@Ryan A. Hey Ryan, the important thing is the practice of saving and investing money. Honestly, the exact place it goes is one of the last things you need to worry about when it comes to S&P vs. REI. If you're buying RE strictly for cash flow, this is going to be an unpopular opinion, but I would almost rather go with an index fund. The real wealth creation of real estate is buying properties below market value, using leverage while gaining a big chunk of equity, still having it cash flow and rinsing and repeating multiple times over. If you want a quick and easy way to invest every month than the S&P is a good option, but if you want to achieve the best returns I would prepare to treat REI like a business that requires work to systematize things which on top of what is likely a demanding full time job with a family can be tough. Not where near impossible though so keep learning and get after it man. Buying a live in flip would probably be a great way to start

Thanks for the guidance. Much appreciated. I guess my worry comes from down the road (let's say 15 years from now) and I'm $X millions of dollars in real estate debt after buying multiple homes in NorCal and I'm essentially relying on everyone paying their rent and all my chess pieces to be working for me and not against me. After thinking about this more as I read y'alls responses, I guess I currently don't have that much faith that everything will go according to plan and I want to make sure I'm not being spread too thin, but at the same time capture the gains of long term growth whether it be index funds or REI.

I hear ya man and understand the fear, but all of your fears can also be mitigated by having adequate reserves and renting out places in a high demand area. Honestly, if I lived in a more expensive area I would live in flip. Especially if you do work yourself, materials are cheap it’s the labor that is pricy. Paint and flooring can add let’s say 10% of the value to a house. Add that with buying below market, some natural appreciation and you can make a good profit and sell tax free in 2 years and throw that towards the next place and index funds.

True. That's a good point about reserves. Maybe I need to think of it like having an emergency fund for each property and that will allow me to sleep at night haha. I'll just need to come to grips with the debt I'm incurring when taking out each loan and know that eventually they will be paid off.
Regarding a live-in flip, I'm not very handy and my wife doesn't let me touch anything when we put together new furniture. She says I'm kind of like a bull in a china shop with my hands. With that said, a live-in flip might not be the route we go.

0 Reply
Shae Green
Real Estate Agent · Salt Lake City, UT · Member since 2018 · 19 posts · 12 votes
6y
@Ryan A.
Hey!! Congrats on the solid income but even more impressive is your ability to save a lot of that income!!
I agree with what was said earlier that it depends on your goals and how passive you want your investing to be. In fact if you like the net worth that you'll be at by just investing in equities for 25-30 years... Then why add in the additional work of rental properties!! Calculate how much your net worth would be if you instead invested that money in properties at an average Bay area appreciation rate though... Your net worth in 25-30 years will be a lot different ;)
With you living in such an expensive area, house hacking could be so powerful. If you buy a property and then rent out parts of it while you live there, this will supercharge your net worth and ability to save because you have to live somewhere anyways!! Living in the property makes it a lot easier to self manage as well. This article has a cool calculation called net worth ROI, which is so powerful in an expensive market, check it out!
https://www.biggerpockets.com/blog/metric-tracking-success-real-estate-deals
In the end theres so much flexibility and you can make your decision as you go. You could buy a couple properties, decide you'd rather just invest passively and then sell them. Or you could keep investing in equities and then later on decide to dump some of it into real estate. Either way you'll be set when you're investing 6 figures a year ;)
Best of luck!
1 Reply
Matthew Terry
Rental Property Investor · Mesa, AZ · Member since 2019 · 138 posts · 144 votes
6y
@Ryan A.
I'm in a similar situation as you. It took me a few years of researching, education, and networking to take the plunge. What I've come to realize is that there is greater risk in W2 income than in real estate and returns for REI not only crush 401K and ETF investing returns, but you have access to some of that money immediately. You will replace your W2 income with passive income, while still building net worth through equity, much faster than when you hit 59.5 years old. You have much more flexibility and control in REI than you do in stocks and W2.
However, REI does take slightly more effort, unless you do syndication which still easily doubles the average 8% return of the stock market with similar risk. It is a no-brainer if you care about making as much money as possible without tremendous risk of something like investing in a start-up or trading the news with options. Don't get in your own way because of fear. At least try it out, you are young enough and make enough W2 to make mistakes and still be financially secure for life.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.