Too many options, scared to make a wrong decision

OP

Member since 2023 · 12 posts · 4 votes

2y

I'm in desperate need of some guidance or reassurance at the moment. I am feeling overwhelmed by options, things I've learned, and fear of the future.

Right now my wife and I are trying to make a huge, potentially life altering, decision. After reading books, watching videos, and learning a lot about the ins and outs of real estate investing, we are at the point where we need to make a move (or decide not to).

We have some money we would like to invest, and we are thinking real estate would be the route to take. We absolutely need this investment to become an income stream for us. We will likely move wherever we decide to invest.

We have been looking at a few different places. I'll share what we are seeing/thinking and invite any corrections or advice.

1. Austin, TX:

Pros: We like the growth and the business development going on in the area. There are areas where we believe over the next 10 years the job growth will aid us in some nice appreciation. The amenities are fantastic (shopping, restaurants, activities, etc.)

Cons: We are trying to get away from crime and other "factors" about LA that we dislike, and in many ways this city feels like a mini-Los Angeles (homelessness, crime, etc.).

2. Franklin, TN:

Pros: We love the place, the people are nice, and it seems to have a lot of what we are looking for. It appears that there has been a lot of growth here in recent years. Fantastic schools.

Cons: I'm skeptical about how well the growth will continue on over the next 5+ years, especially with the questionable economic situation ahead. When we visited Franklin and the surrounding areas, there is an ocean of new building developments. The builders keep jacking the prices up and finding a good deal (or even knowing what a good deal is) is difficult. Other areas nearby that were touted as being major growth hubs like Murfreesboro appear to already be experiencing some price declines. Franklin seems to have a little of this, but not as bad. Also, the amenities aren't the greatest. The restaurant options are alright, but the shopping is so-so and you have to drive a long time to get there depending on where you're at.

3. Springfield, MO

Pros: For a city in Missouri, it does seem to draw people in to some extent and there is growth. The real estate prices are much lower and therefore we can diversify the risk across multiple properties potentially. I also have some ties to the area. The property cost vs rental rates in the area are pretty decent. For one half or one third of the cost, I can get similar rental income per property in Springfield that I could get in the Franklin area.

Cons: Appreciation is MUCH slower. Where the rental income shines, the appreciation misses the mark. Amenities are poor, crime is higher, schools aren't great. (Although one area in Willard, which is northwest of Springfield, does have good schools.)

I am also looking at the map of the United States and researching different places trying to find what I'm looking for. I feel like maybe I'm asking for too much with this investment. I want it all. Good amenities, low crime, reasonable prices with decent CoCROI. I'm sure some of you will laugh about it, but I'm just trying to figure out which things I should be sacrificing. This is going to affect my entire family a lot. I want to bring them somewhere they can be happy, but I also want to create a situation where there is a good investment producing income that they can rely on if I'm no longer able to be there.

Thank you for reading my message, and any feedback is very much appreciated.

Missouri

Short and sweet. :D

0 Reply

Eric Rice

OP

Member since 2023 · 12 posts · 4 votes

2y

Quote from @James Hamling:

Quote from @Luka Milicevic:

@Eric Rice

Are you sure you're talking about the right Franklin TN? That's the furthest description of Franklin that I could think of.

I live in Franklin and it is the goal of everyone in the area to eventually move there. My wife and I constantly talk about it - Once you move here and experience it, there is no going back to your old life.

The pros you mentioned are spot on, but I have to add a few.

The city is incredibly clean and well maintained. Can't emphasize that enough. I bike early in the morning - 5am. The landscaping crews are already out at that time with headlamps mowing grass, mulching, trimming, etc. Sanitation department has brush pick up every week. Leaf pick up through out the fall and winter. The city has predominantly buried utility lines so there are few overhanging power lines. This doesn't seem like a big deal until you actually go somewhere else and notice how big of a deal it is. They implemented under ground utilities decades ago so even the old subdivisions built in the 90s don't have overhanging power lines.

You're skeptical about the growth??? Have you seen what's in the pipeline? Do you know how many companies that you've heard of are headquartered in Franklin? Have you seen how many companies are moving their HQ to Franklin?

Nashville has had a mass influx of young professionals over the last decade. They are living predominantly in the high rise apartments downtown. Where do you think they are all moving to once they have children and need more space and better schools?

I can't recommend the place enough.

In terms of investing here, it depends on what you are looking for. The rent to value is not great. It's mostly class A owner occupied. There are places that will yield better rent to value ratios. It just depends what you want. I had an investor a few years ago where all he cared about was being in the best school zones. So this location worked for him.

If you want to talk more please reach out. I know the area very well.

I 2nd, 3rd and 4th Luka here. I recently toured TN for a couple weeks, was a "deep-dive tour" and Franklin was one of our target tour's, not for investing but for residence. The wife generally does the research and drafting for residence areas, happy-wife haapy'ish-life right, lol. But Franklin really surprised me, it was a whole other level I gotta say. That's comparing against the best Dallas/Houston/TX Gulf Coast "burbs" have to offer. Yeah, no joke I credit Franklin clearing that high a bar.

For investing purposes TN bothers me on the gap between median incomes and median prices, that's troubling. Growth is in many part's/way's off the chart's but I question how much thought is going into intelligent planned, structured growth and how much is just buck-wild unchecked growth. City services matter, and I found that sorely lacking TN wide, little things that make big differences like parks, sidewalks, drainage waste water etc etc..

Nashville is simply awesome, but sorely lacking parking. But, maybe an opportunity in disguise of a headache.

But Franklin.... as our TN guide's said to us Franklin is not where persons go to "make-it", ya move there because you "made-it", lol. They were TN locals' so temper it with that, didn't seem to bougie to me but it was exceptionally nice. I also thought Chattanooga was "ok", and was told I was being a bit of a "snob" as it's supposed to be rather amazing or something, lol.

I think that is a great assessment. We love the area and are interested in living in Franklin to be sure. That said, I do agree that there are a lot of "little things" that could be added to improve the place.

0 Reply

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

2y

Quote from @Eric Rice:

Quote from @Dan H.:

Quote from @Eric Rice:

I'm in desperate need of some guidance or reassurance at the moment. I am feeling overwhelmed by options, things I've learned, and fear of the future.

Right now my wife and I are trying to make a huge, potentially life altering, decision. After reading books, watching videos, and learning a lot about the ins and outs of real estate investing, we are at the point where we need to make a move (or decide not to).

We have some money we would like to invest, and we are thinking real estate would be the route to take. We absolutely need this investment to become an income stream for us. We will likely move wherever we decide to invest.

We have been looking at a few different places. I'll share what we are seeing/thinking and invite any corrections or advice.

1. Austin, TX:

Pros: We like the growth and the business development going on in the area. There are areas where we believe over the next 10 years the job growth will aid us in some nice appreciation. The amenities are fantastic (shopping, restaurants, activities, etc.)

Cons: We are trying to get away from crime and other "factors" about LA that we dislike, and in many ways this city feels like a mini-Los Angeles (homelessness, crime, etc.).

2. Franklin, TN:

Pros: We love the place, the people are nice, and it seems to have a lot of what we are looking for. It appears that there has been a lot of growth here in recent years. Fantastic schools.

Cons: I'm skeptical about how well the growth will continue on over the next 5+ years, especially with the questionable economic situation ahead. When we visited Franklin and the surrounding areas, there is an ocean of new building developments. The builders keep jacking the prices up and finding a good deal (or even knowing what a good deal is) is difficult. Other areas nearby that were touted as being major growth hubs like Murfreesboro appear to already be experiencing some price declines. Franklin seems to have a little of this, but not as bad. Also, the amenities aren't the greatest. The restaurant options are alright, but the shopping is so-so and you have to drive a long time to get there depending on where you're at.

3. Springfield, MO

Pros: For a city in Missouri, it does seem to draw people in to some extent and there is growth. The real estate prices are much lower and therefore we can diversify the risk across multiple properties potentially. I also have some ties to the area. The property cost vs rental rates in the area are pretty decent. For one half or one third of the cost, I can get similar rental income per property in Springfield that I could get in the Franklin area.

Cons: Appreciation is MUCH slower. Where the rental income shines, the appreciation misses the mark. Amenities are poor, crime is higher, schools aren't great. (Although one area in Willard, which is northwest of Springfield, does have good schools.)

I am also looking at the map of the United States and researching different places trying to find what I'm looking for. I feel like maybe I'm asking for too much with this investment. I want it all. Good amenities, low crime, reasonable prices with decent CoCROI. I'm sure some of you will laugh about it, but I'm just trying to figure out which things I should be sacrificing. This is going to affect my entire family a lot. I want to bring them somewhere they can be happy, but I also want to create a situation where there is a good investment producing income that they can rely on if I'm no longer able to be there.

Thank you for reading my message, and any feedback is very much appreciated.

>we are thinking real estate would be the route to take. We absolutely need this investment to become an income stream for us.

I have done well in RE, but I do not consider it low risk. If you absolutely need the investment to produce an income stream then RE is likely not the best choice. It has risk, its returns varies. There can be times like the Great Recession that affected income in many markets or Covid that resulted in many tenants not making their rent payments. In addition, residential RE is not passive even with the use of a PM.

I question if RE is the right choice for you. In addition, the current market has severe challenges due to the rates having doubled since early 2022. Commercial residential has suffered large property value declines (as has office space) in the last 2 years.

There are safe passive investments that can provide reliable returns.

Good luck

Thank you for the reality check. We are aware of the risk, but also actively trying to take steps to reduce it as much as possible. While I stand by what I said about needing the income stream, I don't think we will become destitute if it doesn't work out. It's more so that it will push us backwards pretty far relative to our goals.

This sounds more like you want the income stream than need the income stream. I think we all want return (I do not emphasize cash flow as it is my least desirable source of RE return).

This makes a big difference. If you do not need the income stream, understand the risks, understand RE is often a long term investment, understand residential RE is not passive, understand RE is not liquid, understand we are in a challenging market that will likely result in lower returns than have been achieved in most of the last dozen years then the decision is yours. You are proceeding recognizing the income stream is not guaranteed.

If you need the income stream, residential RE is too risky.

As indicated, I have made a lot of money from RE. However, I have not purchased since Dec 2021 which I believe is my longest period without a purchase in a dozen years. I find this market challenging for buy n hold. I expect better return from residential RE than what my underwriting is currently showing.

Good luck

0 Reply

John McDonald

Member since 2023 · 158 posts · 96 votes

2y

My wife and I lived in Sacramento. She was born in CA. We moved to the Dallas area two years ago. After all the research. This was where we decided to land. Austin has horrible homeless. All the major cities do, especially if they lean left-which all the cities do because they attract younger people. No matter where you go, keep this in mind.

There is no place on Earth like California's weather. The mountains, the beaches but it's just done for. I can't understand why anyone who can get out has stayed. The taxes are the worst in the country and will continue to get worse, the crime, the homeless. My two cents is this: The investment opportunities are second to quality of life and enjoying the here and now. I have heard wonderful things from people who chose Tennessee.

I can't recommend Texas. The volume of people, the traffic, and the heat in the 4 long months of summer combined with no outdoor activities. While Austin is the most beautiful out of all the areas in Texas, the heat and humidity are worse than in the Dallas/Fort Worth area. We have decided to move to NH for its endless outdoor activities both in the summer and winter. Our kids are grown, and schools are not an issue. We work from home so can pick anywhere. And I grew up in the snow, and it doesn't bother me.

My point is it is such an individual choice. I would recommend spending time in Tennessee in the summer to determine if you can handle the heat and humidity. For my wife and I who hiked and biked every weekend in CA-not being able to do that in TX has been brutal. We miss the mountains and the smell of pine trees every weekend. We underestimated how important this is to us. Make sure you are honest with what truly makes you happy and move to an area that supports that. As long as the schools are good and the crime is low you can invest anywhere. There will always be pros and cons.

0 Reply

Mark Brown

Member since 2022 · 30 posts · 18 votes

2y

So you voiced a lot of different concerns. Most of these are reasonable. As a baseline most foundational recommendation that we give is focus on mastering the solving the problems there are at your current level of complexity and problem set. In other words the issues you're going to confront are going to be distinct from someone who's been doing this for 10 years, or someone who's a totally different market or something else.

To me your concern is one of like do I even just get started. I think the first question I asked here is regarding runway. When do you want to see a return and when do you not want to have to work anymore for your capital. Because if you have a lump sum of cash conservatively putting it in some index fund or bonds or retirement vehicle might be better off. It sounds to me like you want to start building a portfolio in real estate. Doing things like flips and on the worst end wholesaling are probably going to be your best bet at relatively quick cash. But there's going to be exponential stress and time you want to have the portion to these endeavors because you have to build strong relationships, and your effectively probably have to do this 80 to 100% of your waking Work hours.

I think for starters your foundational goal should be to just get started. Also investing in a place with high rent growth or higher appreciation due to increased population as well as average raises, or as well as how wages have increased over the X amount of years are all going to be advantageous. But I wouldn't underestimate the value of quality of life. I do think rental income could potentially be crucial but I do think your family's day-to-day comfort is important.

0 Reply

Sasha Fukuda

Walpole, NH · Member since 2018 · 66 posts · 34 votes

2y

So, you want to invest where you live, and i'm guessing you want to manage it yourself. That's fine. I did the same thing. I happened to live in NH, so i bought properties in NH. If that's how you want to do it, my advice is to figure out where you and your family would enjoy living first. Then go there.

My philosophy is that trying to find the optimal location, the optimal investment, and the optimal moment to enter the market is a giant waste of time and energy. If you save more than you spend, invest the difference, and do that over a long period of time, you'll probably come out ahead. Furthermore, there's an element of luck that simply cannot be eliminated or avoided. Unforeseen things will happen in the future and you have no way of knowing whether they'll be good or bad. Just make sure you can withstand bad luck in the short term, and then play the game with the long term in mind.

When you look back decades from now, you'll probably care more about whether your family enjoyed their lives in their city than you will about whether you could have gotten slightly better investment returns in some other city.

0 Reply

Jordan MoorheadBusiness Member

Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes

2y

@Eric Rice dripping springs and oak hill are great options! I live on the Southwest side of Austin and love it. No homelessness there

[email protected]512-888-9122

The Moorhead Team5140 Reviews

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Marcus Auerbach

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

2y

Your first property will not create an income stream @Eric Rice - it is proof of concenpt and a test mule for you to learn. Creating an income stream takes a portfolio and 7-10 years for most people.

Seperate these two things, move where it's good for you and your family. Settle in and then start thinking about investing. And maybe RE is not thr right vehicle for you? If one property makes you anxious, how do you feel about 50?

1 Reply

Rachel Chwaszczewski

Investor · Charlotte Metro and Surrounding Areas · Member since 2023 · 10 posts · 7 votes

2y

I think the first one is always the hardest bc its a leap of faith at some level that it will all work it! The leap should be underpinned by understanding the risk and gathering as much information as needed to fully understand the investment and the risks involved as well as understanding the exit strategy. Look to understand your own risk tolerance as well before stepping into this arena. It will help guide decisions and then as risk tolerance grows your growth and understanding expand as well.

0 Reply

Axel MeierhoeferPro Member

Rental Property Investor · Escondido, CA · Member since 2017 · 679 posts · 550 votes

2y

Quote from @Eric Rice:

@Axel Meierhoefer
Hi Axel, thanks for taking the time to reply to my post.

You are obviously correct in that there aren't inherently any reasons we have to live where our investments are.

Because we are relatively new to real estate investing, I wanted to be close by for convenience mostly. I am focusing on the investment side mainly for the purposes of this post, but we are also moving. I selected places that we are both familiar with and are interested in living just to start. Any divergence is completely fine, as long as it makes sense.

OK, got it

My recommendation is to focus on performance when it comes to your investments.

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Too many options, scared to make a wrong decision

Too many options, scared to make a wrong decision

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