Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
Well, that's it for residential SFH LTR real estate. I officially made the decision today to move on...
I listed two properties today. Reached out to the tenants of another one and they are interested in purchasing. And I'll list the other 2 here in the next month or so. That will be my last 5 properties.
Why you may ask?
I don't work in the real estate industry (not a REP) so (1) I can't take the depreciation. So I basically have a bunch of passive losses locked up. Rising insurance and property taxes have (2) dwindled cashflow to the point rents cannot be raised enough to cover the increase in expenses. (3) Labor has gone through the roof making flips even harder (plumbers used to be $85/hr, now they are $145/hr). I live in Louisiana and we (4) don't have the appreciation that a lot of other places have. There are some micro areas that have better appreciation but these are 300k+ houses (aka nothing you can rent for a profit).
So the 4 ways you make money - cashflow, appreciation, loan paydown and tax deductions have been 75% eliminated. The loan paydown is the only thing left and isn't significant until year 15 (really year 20). In my opinion that money can be better allocated elsewhere for better returns. For example...my rental cashflow is taxed at 37% - whereas I can invest in the stock market and only pay 20% capital gains. And the market has been on an absolute tear the past 3 years (and I see this continuing with AI/robotics/space & satellites).
Overall rating on my RE investments over the last 5 years...probably a 4/10. My duplex was my first purchase - bought for 104k, put about 15k into it (all in 120k). I'll list for 125k, so break even at best. Fourplex was second purchase - bought at 160k, will list for 185k+ (this one is the only one that really makes sense to keep, it cashflows and was bought at a discount). SFH 1 I paid 182k for (overpaid and got emotional), I'll list it for 198k (will likely take a 15-20k loss). SFH 2 I paid 150k, I'll sell to tenants for 197k or list for 205k (fantastic location, bought off-market, I like this one, make 45-50k). SFH 3 paid 130k back in 2017, probably list at 175k (this was a previous primary residence so no capital gains). I haven't bought anything since 2023 and my stock market gains have vastly outpaced my RE gains.
What would I do differently? I would make fewer BUT better deals. I wouldn't go above 80% ARV in ANY case. I'd learn about creative financing and use less of my own money (use more OPM). Then start a direct mail/texting (lead) campaign, funnel leads, make cold calls and ideally make a few great deals. I would ONLY buy in fantastic LOCATIONS. The recurring theme is PRICE & LOCATION. And focus on MAKING it a deal.
The other thing - GET INVOLVED. When I come back I plan to get involved with local groups. Go to the meet-ups. Check in regularly. Do deals with people etc. Maybe even do a mastermind or something with someone local. It's much easier to do things with a partner (or group) than on your own.
Now what am I going to do instead?! Develop a business. I bought some land off a major road and am planning to develop. I may do a trailer park depending on what I can pick up for cheap. I would only do real estate at scale (potentially syndicate or partner as well).
I think it will be a breath of fresh air not worrying about a pipe busting, a roof needing replacement etc. I am a little bummed about selling the "good ones" but that equity will be better allocated elsewhere.
I apologize for the long post. Any questions/comments/concerns let me know!
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5mo
nice post.. for someone that has been in the business for 50 years I am often asked how many rentals I have.. and that number is exactly 2 LOL I did make a run at C and D class in the deep south back post crash and bought about 300 of them with a few partners that lasted oh 18 months or so and I sold out.. to me these days its about right on's not write offs even though I can take the depreciation and I do that through a few hand picked syndicators that run their investments tighter than I can.. So for me lending money building houses and just live with the tax burden.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5mo
nice post.. for someone that has been in the business for 50 years I am often asked how many rentals I have.. and that number is exactly 2 LOL I did make a run at C and D class in the deep south back post crash and bought about 300 of them with a few partners that lasted oh 18 months or so and I sold out.. to me these days its about right on's not write offs even though I can take the depreciation and I do that through a few hand picked syndicators that run their investments tighter than I can.. So for me lending money building houses and just live with the tax burden.
nice post.. for someone that has been in the business for 50 years I am often asked how many rentals I have.. and that number is exactly 2 LOL I did make a run at C and D class in the deep south back post crash and bought about 300 of them with a few partners that lasted oh 18 months or so and I sold out.. to me these days its about right on's not write offs even though I can take the depreciation and I do that through a few hand picked syndicators that run their investments tighter than I can.. So for me lending money building houses and just live with the tax burden.
I am seeing more of that the more people I talk to as well...seems LTR SFH can be a starting point for a lot, but eventually most people move onto developing/building or a business type thing
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
5mo
Thanks for sharing this. As most people only hear and read the stories of those who get a one-hit wonder and do very well on an asset. In many instances, you also don't hear these topics discussed on podcasts or other outlets because the reality is that being successful in real estate is hard and is not always very easy to replicate. Whereas many will make it seem much easier and, by doing so, give people the idea that it is easy to replicate others' successes.
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
5mo
You need to use leverage for real estate to make any sense verses index funds, are your properties owned in cash it sounds like? All my north side chicago clients including myself who bought owner occupant for example 10% down in covid have seen a 300%+ return as properties here appreciated 30-50% since then. My clients who bought before covid even at 25% down have seen a 400% return as properties have doubled in price since then, index funds can not touch those type of total returns.
I love index funds too though and also invest in them and some bond funds but the returns are WAY lower then leveraged 2-4 unit rental properties.
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
5mo
@Henry Lazerow
Again this is based on my location. No doubt there are people that happen to be in the right area, get lucky or what have you and see atypical results. This is far from the norm however.
Yes my properties are leveraged, 20% down. Couple I could've turned into a BRRRR but then there's no cash flow when you rent it out. Once you get any type of equity you have to sell or have a low return on equity.
As far as stocks it's been a huge win for me the past couple of years. Any cash flow I make from rentals I'm paying 37% on. Capital gains I'm paying 20%. It's not even close. And yes you can leverage stocks fairly close to how you leverage with RE. And yes you can deduct margin interest.
I feel really bad for you. I'm not sure exactly what you're doing with stocks if your day trading or investing in penny stocks...or just buying and selling.
anyway I'm wishing you great luck in the stock market!!
I feel really bad for you. I'm not sure exactly what you're doing with stocks if your day trading or investing in penny stocks...or just buying and selling.
anyway I'm wishing you great luck in the stock market!!
Don't feel bad for me. This is still a profitable venture, just not a profitable as I expected or wanted it to be. I just feel there are better opportunities for my personal circumstances elsewhere at this time!
As for the stock market - I invest. I don't trade, do penny stocks, no options (yet) or anything like that. I DCA in good companies and index funds and I plan to leave the money there for a long time. I do use margin from time to time depending. Margin interest is 5% and my checking account makes 4.25% so it really comes out almost even but I maintain liquidity and have a tax deduction for the margin interest.
Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
5mo
I would make sure to run a tax projection to see what your gain on sale will be. You're right that the passive losses can't help you out over $150k but you'll thank yourself when these properties sell.
sorry to hear about your experience. Sometimes things work, other times they don't.
I would make sure to run a tax projection to see what your gain on sale will be. You're right that the passive losses can't help you out over $150k but you'll thank yourself when these properties sell.
sorry to hear about your experience. Sometimes things work, other times they don't.
For sure, I sent an email to my CPA at the same time I decided to list them lol. Figure the cost basis, depreciation recapture...I believe I can sell at least 2 at the same time. See what the damage looks like - if it's too bad I'll buy some raw land to hold for appreciation, subdivide etc
Yea I think my expectations and definitions of "working out" & "success" are different than most. I find that a lot of people don't consider opportunity cost - they consider their investment a success because they are not aware of other opportunities (they are not comparing it to anything, which is fine for some). I personally cannot do that.
Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
5mo
Hey @Jeremy Horton - First off - I GREATLY APPRECIATE YOUR POST! I am personally feeling in the same boat here in Chicago.
I went all in on real estate for about the last 6 years and have found myself more cash poor than ever (which I've done several times to myself - my life and real estate journey has been like a cashflow roller coaster).
I think the key it what you mentioned FEWER - BETTER DEALS. The other thing I would speak up about is focus on one area, one type of property, one strategy, etc. I tried every stratagey in too many places.
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
5mo
Thanks for posting this Jeremy!! We need more people keeping it real. After 15 years of buy and hold in my opinion it's all about leveraged appreciation. Cashflow is secondary. The problem with C and D class properties is they don't appreciate (much).
Cashflow is just for keeping the lights on. Wealth comes from equity and cashflow is usually around 7% of equity, give or take. Once you understand that, you know what to buy.
Buying in D and even C class areas is basically the training wheels that allow you to start with little money and then trade up (1031) into a better asset class.
Thanks for posting this Jeremy!! We need more people keeping it real. After 15 years of buy and hold in my opinion it's all about leveraged appreciation. Cashflow is secondary. The problem with C and D class properties is they don't appreciate (much).
Cashflow is just for keeping the lights on. Wealth comes from equity and cashflow is usually around 7% of equity, give or take. Once you understand that, you know what to buy.
Buying in D and even C class areas is basically the training wheels that allow you to start with little money and then trade up (1031) into a better asset class.
I agree 100%. Most of my properties were in B areas - maybe borderline B/C on the duplex and one of the SFHs. There is definitely a noticeable difference in maintenance & repairs. My A property will go all year without a single call to the PM. I would actually suggest skipping C/D areas - low appreciation/value add and tough to sell.
Personally I would only either do a flip or BRRRR (hold for a year then sell) or something at scale (trailer park/mobile home/RV park/townhome etc). I just do not see the money in SFH LTR in MOST locations. It just seems like you will end up getting low returns somewhere whether that's cashflow or equity.
Thanks for posting this Jeremy!! We need more people keeping it real. After 15 years of buy and hold in my opinion it's all about leveraged appreciation. Cashflow is secondary. The problem with C and D class properties is they don't appreciate (much).
Cashflow is just for keeping the lights on. Wealth comes from equity and cashflow is usually around 7% of equity, give or take. Once you understand that, you know what to buy.
Buying in D and even C class areas is basically the training wheels that allow you to start with little money and then trade up (1031) into a better asset class.
I agree 100%. Most of my properties were in B areas - maybe borderline B/C on the duplex and one of the SFHs. There is definitely a noticeable difference in maintenance & repairs. My A property will go all year without a single call to the PM. I would actually suggest skipping C/D areas - low appreciation/value add and tough to sell.
Personally I would only either do a flip or BRRRR (hold for a year then sell) or something at scale (trailer park/mobile home/RV park/townhome etc). I just do not see the money in SFH LTR in MOST locations. It just seems like you will end up getting low returns somewhere whether that's cashflow or equity.
From my research SFH can be a tough shot for a new investor. You only have 1 door rented out which also means 100% vacancy if that were to occur. SFH only makes sense to me if you're already well invested, and can afford huge down payments. The mortgage rate can be high on SFHs especially if you only have 1 door.
Thanks for posting this Jeremy!! We need more people keeping it real. After 15 years of buy and hold in my opinion it's all about leveraged appreciation. Cashflow is secondary. The problem with C and D class properties is they don't appreciate (much).
Cashflow is just for keeping the lights on. Wealth comes from equity and cashflow is usually around 7% of equity, give or take. Once you understand that, you know what to buy.
Buying in D and even C class areas is basically the training wheels that allow you to start with little money and then trade up (1031) into a better asset class.
I agree 100%. Most of my properties were in B areas - maybe borderline B/C on the duplex and one of the SFHs. There is definitely a noticeable difference in maintenance & repairs. My A property will go all year without a single call to the PM. I would actually suggest skipping C/D areas - low appreciation/value add and tough to sell.
Personally I would only either do a flip or BRRRR (hold for a year then sell) or something at scale (trailer park/mobile home/RV park/townhome etc). I just do not see the money in SFH LTR in MOST locations. It just seems like you will end up getting low returns somewhere whether that's cashflow or equity.
I believe there are different definitions for A,B,C and D. Some people rate rentals in this way and if it is a top rental property they rate it A. But when you segment a market professionally the median sales price for your area is the divining line between B and C.
The 300k SFR you mentioned is likely in a B area. Class A neighborhoods are typically over 500k or higher, makes absolutely no sense to invest there. We target right around the median, maybe a little above. By definition, these are the areas where people want to move to from the areas below the median.
But you are right: the financial model for B areas is almost impossible, you have to put 30-40% down to break even, cash flow comes after a few years, but you have a significant dollar amount going towards principal every month. And of course you have appreciation.
Some similarities here. I went "all in" (for me) and bought 5 SFH rentals from ‘20-‘24 and am selling 1-2 of them soon to deploy $ elsewhere. I'm keeping the 3% mortgages and selling some 7% ones.
I’m not selling out though, more just diversifying. I like rental real estate in moderation, I’m just gonna park $ in other places too, which I haven’t done much of yet.
Yup, I hear what your saying. I'm in Seattle la la land, where our city council is determined to eliminate the landlord. When this started 10 years ago I thought no big deal, I can ride this out. It continues and I'm just sick of it. AND, I see my stock going wild and I'm thinking (after many years) this landlord thing is now for chumps. All SFH's. I have a few beauties that I can't bear to leave, and fortunately they are not in Seattle. You may consider holding onto that Multi family. If there's any relief or future in rentals it might be there. In Seattle the SFR is dead. You know what your'e doing, all I can add is to not put all eggs in one basket. Keep rockin'.
Real Estate Agent · Memphis · Member since 2026 · 546 posts · 316 votes
5mo
Appreciate you laying this out — a lot of people think this but don’t say it this clearly.
What you’re describing isn’t really “real estate doesn’t work,” it’s more a combination of market selection, timing, and how the deals were structured going in. When cash flow is thin and appreciation isn’t doing the heavy lifting, the margin for error gets really tight.
The part that stands out is you’ve already identified it — price and location. If those aren’t dialed in upfront, everything else (taxes, insurance, labor) just compounds the pressure over time.
On the PM side of things, a lot of portfolios in that range end up feeling worse than they should because operations aren’t tight enough to protect the margins that are there. Small inefficiencies don’t look like much individually, but they stack quickly when cash flow is already thin.
That said, your shift in approach makes sense — fewer deals, better basis, and more control over execution. That’s usually where people see a different outcome the second time around.
Appreciate you laying this out — a lot of people think this but don’t say it this clearly.
What you’re describing isn’t really “real estate doesn’t work,” it’s more a combination of market selection, timing, and how the deals were structured going in. When cash flow is thin and appreciation isn’t doing the heavy lifting, the margin for error gets really tight.
The part that stands out is you’ve already identified it — price and location. If those aren’t dialed in upfront, everything else (taxes, insurance, labor) just compounds the pressure over time.
On the PM side of things, a lot of portfolios in that range end up feeling worse than they should because operations aren’t tight enough to protect the margins that are there. Small inefficiencies don’t look like much individually, but they stack quickly when cash flow is already thin.
That said, your shift in approach makes sense — fewer deals, better basis, and more control over execution. That’s usually where people see a different outcome the second time around.
I need to clarify because there seems to be some confusion - and I have considered posting actual numbers from my portfolio but the post itself would be very long.
As of right now EVERYTHING CASHFLOWS even after increases in insurance/taxes and they are all managed by a property manager. I track all of this monthly and run annual reports on an individual basis and portfolio basis. 3 out of the last 5 were bought at a GOOD DISCOUNT - 80% ARV all in.
By MOST people's standards, they would probably consider this a success and continue to rent them out long term BUT alas they would be forgetting the OPPORTUNITY COST. Why make $5 here, when I can make $7 over there (the key is you have to recognize the $7 opportunity)?
The "Lessons Learned" is simply what I have identified over the last 5 years that would help someone be MORE successful. Clarifying that I am not saying this was a failure (relative to general real estate investing and probably most), but simply that these lessons could make someone MORE successful.
My main question is how much cashflow were you bringing in before these increases in taxes and insurance?
It sounds like you had a few market issues. I believe you can get back into it, but consult more. I believe the real value is found by holding onto LTRs if they are producing cash flow well enough. Your debt is being paid down, and all you need to do is use the extra cash flow to supplement fixes when needed. A misconception I've read over and over is that people think real estate is going to make them a millionaire over night. But, either way it sounds like your market went sour, or you didn't do the proper research needed.
My main question is how much cashflow were you bringing in before these increases in taxes and insurance?
It sounds like you had a few market issues. I believe you can get back into it, but consult more. I believe the real value is found by holding onto LTRs if they are producing cash flow well enough. Your debt is being paid down, and all you need to do is use the extra cash flow to supplement fixes when needed. A misconception I've read over and over is that people think real estate is going to make them a millionaire over night. But, either way it sounds like your market went sour, or you didn't do the proper research needed.
BEST OF LUCK!
No, you're misunderstanding. I don't want to get back into it. Look at my post history if you want to see cashflow, I posted about it not long ago. Cashflow was not a problem - it has been eroded over the past several years but EVERYTHING STILL CASHFLOWS. Could I continue to rent these out? Sure. Do I want to? No.
Could I check into insurance policies and do cash value or something instead? Sure. Do I want to? No. Could I maybe raise rents and squeeze a little more here and there? Sure. Do I want to? No.
You would probably look at my numbers and consider this portfolio a success honestly. I don't because I want to pursue other opportunities that I believe will be much better. (much better for my personal circumstances).
Like I said - even the cashflow I do make is taxed at 35-37%. Why would I do this when capital gains is 20%? For my personal situation it doesn't work out nearly as well. Why would I continue to lock up passive losses when I can develop an active business and deduct directly from my W2?
If I was a RE agent then sure - I'd get to deduct the depreciation saving me thousands (REP). Could probably easily manage them saving even more. The tax situation is much lower. Now I'm not a RE agent, I'm a W2 employee.
If I did this again it would be done ACTIVELY and at SCALE.
My main question is how much cashflow were you bringing in before these increases in taxes and insurance?
It sounds like you had a few market issues. I believe you can get back into it, but consult more. I believe the real value is found by holding onto LTRs if they are producing cash flow well enough. Your debt is being paid down, and all you need to do is use the extra cash flow to supplement fixes when needed. A misconception I've read over and over is that people think real estate is going to make them a millionaire over night. But, either way it sounds like your market went sour, or you didn't do the proper research needed.
BEST OF LUCK!
No, you're misunderstanding. I don't want to get back into it. Look at my post history if you want to see cashflow, I posted about it not long ago. Cashflow was not a problem - it has been eroded over the past several years but EVERYTHING STILL CASHFLOWS. Could I continue to rent these out? Sure. Do I want to? No.
Could I check into insurance policies and do cash value or something instead? Sure. Do I want to? No. Could I maybe raise rents and squeeze a little more here and there? Sure. Do I want to? No.
You would probably look at my numbers and consider this portfolio a success honestly. I don't because I want to pursue other opportunities that I believe will be much better. (much better for my personal circumstances).
Like I said - even the cashflow I do make is taxed at 35-37%. Why would I do this when capital gains is 20%? For my personal situation it doesn't work out nearly as well. Why would I continue to lock up passive losses when I can develop an active business and deduct directly from my W2?
If I was a RE agent then sure - I'd get to deduct the depreciation saving me thousands (REP). Could probably easily manage them saving even more. The tax situation is much lower. Now I'm not a RE agent, I'm a W2 employee.
If I did this again it would be done ACTIVELY and at SCALE.
My main question is how much cashflow were you bringing in before these increases in taxes and insurance?
It sounds like you had a few market issues. I believe you can get back into it, but consult more. I believe the real value is found by holding onto LTRs if they are producing cash flow well enough. Your debt is being paid down, and all you need to do is use the extra cash flow to supplement fixes when needed. A misconception I've read over and over is that people think real estate is going to make them a millionaire over night. But, either way it sounds like your market went sour, or you didn't do the proper research needed.
BEST OF LUCK!
No, you're misunderstanding. I don't want to get back into it. Look at my post history if you want to see cashflow, I posted about it not long ago. Cashflow was not a problem - it has been eroded over the past several years but EVERYTHING STILL CASHFLOWS. Could I continue to rent these out? Sure. Do I want to? No.
Could I check into insurance policies and do cash value or something instead? Sure. Do I want to? No. Could I maybe raise rents and squeeze a little more here and there? Sure. Do I want to? No.
You would probably look at my numbers and consider this portfolio a success honestly. I don't because I want to pursue other opportunities that I believe will be much better. (much better for my personal circumstances).
Like I said - even the cashflow I do make is taxed at 35-37%. Why would I do this when capital gains is 20%? For my personal situation it doesn't work out nearly as well. Why would I continue to lock up passive losses when I can develop an active business and deduct directly from my W2?
If I was a RE agent then sure - I'd get to deduct the depreciation saving me thousands (REP). Could probably easily manage them saving even more. The tax situation is much lower. Now I'm not a RE agent, I'm a W2 employee.
If I did this again it would be done ACTIVELY and at SCALE.
Check out ROTH retirement plans.
I've been doing the backdoor ROTH IRA for the last 5-6 years
My 401K is traditional since I get the tax deductions now. When I'm older I plan to have more tax deductions. So although the traditional 401k income will be taxed in retirement, I will ideally be able to deduct a lot from it using various active businesses. That is the plan anyway
Investor · Hatboro, PA · Member since 2016 · 2k+ posts · 850 votes
5mo
Hi @Jeremy Horton, takes a lot of clarity to step back and reallocate when something isn’t performing the way you want.
Alot of what you’re saying resonates. I actually had to go through a similar reset back during the 2008 downturn. I learned the hard way that owning a bunch of properties doesn’t always equal freedom, especially when the market shifts and everything gets stressed at once. That experience is a big part of why I invest the way I do now, much more focused on downside protection, strong operators, and not doing it all alone. It’s also what led my partner and I to build our co investing club, so we can vet deals together and be more intentional about where we put capital.
Honestly, what you’re doing sounds like refining your approach based on real experience, which is where the real growth happens!
Well, that's it for residential SFH LTR real estate. I officially made the decision today to move on...
I listed two properties today. Reached out to the tenants of another one and they are interested in purchasing. And I'll list the other 2 here in the next month or so. That will be my last 5 properties.
Why you may ask?
I don't work in the real estate industry (not a REP) so (1) I can't take the depreciation. So I basically have a bunch of passive losses locked up. Rising insurance and property taxes have (2) dwindled cashflow to the point rents cannot be raised enough to cover the increase in expenses. (3) Labor has gone through the roof making flips even harder (plumbers used to be $85/hr, now they are $145/hr). I live in Louisiana and we (4) don't have the appreciation that a lot of other places have. There are some micro areas that have better appreciation but these are 300k+ houses (aka nothing you can rent for a profit).
So the 4 ways you make money - cashflow, appreciation, loan paydown and tax deductions have been 75% eliminated. The loan paydown is the only thing left and isn't significant until year 15 (really year 20). In my opinion that money can be better allocated elsewhere for better returns. For example...my rental cashflow is taxed at 37% - whereas I can invest in the stock market and only pay 20% capital gains. And the market has been on an absolute tear the past 3 years (and I see this continuing with AI/robotics/space & satellites).
Overall rating on my RE investments over the last 5 years...probably a 4/10. My duplex was my first purchase - bought for 104k, put about 15k into it (all in 120k). I'll list for 125k, so break even at best. Fourplex was second purchase - bought at 160k, will list for 185k+ (this one is the only one that really makes sense to keep, it cashflows and was bought at a discount). SFH 1 I paid 182k for (overpaid and got emotional), I'll list it for 198k (will likely take a 15-20k loss). SFH 2 I paid 150k, I'll sell to tenants for 197k or list for 205k (fantastic location, bought off-market, I like this one, make 45-50k). SFH 3 paid 130k back in 2017, probably list at 175k (this was a previous primary residence so no capital gains). I haven't bought anything since 2023 and my stock market gains have vastly outpaced my RE gains.
What would I do differently? I would make fewer BUT better deals. I wouldn't go above 80% ARV in ANY case. I'd learn about creative financing and use less of my own money (use more OPM). Then start a direct mail/texting (lead) campaign, funnel leads, make cold calls and ideally make a few great deals. I would ONLY buy in fantastic LOCATIONS. The recurring theme is PRICE & LOCATION. And focus on MAKING it a deal.
The other thing - GET INVOLVED. When I come back I plan to get involved with local groups. Go to the meet-ups. Check in regularly. Do deals with people etc. Maybe even do a mastermind or something with someone local. It's much easier to do things with a partner (or group) than on your own.
Now what am I going to do instead?! Develop a business. I bought some land off a major road and am planning to develop. I may do a trailer park depending on what I can pick up for cheap. I would only do real estate at scale (potentially syndicate or partner as well).
I think it will be a breath of fresh air not worrying about a pipe busting, a roof needing replacement etc. I am a little bummed about selling the "good ones" but that equity will be better allocated elsewhere.
I apologize for the long post. Any questions/comments/concerns let me know!
You’ve hit more than a few interesting points. With the way the cap rates (very low)on most properties are right now, a buy, rent and hold strategy seems impossibly long term with replacement, repair, and maintenance expenses eating up whatever positive cash flow was projected.
IF the stock market sees a severe (say 40%) ‘CORRECTION’ over the next decade people will be flocking to real estate - not saying it’s going to happen - just that it’s a possibility.
For real estate INVESTORS, (rather than people in the real estate BUSINESS (or VERY “involved” investors), carefully selected REITs offer as good, or better returns without the hassle of “tenants and toilets”.
For those who have mastered “creative real estate WEALTH ENHANCEMENT strategies, NOTHING will produce the risk/return reward of utilizing those strategies.
At the risk of redundancy (I’ve published the following before), here are SOME of the real estate investment strategies I used to start with $5,000 45 years ago and create a low (very low) 8 figure estate
Buy truly below market by offering a very fast close, all cash, without the need for financing. To implement this strategy you need to have the full purchase price in readily accessible funds, so it won’t work for the majority of investors. Further, only a minority of sellers will be interested or motivated to offer a significant discount for an immediate no contingency sale.
Sell a property with an existing low interest mortgage utilizing a mortgage wrap. You’ll receive a higher price for the property because by offering seller financing you open up the bidding to a greater number of buyers. You create a note with an ultra high yield because you capture the interest rate differential between the stated interest rate on the wrap note and the lower interest rate on the underlying note.
3. Substitute a note purchased at large discount for seller financed note at full value (substitution of collateral)
Buy a property with seller financing at a low interest rate and long term and a substitution of collateral clause. Buy a note with a interest rate similar to the seller financed note at a large discount due to the relatively low interest rate and long term - and “substitute” this note for the seller financed note. You’ve just decreased your purchase price by the difference between the principal of the seller financed note and the “discounted” price you paid for the substitute note. Further, you now own a “free and clear” property you can borrow against should you desire and probably get all your invested cash out.
Negotiate for ownership interest in a property, with good cash flow from operations, but suffering negative cash flow from a high interest hard money loan that the owner can't refinance due to his personal credit limitations. Refinance using your good credit at 50% LTV and no personal guarantee. Negotiate the lender allowing a one time note assumption.
5.Worknote
Purchase a low interest rate note at a significant discount to principal. “Work” the note by offering a smaller discount for payoff to the debtor, or by enticing an increase in monthly payments for a decrease in interest rate, which should if structured correctly increase you yield.
6.Business/Realestatecombination
Purchase a business property such as an automotive repair shop. Purchase all heavy equipment needed for an automotive service business such as lifts, cranes, etc. Find an experienced operator wanting to operate in your location and sell him the business and lease the real estate to him. You can charge a hefty premium because with the shop fully equipped the operator saves the cost of outfitting the shop and the time and effort required. You can obtain a 12 cap or better. on this type of situation.
7. Syndicate deal
Syndicate property or note acquisition and retain equity interest as “promote”.
8. Purchase property or note wholesale; sell one half interest retail
Troy, MI · Member since 2019 · 61 posts · 20 votes
5mo
@Jeremy Horton I certainly understand what you are saying. We could never get more rentals in Troy MI that would match the returns we are getting on our 2 duplexes. We also own rentals in other parts of Metro Detroit that have significantly appreciated, and started flipping last year making money on both we sold.
On to today! We closed on 2 houses for $180K, not in the city of Detroit! One has a tenant, the other can be made tenant ready quickly. Wish we had more bandwidth, there are more deals out there.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
5mo
@Jeremy Hortonand you can get into a lot of investments that are a lot more passive. However it is a good move talking to the CPA because we have had situations with taxes where timing would have made all the difference in our tax burden. Not sure in your case it will matter but sometimes it does.
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
5mo
Thanks for sharing. It's an absolute grind and not worth it as I see it for SFH long term rentals. I think value add and owner occupied strategies are the only options that make sense in the current market. I suppose you could make the argument for leverage + appreciation on expensive assets/locations, but that's a gut punch every month for 2-5 years right now.
I also love the "I told you so" nature of so many of these responses. You're an experienced operator that is going into this wide eyed. Good luck on the next venture...I have a feeling that it's gonna work out just fine.
Well, that's it for residential SFH LTR real estate. I officially made the decision today to move on...
I listed two properties today. Reached out to the tenants of another one and they are interested in purchasing. And I'll list the other 2 here in the next month or so. That will be my last 5 properties.
Why you may ask?
I don't work in the real estate industry (not a REP) so (1) I can't take the depreciation. So I basically have a bunch of passive losses locked up. Rising insurance and property taxes have (2) dwindled cashflow to the point rents cannot be raised enough to cover the increase in expenses. (3) Labor has gone through the roof making flips even harder (plumbers used to be $85/hr, now they are $145/hr). I live in Louisiana and we (4) don't have the appreciation that a lot of other places have. There are some micro areas that have better appreciation but these are 300k+ houses (aka nothing you can rent for a profit).
So the 4 ways you make money - cashflow, appreciation, loan paydown and tax deductions have been 75% eliminated. The loan paydown is the only thing left and isn't significant until year 15 (really year 20). In my opinion that money can be better allocated elsewhere for better returns. For example...my rental cashflow is taxed at 37% - whereas I can invest in the stock market and only pay 20% capital gains. And the market has been on an absolute tear the past 3 years (and I see this continuing with AI/robotics/space & satellites).
Overall rating on my RE investments over the last 5 years...probably a 4/10. My duplex was my first purchase - bought for 104k, put about 15k into it (all in 120k). I'll list for 125k, so break even at best. Fourplex was second purchase - bought at 160k, will list for 185k+ (this one is the only one that really makes sense to keep, it cashflows and was bought at a discount). SFH 1 I paid 182k for (overpaid and got emotional), I'll list it for 198k (will likely take a 15-20k loss). SFH 2 I paid 150k, I'll sell to tenants for 197k or list for 205k (fantastic location, bought off-market, I like this one, make 45-50k). SFH 3 paid 130k back in 2017, probably list at 175k (this was a previous primary residence so no capital gains). I haven't bought anything since 2023 and my stock market gains have vastly outpaced my RE gains.
What would I do differently? I would make fewer BUT better deals. I wouldn't go above 80% ARV in ANY case. I'd learn about creative financing and use less of my own money (use more OPM). Then start a direct mail/texting (lead) campaign, funnel leads, make cold calls and ideally make a few great deals. I would ONLY buy in fantastic LOCATIONS. The recurring theme is PRICE & LOCATION. And focus on MAKING it a deal.
The other thing - GET INVOLVED. When I come back I plan to get involved with local groups. Go to the meet-ups. Check in regularly. Do deals with people etc. Maybe even do a mastermind or something with someone local. It's much easier to do things with a partner (or group) than on your own.
Now what am I going to do instead?! Develop a business. I bought some land off a major road and am planning to develop. I may do a trailer park depending on what I can pick up for cheap. I would only do real estate at scale (potentially syndicate or partner as well).
I think it will be a breath of fresh air not worrying about a pipe busting, a roof needing replacement etc. I am a little bummed about selling the "good ones" but that equity will be better allocated elsewhere.
I apologize for the long post. Any questions/comments/concerns let me know!
You make your money when you buy - meaning, you set your future gains up by how/what/where you buy.
Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
5mo
@Marcus Auerbach - 10 years into the game myself, I never heard someone explain appreciation and cashflow in such a practical manner that makes a lot of sense regarding wealth generation.
I can also see how starting with C & D properties with some cash flow -> Paying down the debt and building a small amount of appreciation allows you the opportunity to trade up into higher appreciating assets.
Well, that's it for residential SFH LTR real estate. I officially made the decision today to move on...
I listed two properties today. Reached out to the tenants of another one and they are interested in purchasing. And I'll list the other 2 here in the next month or so. That will be my last 5 properties.
Why you may ask?
I don't work in the real estate industry (not a REP) so (1) I can't take the depreciation. So I basically have a bunch of passive losses locked up. Rising insurance and property taxes have (2) dwindled cashflow to the point rents cannot be raised enough to cover the increase in expenses. (3) Labor has gone through the roof making flips even harder (plumbers used to be $85/hr, now they are $145/hr). I live in Louisiana and we (4) don't have the appreciation that a lot of other places have. There are some micro areas that have better appreciation but these are 300k+ houses (aka nothing you can rent for a profit).
So the 4 ways you make money - cashflow, appreciation, loan paydown and tax deductions have been 75% eliminated. The loan paydown is the only thing left and isn't significant until year 15 (really year 20). In my opinion that money can be better allocated elsewhere for better returns. For example...my rental cashflow is taxed at 37% - whereas I can invest in the stock market and only pay 20% capital gains. And the market has been on an absolute tear the past 3 years (and I see this continuing with AI/robotics/space & satellites).
Overall rating on my RE investments over the last 5 years...probably a 4/10. My duplex was my first purchase - bought for 104k, put about 15k into it (all in 120k). I'll list for 125k, so break even at best. Fourplex was second purchase - bought at 160k, will list for 185k+ (this one is the only one that really makes sense to keep, it cashflows and was bought at a discount). SFH 1 I paid 182k for (overpaid and got emotional), I'll list it for 198k (will likely take a 15-20k loss). SFH 2 I paid 150k, I'll sell to tenants for 197k or list for 205k (fantastic location, bought off-market, I like this one, make 45-50k). SFH 3 paid 130k back in 2017, probably list at 175k (this was a previous primary residence so no capital gains). I haven't bought anything since 2023 and my stock market gains have vastly outpaced my RE gains.
What would I do differently? I would make fewer BUT better deals. I wouldn't go above 80% ARV in ANY case. I'd learn about creative financing and use less of my own money (use more OPM). Then start a direct mail/texting (lead) campaign, funnel leads, make cold calls and ideally make a few great deals. I would ONLY buy in fantastic LOCATIONS. The recurring theme is PRICE & LOCATION. And focus on MAKING it a deal.
The other thing - GET INVOLVED. When I come back I plan to get involved with local groups. Go to the meet-ups. Check in regularly. Do deals with people etc. Maybe even do a mastermind or something with someone local. It's much easier to do things with a partner (or group) than on your own.
Now what am I going to do instead?! Develop a business. I bought some land off a major road and am planning to develop. I may do a trailer park depending on what I can pick up for cheap. I would only do real estate at scale (potentially syndicate or partner as well).
I think it will be a breath of fresh air not worrying about a pipe busting, a roof needing replacement etc. I am a little bummed about selling the "good ones" but that equity will be better allocated elsewhere.
I apologize for the long post. Any questions/comments/concerns let me know!
This is a completely understandable post. It can be an exhausting industry and can drain your finances in more ways than one.
I would suggest though, going one step further and keeping one toe in the game. That property you're going to lose money on? Do a contract for deed and Seller Finance it out to another investor. Two toes in and you could do the same with the fourplex you like.
Maybe you have cash flow now, maybe not. But you won't lose money and perhaps those properties will come back to you in 5 years or so or at least you'll make a profit by the end. You could find buyers at those groups you haven't gotten involved in yet. Maybe you'll find someone to partner with on your mobile home park venture there too.
Happy to help go over how to fund those if you want.
Well, that's it for residential SFH LTR real estate. I officially made the decision today to move on...
I listed two properties today. Reached out to the tenants of another one and they are interested in purchasing. And I'll list the other 2 here in the next month or so. That will be my last 5 properties.
Why you may ask?
I don't work in the real estate industry (not a REP) so (1) I can't take the depreciation. So I basically have a bunch of passive losses locked up. Rising insurance and property taxes have (2) dwindled cashflow to the point rents cannot be raised enough to cover the increase in expenses. (3) Labor has gone through the roof making flips even harder (plumbers used to be $85/hr, now they are $145/hr). I live in Louisiana and we (4) don't have the appreciation that a lot of other places have. There are some micro areas that have better appreciation but these are 300k+ houses (aka nothing you can rent for a profit).
So the 4 ways you make money - cashflow, appreciation, loan paydown and tax deductions have been 75% eliminated. The loan paydown is the only thing left and isn't significant until year 15 (really year 20). In my opinion that money can be better allocated elsewhere for better returns. For example...my rental cashflow is taxed at 37% - whereas I can invest in the stock market and only pay 20% capital gains. And the market has been on an absolute tear the past 3 years (and I see this continuing with AI/robotics/space & satellites).
Overall rating on my RE investments over the last 5 years...probably a 4/10. My duplex was my first purchase - bought for 104k, put about 15k into it (all in 120k). I'll list for 125k, so break even at best. Fourplex was second purchase - bought at 160k, will list for 185k+ (this one is the only one that really makes sense to keep, it cashflows and was bought at a discount). SFH 1 I paid 182k for (overpaid and got emotional), I'll list it for 198k (will likely take a 15-20k loss). SFH 2 I paid 150k, I'll sell to tenants for 197k or list for 205k (fantastic location, bought off-market, I like this one, make 45-50k). SFH 3 paid 130k back in 2017, probably list at 175k (this was a previous primary residence so no capital gains). I haven't bought anything since 2023 and my stock market gains have vastly outpaced my RE gains.
What would I do differently? I would make fewer BUT better deals. I wouldn't go above 80% ARV in ANY case. I'd learn about creative financing and use less of my own money (use more OPM). Then start a direct mail/texting (lead) campaign, funnel leads, make cold calls and ideally make a few great deals. I would ONLY buy in fantastic LOCATIONS. The recurring theme is PRICE & LOCATION. And focus on MAKING it a deal.
The other thing - GET INVOLVED. When I come back I plan to get involved with local groups. Go to the meet-ups. Check in regularly. Do deals with people etc. Maybe even do a mastermind or something with someone local. It's much easier to do things with a partner (or group) than on your own.
Now what am I going to do instead?! Develop a business. I bought some land off a major road and am planning to develop. I may do a trailer park depending on what I can pick up for cheap. I would only do real estate at scale (potentially syndicate or partner as well).
I think it will be a breath of fresh air not worrying about a pipe busting, a roof needing replacement etc. I am a little bummed about selling the "good ones" but that equity will be better allocated elsewhere.
I apologize for the long post. Any questions/comments/concerns let me know!
This is a completely understandable post. It can be an exhausting industry and can drain your finances in more ways than one.
I would suggest though, going one step further and keeping one toe in the game. That property you're going to lose money on? Do a contract for deed and Seller Finance it out to another investor. Two toes in and you could do the same with the fourplex you like.
Maybe you have cash flow now, maybe not. But you won't lose money and perhaps those properties will come back to you in 5 years or so or at least you'll make a profit by the end. You could find buyers at those groups you haven't gotten involved in yet. Maybe you'll find someone to partner with on your mobile home park venture there too.
Happy to help go over how to fund those if you want.
It's an interesting take, and one I've thought about. Just keeping a couple of the best ones. I keep coming back to the same thing though...can't take the tax deductions, return on equity is low, the small cashflow doesn't move the needle as far as my monthly expenses. And then you have the opportunity cost - 50k+ sitting in a property in 5 years. I like to gamble a little bit in the market, especially when it's a bull market as we've had and I bet I can nearly double that in a year or two (and then only pay 20% capital gains) and use that money to borrow against (even cheaper than a HELOC right now, and deduct the margin interest).
I still cashflow, but it's just not that good, if that makes sense. It's too slow, the returns are too low and I am not in a position to maximize the returns. If I was in the RE industry myself, I'd keep all of them no doubt.
I could see myself getting back into in a few years before retirement - preferably something larger though - small apartment complex, trailer/RV park something at scale. That would be secondary to running a business, which I believe I will have multiple at that time. I much prefer the business route overall.
Well, that's it for residential SFH LTR real estate. I officially made the decision today to move on...
I listed two properties today. Reached out to the tenants of another one and they are interested in purchasing. And I'll list the other 2 here in the next month or so. That will be my last 5 properties.
Why you may ask?
I don't work in the real estate industry (not a REP) so (1) I can't take the depreciation. So I basically have a bunch of passive losses locked up. Rising insurance and property taxes have (2) dwindled cashflow to the point rents cannot be raised enough to cover the increase in expenses. (3) Labor has gone through the roof making flips even harder (plumbers used to be $85/hr, now they are $145/hr). I live in Louisiana and we (4) don't have the appreciation that a lot of other places have. There are some micro areas that have better appreciation but these are 300k+ houses (aka nothing you can rent for a profit).
So the 4 ways you make money - cashflow, appreciation, loan paydown and tax deductions have been 75% eliminated. The loan paydown is the only thing left and isn't significant until year 15 (really year 20). In my opinion that money can be better allocated elsewhere for better returns. For example...my rental cashflow is taxed at 37% - whereas I can invest in the stock market and only pay 20% capital gains. And the market has been on an absolute tear the past 3 years (and I see this continuing with AI/robotics/space & satellites).
Overall rating on my RE investments over the last 5 years...probably a 4/10. My duplex was my first purchase - bought for 104k, put about 15k into it (all in 120k). I'll list for 125k, so break even at best. Fourplex was second purchase - bought at 160k, will list for 185k+ (this one is the only one that really makes sense to keep, it cashflows and was bought at a discount). SFH 1 I paid 182k for (overpaid and got emotional), I'll list it for 198k (will likely take a 15-20k loss). SFH 2 I paid 150k, I'll sell to tenants for 197k or list for 205k (fantastic location, bought off-market, I like this one, make 45-50k). SFH 3 paid 130k back in 2017, probably list at 175k (this was a previous primary residence so no capital gains). I haven't bought anything since 2023 and my stock market gains have vastly outpaced my RE gains.
What would I do differently? I would make fewer BUT better deals. I wouldn't go above 80% ARV in ANY case. I'd learn about creative financing and use less of my own money (use more OPM). Then start a direct mail/texting (lead) campaign, funnel leads, make cold calls and ideally make a few great deals. I would ONLY buy in fantastic LOCATIONS. The recurring theme is PRICE & LOCATION. And focus on MAKING it a deal.
The other thing - GET INVOLVED. When I come back I plan to get involved with local groups. Go to the meet-ups. Check in regularly. Do deals with people etc. Maybe even do a mastermind or something with someone local. It's much easier to do things with a partner (or group) than on your own.
Now what am I going to do instead?! Develop a business. I bought some land off a major road and am planning to develop. I may do a trailer park depending on what I can pick up for cheap. I would only do real estate at scale (potentially syndicate or partner as well).
I think it will be a breath of fresh air not worrying about a pipe busting, a roof needing replacement etc. I am a little bummed about selling the "good ones" but that equity will be better allocated elsewhere.
I apologize for the long post. Any questions/comments/concerns let me know!
This is a completely understandable post. It can be an exhausting industry and can drain your finances in more ways than one.
I would suggest though, going one step further and keeping one toe in the game. That property you're going to lose money on? Do a contract for deed and Seller Finance it out to another investor. Two toes in and you could do the same with the fourplex you like.
Maybe you have cash flow now, maybe not. But you won't lose money and perhaps those properties will come back to you in 5 years or so or at least you'll make a profit by the end. You could find buyers at those groups you haven't gotten involved in yet. Maybe you'll find someone to partner with on your mobile home park venture there too.
Happy to help go over how to fund those if you want.
It's an interesting take, and one I've thought about. Just keeping a couple of the best ones. I keep coming back to the same thing though...can't take the tax deductions, return on equity is low, the small cashflow doesn't move the needle as far as my monthly expenses. And then you have the opportunity cost - 50k+ sitting in a property in 5 years. I like to gamble a little bit in the market, especially when it's a bull market as we've had and I bet I can nearly double that in a year or two (and then only pay 20% capital gains) and use that money to borrow against (even cheaper than a HELOC right now, and deduct the margin interest).
I still cashflow, but it's just not that good, if that makes sense. It's too slow, the returns are too low and I am not in a position to maximize the returns. If I was in the RE industry myself, I'd keep all of them no doubt.
I could see myself getting back into in a few years before retirement - preferably something larger though - small apartment complex, trailer/RV park something at scale. That would be secondary to running a business, which I believe I will have multiple at that time. I much prefer the business route overall.
Personally, I'm a much bigger fan of multi-family myself too. What businesses are you looking at seriously?
Rental Property Investor · Member since 2018 · 826 posts · 810 votes
5mo
Sorry to hear about the burn-out but appreciate you being honest for others to learn from. Over the years more “cash flow” chasers will hit the same wall, and unfortunately posts like these will get buried by the flurries of Midwest cash flow sales people.
Human nature seeks fast gratification, so it’ll be hard for most to focus on high quality assets that have lower cap rates. Certainly money can be made in any market, but folks need to be real about how much effort is worth the yield.
yield is a function of risk, effort and barriers to entry. Period.
Well, that's it for residential SFH LTR real estate. I officially made the decision today to move on...
I listed two properties today. Reached out to the tenants of another one and they are interested in purchasing. And I'll list the other 2 here in the next month or so. That will be my last 5 properties.
Why you may ask?
I don't work in the real estate industry (not a REP) so (1) I can't take the depreciation. So I basically have a bunch of passive losses locked up. Rising insurance and property taxes have (2) dwindled cashflow to the point rents cannot be raised enough to cover the increase in expenses. (3) Labor has gone through the roof making flips even harder (plumbers used to be $85/hr, now they are $145/hr). I live in Louisiana and we (4) don't have the appreciation that a lot of other places have. There are some micro areas that have better appreciation but these are 300k+ houses (aka nothing you can rent for a profit).
So the 4 ways you make money - cashflow, appreciation, loan paydown and tax deductions have been 75% eliminated. The loan paydown is the only thing left and isn't significant until year 15 (really year 20). In my opinion that money can be better allocated elsewhere for better returns. For example...my rental cashflow is taxed at 37% - whereas I can invest in the stock market and only pay 20% capital gains. And the market has been on an absolute tear the past 3 years (and I see this continuing with AI/robotics/space & satellites).
Overall rating on my RE investments over the last 5 years...probably a 4/10. My duplex was my first purchase - bought for 104k, put about 15k into it (all in 120k). I'll list for 125k, so break even at best. Fourplex was second purchase - bought at 160k, will list for 185k+ (this one is the only one that really makes sense to keep, it cashflows and was bought at a discount). SFH 1 I paid 182k for (overpaid and got emotional), I'll list it for 198k (will likely take a 15-20k loss). SFH 2 I paid 150k, I'll sell to tenants for 197k or list for 205k (fantastic location, bought off-market, I like this one, make 45-50k). SFH 3 paid 130k back in 2017, probably list at 175k (this was a previous primary residence so no capital gains). I haven't bought anything since 2023 and my stock market gains have vastly outpaced my RE gains.
What would I do differently? I would make fewer BUT better deals. I wouldn't go above 80% ARV in ANY case. I'd learn about creative financing and use less of my own money (use more OPM). Then start a direct mail/texting (lead) campaign, funnel leads, make cold calls and ideally make a few great deals. I would ONLY buy in fantastic LOCATIONS. The recurring theme is PRICE & LOCATION. And focus on MAKING it a deal.
The other thing - GET INVOLVED. When I come back I plan to get involved with local groups. Go to the meet-ups. Check in regularly. Do deals with people etc. Maybe even do a mastermind or something with someone local. It's much easier to do things with a partner (or group) than on your own.
Now what am I going to do instead?! Develop a business. I bought some land off a major road and am planning to develop. I may do a trailer park depending on what I can pick up for cheap. I would only do real estate at scale (potentially syndicate or partner as well).
I think it will be a breath of fresh air not worrying about a pipe busting, a roof needing replacement etc. I am a little bummed about selling the "good ones" but that equity will be better allocated elsewhere.
I apologize for the long post. Any questions/comments/concerns let me know!
Thanks for keeping it real..
And to the bigger pocket community. This post represents a person that doesn’t have a financial benefit for pretending something is better than it really is. For anyone that wants to argue or second guest the poster look and see if they are selling something or providing a service that would benefit from pretending buying rental houses is still a great idea.
Well, that's it for residential SFH LTR real estate. I officially made the decision today to move on...
I listed two properties today. Reached out to the tenants of another one and they are interested in purchasing. And I'll list the other 2 here in the next month or so. That will be my last 5 properties.
Why you may ask?
I don't work in the real estate industry (not a REP) so (1) I can't take the depreciation. So I basically have a bunch of passive losses locked up. Rising insurance and property taxes have (2) dwindled cashflow to the point rents cannot be raised enough to cover the increase in expenses. (3) Labor has gone through the roof making flips even harder (plumbers used to be $85/hr, now they are $145/hr). I live in Louisiana and we (4) don't have the appreciation that a lot of other places have. There are some micro areas that have better appreciation but these are 300k+ houses (aka nothing you can rent for a profit).
So the 4 ways you make money - cashflow, appreciation, loan paydown and tax deductions have been 75% eliminated. The loan paydown is the only thing left and isn't significant until year 15 (really year 20). In my opinion that money can be better allocated elsewhere for better returns. For example...my rental cashflow is taxed at 37% - whereas I can invest in the stock market and only pay 20% capital gains. And the market has been on an absolute tear the past 3 years (and I see this continuing with AI/robotics/space & satellites).
Overall rating on my RE investments over the last 5 years...probably a 4/10. My duplex was my first purchase - bought for 104k, put about 15k into it (all in 120k). I'll list for 125k, so break even at best. Fourplex was second purchase - bought at 160k, will list for 185k+ (this one is the only one that really makes sense to keep, it cashflows and was bought at a discount). SFH 1 I paid 182k for (overpaid and got emotional), I'll list it for 198k (will likely take a 15-20k loss). SFH 2 I paid 150k, I'll sell to tenants for 197k or list for 205k (fantastic location, bought off-market, I like this one, make 45-50k). SFH 3 paid 130k back in 2017, probably list at 175k (this was a previous primary residence so no capital gains). I haven't bought anything since 2023 and my stock market gains have vastly outpaced my RE gains.
What would I do differently? I would make fewer BUT better deals. I wouldn't go above 80% ARV in ANY case. I'd learn about creative financing and use less of my own money (use more OPM). Then start a direct mail/texting (lead) campaign, funnel leads, make cold calls and ideally make a few great deals. I would ONLY buy in fantastic LOCATIONS. The recurring theme is PRICE & LOCATION. And focus on MAKING it a deal.
The other thing - GET INVOLVED. When I come back I plan to get involved with local groups. Go to the meet-ups. Check in regularly. Do deals with people etc. Maybe even do a mastermind or something with someone local. It's much easier to do things with a partner (or group) than on your own.
Now what am I going to do instead?! Develop a business. I bought some land off a major road and am planning to develop. I may do a trailer park depending on what I can pick up for cheap. I would only do real estate at scale (potentially syndicate or partner as well).
I think it will be a breath of fresh air not worrying about a pipe busting, a roof needing replacement etc. I am a little bummed about selling the "good ones" but that equity will be better allocated elsewhere.
I apologize for the long post. Any questions/comments/concerns let me know!
Thanks for keeping it real..
And to the bigger pocket community. This post represents a person that doesn’t have a financial benefit for pretending something is better than it really is. For anyone that wants to argue or second guest the poster look and see if they are selling something or providing a service that would benefit from pretending buying rental houses is still a great idea.
I appreciate it. That's the thing - I see so many new people, and people scraping up their last dime to buy a rental property, and the vast majority of people I talk to say "wow" when you tell them how many houses/doors you own. For what? Have they been there & done that? There is a big misconception about LTR SFH rental profitability.
I just do not see the returns for MOST people. Sure you have the top percentage that is in the real estate industry, they live it day in and day out. This is what they do for a living. For those - I think it can make sense. A lot of these people don't have 401k/IRA - the real estate is all they do. More resources. Can receive the full benefits. Etc.
For me the returns are just not there these days. Partly to do with location. Prices of labor.
The other crazy thing - these were not bad deals. There's 1 I'll take credit for being a bad deal. I did get emotional and overpaid. It happens. But the other 4 were good deals - cashflow and equity at the buy.
I'm going to either update this thread or start a new one showing my spreadsheets - the full analysis of each property from buying to selling. Maybe we can all get something from it.
Well, that's it for residential SFH LTR real estate. I officially made the decision today to move on...
I listed two properties today. Reached out to the tenants of another one and they are interested in purchasing. And I'll list the other 2 here in the next month or so. That will be my last 5 properties.
Why you may ask?
I don't work in the real estate industry (not a REP) so (1) I can't take the depreciation. So I basically have a bunch of passive losses locked up. Rising insurance and property taxes have (2) dwindled cashflow to the point rents cannot be raised enough to cover the increase in expenses. (3) Labor has gone through the roof making flips even harder (plumbers used to be $85/hr, now they are $145/hr). I live in Louisiana and we (4) don't have the appreciation that a lot of other places have. There are some micro areas that have better appreciation but these are 300k+ houses (aka nothing you can rent for a profit).
So the 4 ways you make money - cashflow, appreciation, loan paydown and tax deductions have been 75% eliminated. The loan paydown is the only thing left and isn't significant until year 15 (really year 20). In my opinion that money can be better allocated elsewhere for better returns. For example...my rental cashflow is taxed at 37% - whereas I can invest in the stock market and only pay 20% capital gains. And the market has been on an absolute tear the past 3 years (and I see this continuing with AI/robotics/space & satellites).
Overall rating on my RE investments over the last 5 years...probably a 4/10. My duplex was my first purchase - bought for 104k, put about 15k into it (all in 120k). I'll list for 125k, so break even at best. Fourplex was second purchase - bought at 160k, will list for 185k+ (this one is the only one that really makes sense to keep, it cashflows and was bought at a discount). SFH 1 I paid 182k for (overpaid and got emotional), I'll list it for 198k (will likely take a 15-20k loss). SFH 2 I paid 150k, I'll sell to tenants for 197k or list for 205k (fantastic location, bought off-market, I like this one, make 45-50k). SFH 3 paid 130k back in 2017, probably list at 175k (this was a previous primary residence so no capital gains). I haven't bought anything since 2023 and my stock market gains have vastly outpaced my RE gains.
What would I do differently? I would make fewer BUT better deals. I wouldn't go above 80% ARV in ANY case. I'd learn about creative financing and use less of my own money (use more OPM). Then start a direct mail/texting (lead) campaign, funnel leads, make cold calls and ideally make a few great deals. I would ONLY buy in fantastic LOCATIONS. The recurring theme is PRICE & LOCATION. And focus on MAKING it a deal.
The other thing - GET INVOLVED. When I come back I plan to get involved with local groups. Go to the meet-ups. Check in regularly. Do deals with people etc. Maybe even do a mastermind or something with someone local. It's much easier to do things with a partner (or group) than on your own.
Now what am I going to do instead?! Develop a business. I bought some land off a major road and am planning to develop. I may do a trailer park depending on what I can pick up for cheap. I would only do real estate at scale (potentially syndicate or partner as well).
I think it will be a breath of fresh air not worrying about a pipe busting, a roof needing replacement etc. I am a little bummed about selling the "good ones" but that equity will be better allocated elsewhere.
I apologize for the long post. Any questions/comments/concerns let me know!
Thanks for keeping it real..
And to the bigger pocket community. This post represents a person that doesn’t have a financial benefit for pretending something is better than it really is. For anyone that wants to argue or second guest the poster look and see if they are selling something or providing a service that would benefit from pretending buying rental houses is still a great idea.
Agreed. Jeremy is a real one & has been a real one.
Wheres Collins chart to refer to, but I really recommend folks understand the nuances of the markets.
I would actually tell Jeremy to divest via consolidating the count not the asset class. Find 1-2 fixer uppers in areas you'll visit. There's zero timeline, just keep hunting weekly for them. Do the work on the RE; that's where the money is. Keep your cost basis low via forced appreciation then let it ride. It is hard, but that's the point.
Well, that's it for residential SFH LTR real estate. I officially made the decision today to move on...
I listed two properties today. Reached out to the tenants of another one and they are interested in purchasing. And I'll list the other 2 here in the next month or so. That will be my last 5 properties.
Why you may ask?
I don't work in the real estate industry (not a REP) so (1) I can't take the depreciation. So I basically have a bunch of passive losses locked up. Rising insurance and property taxes have (2) dwindled cashflow to the point rents cannot be raised enough to cover the increase in expenses. (3) Labor has gone through the roof making flips even harder (plumbers used to be $85/hr, now they are $145/hr). I live in Louisiana and we (4) don't have the appreciation that a lot of other places have. There are some micro areas that have better appreciation but these are 300k+ houses (aka nothing you can rent for a profit).
So the 4 ways you make money - cashflow, appreciation, loan paydown and tax deductions have been 75% eliminated. The loan paydown is the only thing left and isn't significant until year 15 (really year 20). In my opinion that money can be better allocated elsewhere for better returns. For example...my rental cashflow is taxed at 37% - whereas I can invest in the stock market and only pay 20% capital gains. And the market has been on an absolute tear the past 3 years (and I see this continuing with AI/robotics/space & satellites).
Overall rating on my RE investments over the last 5 years...probably a 4/10. My duplex was my first purchase - bought for 104k, put about 15k into it (all in 120k). I'll list for 125k, so break even at best. Fourplex was second purchase - bought at 160k, will list for 185k+ (this one is the only one that really makes sense to keep, it cashflows and was bought at a discount). SFH 1 I paid 182k for (overpaid and got emotional), I'll list it for 198k (will likely take a 15-20k loss). SFH 2 I paid 150k, I'll sell to tenants for 197k or list for 205k (fantastic location, bought off-market, I like this one, make 45-50k). SFH 3 paid 130k back in 2017, probably list at 175k (this was a previous primary residence so no capital gains). I haven't bought anything since 2023 and my stock market gains have vastly outpaced my RE gains.
What would I do differently? I would make fewer BUT better deals. I wouldn't go above 80% ARV in ANY case. I'd learn about creative financing and use less of my own money (use more OPM). Then start a direct mail/texting (lead) campaign, funnel leads, make cold calls and ideally make a few great deals. I would ONLY buy in fantastic LOCATIONS. The recurring theme is PRICE & LOCATION. And focus on MAKING it a deal.
The other thing - GET INVOLVED. When I come back I plan to get involved with local groups. Go to the meet-ups. Check in regularly. Do deals with people etc. Maybe even do a mastermind or something with someone local. It's much easier to do things with a partner (or group) than on your own.
Now what am I going to do instead?! Develop a business. I bought some land off a major road and am planning to develop. I may do a trailer park depending on what I can pick up for cheap. I would only do real estate at scale (potentially syndicate or partner as well).
I think it will be a breath of fresh air not worrying about a pipe busting, a roof needing replacement etc. I am a little bummed about selling the "good ones" but that equity will be better allocated elsewhere.
I apologize for the long post. Any questions/comments/concerns let me know!
Thanks for keeping it real..
And to the bigger pocket community. This post represents a person that doesn’t have a financial benefit for pretending something is better than it really is. For anyone that wants to argue or second guest the poster look and see if they are selling something or providing a service that would benefit from pretending buying rental houses is still a great idea.
Agreed. Jeremy is a real one & has been a real one.
Wheres Collins chart to refer to, but I really recommend folks understand the nuances of the markets.
I would actually tell Jeremy to divest via consolidating the count not the asset class. Find 1-2 fixer uppers in areas you'll visit. There's zero timeline, just keep hunting weekly for them. Do the work on the RE; that's where the money is. Keep your cost basis low via forced appreciation then let it ride. It is hard, but that's the point.
I appreciate it. I definitely DCA into the market, when good stuff drops >10 from ATH, I invest more, if it drops >20 even more and so on. Of course you don't want to invest in a sinking ship, but there are a lot of really good companies out there right now. It's a big chunk of standard S&P, some international and a handful of primarily tech stocks, some banking (even my Wal-Mart stock was up >50% last year...Walmart). I am aware that a lot of stocks have a high valuation right now - some are just expensive (like buying a cadillac vs a honda) and some are overvalued. I do speculate with some, but sometimes you got to. It's just hard looking at that and seeing stuff up 80-100% in the past year or so...then looking at my RE that feels like it's just sitting there. Robinhood even gives 4.25% on a savings account. And if you want to leverage margin interest is tax deductible (a lot cheaper than a hard money loan) and at <5% right now for 50k or over.
Very interesting point timeline for realizing the gains with RE - that was one of my doubts initially. Let's just ride it out, everything is still cashflowing (albeit not what it originally was) and see how we are in 10 years. But a big reason I'm selling is to basically allocate this money towards an active business (it would help tremendously for my W2). That and I think it will free up a lot of my time. I DIY'ed some properties and learned pretty quickly that it's not the way to go, simply for time's sake. Sure I'd save money overall but it took working on the property everyday I was available to for literally months on end. Just not worth it. Then I couldn't get a good enough deal to justify a contractor and all that...there may be some improvement in deal finding/making to be done there. I recognize there were definitely some things I could've done better as well.
I really liked your point about the zero timeline thing as well. Once I can get my business developed and going I plan to get back into RE, but it will either be at LTRs at scale or an STR. I seriously considered an STR, but I think there's time for that (although it is in the pipeline). And like you mentioned - there will be no rush. The occasional or even rare deal is fine as long as it's a great deal.
I'll keep this thread updated as I sell to show the full picture. I would like to post a full analysis to see what the community thinks. I have always appreciated your experienced insight!
Well, that's it for residential SFH LTR real estate. I officially made the decision today to move on...
I listed two properties today. Reached out to the tenants of another one and they are interested in purchasing. And I'll list the other 2 here in the next month or so. That will be my last 5 properties.
Why you may ask?
I don't work in the real estate industry (not a REP) so (1) I can't take the depreciation. So I basically have a bunch of passive losses locked up. Rising insurance and property taxes have (2) dwindled cashflow to the point rents cannot be raised enough to cover the increase in expenses. (3) Labor has gone through the roof making flips even harder (plumbers used to be $85/hr, now they are $145/hr). I live in Louisiana and we (4) don't have the appreciation that a lot of other places have. There are some micro areas that have better appreciation but these are 300k+ houses (aka nothing you can rent for a profit).
So the 4 ways you make money - cashflow, appreciation, loan paydown and tax deductions have been 75% eliminated. The loan paydown is the only thing left and isn't significant until year 15 (really year 20). In my opinion that money can be better allocated elsewhere for better returns. For example...my rental cashflow is taxed at 37% - whereas I can invest in the stock market and only pay 20% capital gains. And the market has been on an absolute tear the past 3 years (and I see this continuing with AI/robotics/space & satellites).
Overall rating on my RE investments over the last 5 years...probably a 4/10. My duplex was my first purchase - bought for 104k, put about 15k into it (all in 120k). I'll list for 125k, so break even at best. Fourplex was second purchase - bought at 160k, will list for 185k+ (this one is the only one that really makes sense to keep, it cashflows and was bought at a discount). SFH 1 I paid 182k for (overpaid and got emotional), I'll list it for 198k (will likely take a 15-20k loss). SFH 2 I paid 150k, I'll sell to tenants for 197k or list for 205k (fantastic location, bought off-market, I like this one, make 45-50k). SFH 3 paid 130k back in 2017, probably list at 175k (this was a previous primary residence so no capital gains). I haven't bought anything since 2023 and my stock market gains have vastly outpaced my RE gains.
What would I do differently? I would make fewer BUT better deals. I wouldn't go above 80% ARV in ANY case. I'd learn about creative financing and use less of my own money (use more OPM). Then start a direct mail/texting (lead) campaign, funnel leads, make cold calls and ideally make a few great deals. I would ONLY buy in fantastic LOCATIONS. The recurring theme is PRICE & LOCATION. And focus on MAKING it a deal.
The other thing - GET INVOLVED. When I come back I plan to get involved with local groups. Go to the meet-ups. Check in regularly. Do deals with people etc. Maybe even do a mastermind or something with someone local. It's much easier to do things with a partner (or group) than on your own.
Now what am I going to do instead?! Develop a business. I bought some land off a major road and am planning to develop. I may do a trailer park depending on what I can pick up for cheap. I would only do real estate at scale (potentially syndicate or partner as well).
I think it will be a breath of fresh air not worrying about a pipe busting, a roof needing replacement etc. I am a little bummed about selling the "good ones" but that equity will be better allocated elsewhere.
I apologize for the long post. Any questions/comments/concerns let me know!
Thanks for keeping it real..
And to the bigger pocket community. This post represents a person that doesn’t have a financial benefit for pretending something is better than it really is. For anyone that wants to argue or second guest the poster look and see if they are selling something or providing a service that would benefit from pretending buying rental houses is still a great idea.
Agreed. Jeremy is a real one & has been a real one.
Wheres Collins chart to refer to, but I really recommend folks understand the nuances of the markets.
I would actually tell Jeremy to divest via consolidating the count not the asset class. Find 1-2 fixer uppers in areas you'll visit. There's zero timeline, just keep hunting weekly for them. Do the work on the RE; that's where the money is. Keep your cost basis low via forced appreciation then let it ride. It is hard, but that's the point.
I appreciate it. I definitely DCA into the market, when good stuff drops >10 from ATH, I invest more, if it drops >20 even more and so on. Of course you don't want to invest in a sinking ship, but there are a lot of really good companies out there right now. It's a big chunk of standard S&P, some international and a handful of primarily tech stocks, some banking (even my Wal-Mart stock was up >50% last year...Walmart). I am aware that a lot of stocks have a high valuation right now - some are just expensive (like buying a cadillac vs a honda) and some are overvalued. I do speculate with some, but sometimes you got to. It's just hard looking at that and seeing stuff up 80-100% in the past year or so...then looking at my RE that feels like it's just sitting there. Robinhood even gives 4.25% on a savings account. And if you want to leverage margin interest is tax deductible (a lot cheaper than a hard money loan) and at <5% right now for 50k or over.
Very interesting point timeline for realizing the gains with RE - that was one of my doubts initially. Let's just ride it out, everything is still cashflowing (albeit not what it originally was) and see how we are in 10 years. But a big reason I'm selling is to basically allocate this money towards an active business (it would help tremendously for my W2). That and I think it will free up a lot of my time. I DIY'ed some properties and learned pretty quickly that it's not the way to go, simply for time's sake. Sure I'd save money overall but it took working on the property everyday I was available to for literally months on end. Just not worth it. Then I couldn't get a good enough deal to justify a contractor and all that...there may be some improvement in deal finding/making to be done there. I recognize there were definitely some things I could've done better as well.
I really liked your point about the zero timeline thing as well. Once I can get my business developed and going I plan to get back into RE, but it will either be at LTRs at scale or an STR. I seriously considered an STR, but I think there's time for that (although it is in the pipeline). And like you mentioned - there will be no rush. The occasional or even rare deal is fine as long as it's a great deal.
I'll keep this thread updated as I sell to show the full picture. I would like to post a full analysis to see what the community thinks. I have always appreciated your experienced insight!
You should read the crypto thread. It'll get your juices flowing on the equity/etf markets.
CPA| New Clients Welcome| 50 States · Member since 2016 · 430 posts · 93 votes
5mo
@Jeremy Horton, hi. That’s a very honest breakdown, and a lot of investors quietly hit this same wall. A few thoughts from a tax/strategy angle:
-Depreciation isn’t “lost”—those passive losses are suspended, not gone. They’ll offset gains when you sell, which softens the tax hit.
-The 37% vs 20% comparison is real but remember RE gives leverage + forced equity + tax deferral (different game than stocks).
- Your biggest takeaway is spot on: deal quality > deal quantity. Most portfolios underperform because of entry price and location, not the asset class itself.
- Also agree, at scale (multifamily, mobile home parks, development), the economics start to look very different.
Head of Real Estate Investing at BiggerPockets · Seattle, WA · Member since 2015 · 224 posts · 826 votes
5mo
@Jeremy Horton thanks for sharing. The way you phrase it makes a lot of sense, and I applaud that you have the guts to know when something isn't working for you, and it's time to pivot. Rentals are a long game, and depending on the asset, and timing of purchase, sometimes it just makes sense to sell and deploy your capital elsewhere. I'm selling a few properties myself right now. I plan to redeploy some into rentals, and some into lending. Good luck with the business venture!
@Jeremy Horton thanks for sharing. The way you phrase it makes a lot of sense, and I applaud that you have the guts to know when something isn't working for you, and it's time to pivot. Rentals are a long game, and depending on the asset, and timing of purchase, sometimes it just makes sense to sell and deploy your capital elsewhere. I'm selling a few properties myself right now. I plan to redeploy some into rentals, and some into lending. Good luck with the business venture!
when I had my HML company circa 88 to 82 in SF Bay Area I had 250 clients and I would say 200 of them were burnt out landlords .. landlords moving to HML or private money lender is a very natural progression. Most get into rentals for the monthly payments.. once they figure out lending is basically the same thing collect monthly payments but with much less management aspect they tend to switch over after time. Of course private lending or HML is not all wine and roses either .. defaults can be a major stress-er.
@Jeremy Horton thanks for sharing. The way you phrase it makes a lot of sense, and I applaud that you have the guts to know when something isn't working for you, and it's time to pivot. Rentals are a long game, and depending on the asset, and timing of purchase, sometimes it just makes sense to sell and deploy your capital elsewhere. I'm selling a few properties myself right now. I plan to redeploy some into rentals, and some into lending. Good luck with the business venture!
What's your strategy with selling some of the ones you own?
I did find it interesting one of the podcasts you had - fairly sure it was you and Mandy or Mindy (something like that I was listening to). If you saw her social media you'd think she was 100% all in on rental properties. Then on the podcast she mentioned it was only like 1/3-1/4 of her net worth. I feel like you mentioned something along those lines as well.
I did find that eye opening - if wow, these people that work for BP aren't even all in on rental properties like they make it seem (or made me think it was that way anyway) then there's something going on here. Maybe it's not as good as it it made out to be.
Appreciate all your data deli work Dave, I always did like your version of podcasting much more. Solid data, numbers, just more realistic than some others
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
5mo
I understand your decision. Residential RE is not passive. For it to be worth the effort and risk, RE has to produce returns far greater than passive options.
This is problematic for most investors. They are not far exceeding the return of passive options. I have various theories 1) they have insufficient understanding of the return of various passive options 2) they under estimate the effort involved in residential RE. This is especially true of self managers. 3) they under estimate the various risks.
I seem to see a post weekly of someone who is considering investing in a market with historical appreciation below inflation and negative cash flow when properly allocating for sustained expenses. Why?
I do not invest in residential RE to achieve returns slightly better than passive options. I invest in RE to achieve returns that significantly improve the quality of my family’s life. This cannot be achieved on a few hundred a door each month of positive cash flow. If the return is not at least 4 digits a month, there are other options that are more passive and have less risk than residential RE.
