I've had passion on real estate investment after reading rich dad. I am a physician having really busy schedules with quite decent income. What I am realizing is that REI is not really passive. I even looked at turnkey companies but I couldn't find great "products" for a decent return.
I am enjoying my job and my goal is not early retirement but want my money and myself to “work for me”.
Do you think I am having good excuses not to start REI in this situation? If not (I hope you say not), what would you do first in my case? My biggest concern is I may end up doing very poor in both my job and REI...
2) Look into becoming a limited partner on apartment syndications
Either of those paths can be very passive. Your best bet is to just be a money guy. Fund flips for some investors. There's always people looking for private passive money. The returns are whatever you negotiate.
2) Look into becoming a limited partner on apartment syndications
Either of those paths can be very passive. Your best bet is to just be a money guy. Fund flips for some investors. There's always people looking for private passive money. The returns are whatever you negotiate.
@Andre Williams I am in similar positions except my schedule isn't quite as hectic. I do have to mention a few things.
#1 In your situation, whatever you take in as cash flow you will likely lose around 40% of it to the IRS unless you spend some money to get a firm working for you. Keep that in mind when you make a decision on where and what you want to invest in. Unless you need the money, think long term.
#2 Please make sure you have a good asset protection strategy in place. You, as a physician, are going to be a high target for lawsuit, just or not just. You don't want your investment to get in the way of your personal stuff.
#3 If you really want real estate, you might want to get into crowdfunding or REITs. They are truly passive income and they usually bring a decent return. You won't be able to leverage it like you can with a mortgage, but your risk is much lower. Also as a high income earner, you are likely going to be able to get into crowdfunding and many other alternative investment vehicles. You can get in on some great commercial sites for about $15-25K. I am currently earning close to 10% a year on one of my investment in just cash flow, my 25K will likely be worth 40-50K in 3-4 years.
#4 This is risky, but NNN lease is something you could consider. They are basically guarantee 5-8% in return, the question is what if they leave after 10 years. You would be stuck with a worthless piece of property.
Rental Property Investor · Kansas City, MO · Member since 2016 · 116 posts · 49 votes
7y
@Andre Williams, I think the turnkey strategy can provide safe and consistent returns if done correctly with the right company. If you share what your target return looks like, I would be more than happy to share my perspective. Are you looking for:
1. Consistent returns over a long-term period (low-moderate risk in my opinion)
2. Up-front equity for a short-term holding period (BRRRR) (moderate-risky, in my opinion, especially if investing out of state)
Also, how much time are you wanting to spend on REI? In my opinion, the more time you have the less risky the #2 option can be, but if time is something of a concern, finding the right team could help you get started. Just thought I would share my perspective. Thanks for posting!
London · Member since 2019 · 722 posts · 386 votes
7y
Andre (& Tom),
I have been investing for about 36 years now. Started in CA. These days I have property from Hawaii to London England and north of there.
If you are busy, you need to really think about what that means. You can and should leave your cash in a bank account if you really have zero time to manage it and do not trust others to do so. Better to retain the principal even if there is a small hit annual because of inflation. The small hit is nothing compared to a big loss because you did not do your homework. You may have more time in the future, protect the principal in the meantime.
Once you get over that you have no time and you do not have anyone to trust, you need to commit to getting over the problem. Once you reach this point, you need to get really honest with yourself. What are you already good at? What skills are easy to transfer?
I was at a property meeting last night. I spoke with an actuary. The person loves math. They could spend all day with the model and checking details. I suggested he pay to his strengths and accept that he needs a 'team'. Maybe 1 person. Maybe a group. Maybe a virtual team on a deal by deal basis. Maybe a long term partner. Play to his strengths and backfill the rest.
In terms of your capital, accept you need to get started with small steps. As Peter Drucker once said, pick solutions you can back out of with the least cost. You are testing things. Like first dates. You want to learn what you do not already know. You want to experiment with the other person or persons to see if there is alignment. If we accept you will not have time, you need to buy time by working with someone else you can do what you will not or can not do.
You can get there. A journey of 1,000 miles starts with the first step. There is no need to rush. The early transactions should be small and easy to learn from. Go large later when you are more certain.
I have been there, done it and have all the T-shirts. This business can be very forgiving if you take the time to ramp up slowly. There is no need to rush.
Investor · Dallas, TX · Member since 2014 · 177 posts · 213 votes
7y
@Andre Williams To make a different suggestion, what about partnering? There are tons of people that have the time and not the money (the opposite of your situation).
My overall impression was that I could find the deal myself in zillow or trulia better than what they were selling. The locations, house conditions were not attractive at all.. but this is just my impression about turnkey.
I totally agree with you. Slow start is what I wanted looking for 50-100K condos. The problem is many times properties at this price range need relatively more works to begin with than those with higher prices.
@John Corey Agree. I have made some decent money in the stock market the past couple of years. While I still believe the stock market should be a big part of anyone's portfolio, I do know I have to diversify to spread the risk. I can't take the up and down of the stock market due to the self inflicted wounds by our politicians. I am definitely proceeding into the real estate with a lot of caution. I have done the math in many cities around the country and I came close in pursuing a few small deals. Yet after calculating the numbers, I think the best deal for me are either going to be flips or play in some of the strong appreciation markets. At this point, strong appreciation is too expensive and no jumps are going to happen for a while unless I bail a homeowner out of a situation if I get lucky. That's why I am not really hopeful in finding a good turnkey property, I am likely going to have to get homes that I can do flips on.
@Andre Williams You should qualify as an accredited investor. You can go to crowdstreet.com equitymultiple.com for some crowdfunding COMMERCIAL deals. You might not be able to leverage your 25K like you can with your own place with mortgage, but the returns on them are much much greater than anything you have going on if you buy the place yourself. You can invest 25K, get nearly 10% back in return for 5 years plus 1.8x equity back on some of these deals. Best yet since they are running business, there is a good chance some will be recession proof. I want to get in on more, but I am still trying to buy my own properties first just for the sake of the challenge and even more diversification.
You are not going to make any substantial income on a little SFH or condo at this point. Do it because you want it, crowdfunding is likely where you can make more short term.
As I said before, you should think about tax consequences. If you play for cash flow, you will likely lose half of what you earned after factoring in taxes since they are taxed at your income. If you hold the property, you can turn the gain into a capital gain and result in 20% tax instead of 30%+. Flips will be taxed at your bracket, but you can do some workarounds to trim some of that number. That's why I said the flips better be worth it. Is it worth it for you to spend 4 months on a flip and make $20K. After taxes it would be like $12K.
@Andre Williams BTW if you need a referral, PM me your email. I think you get better returns
EquityMultiple today just listed a rehab center lease. It is a NNN list so it is basically guarantee income unless the tenant files for bankruptcy. They target to keep that for 2-4 years. The return is 12%. You are not finding that in any sub 100K condo right off the bat with no work. I can literally put in $10K tomorrow. It will start paying me $100 per month once they start. If they sell it in 3 years, I can take the 10K back and see what house I can buy, perhaps it will be cheaper.
This duplex I am looking at. It is $500K with $50K in renovation. Even if everything is rented at top of market, I am barely going to make $300 a month. This is after I put down $100K to secure it.
I've had passion on real estate investment after reading rich dad. I am a physician having really busy schedules with quite decent income. What I am realizing is that REI is not really passive. I even looked at turnkey companies but I couldn't find great "products" for a decent return.
I am enjoying my job and my goal is not early retirement but want my money and myself to “work for me”.
Do you think I am having good excuses not to start REI in this situation? If not (I hope you say not), what would you do first in my case? My biggest concern is I may end up doing very poor in both my job and REI...
If I were you I would look to very well established turnkey companies and buy very low risk products. Your goal shouldn't be chasing cash on cash returns. It should be building a long term portfolio that kicks off a respectable return as well as allows you to shelter income from taxes and benefit from tenants paying down your mortgages.
My overall impression was that I could find the deal myself in zillow or trulia better than what they were selling. The locations, house conditions were not attractive at all.. but this is just my impression about turnkey.
Have you found better properties online? Like confirmed they're better? But it doesn't sound like you've invested, so have those not worked out for you either?
London · Member since 2019 · 722 posts · 386 votes
7y
I am a buy and hold investor. It can be for decades. Too lazy to focus on flips and things which require heavy focus (chasing the deal, doing the work and the chasing the exit buyer).
So, I do not believe in market timing. I figure I can capture the next rise by being in the market. The tenant pays me to maintain my position in the market.
I think of it as a free option on the future value. An ‘option’ where the tenant is paying the carry costs. If you are in the financial marketplace you understand the need to cover the carry costs while you wait for the option to be in the money.
For people who have little time, buy a property you want to hold for a long time (well located, in demand) or partner with a hands-on operator.
Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
7y
You really came on here to say you are too busy for REI? I assume you mean as a big time super importnat doctor you are too busy to go to the REI Outdoor store today :-)
Rental Property Investor · South shore, MA · Member since 2017 · 1k+ posts · 1k+ votes
7y
You will have enough time if you are willing to put in the effort.
Being organized and scheduling your time accordingly is a must.
I work full time and spend any chance I can fixing up the houses, it is my “side hussle”, and I now own three homes in two years.
you won’t be spending your weekends at the beach or taking vacations. But those are sacrifices you might have to make. It’s not really a sacrifice if it’s something you really enjoy though.
Andrew, can you share some resources where I can find syndications? I honestly never thought about it.
You can buy in on crowdsourcing sites like FundRise (technically different than a syndication) or find investors who are doing syndications. I know Ben Leybovich does a lot and we have some friends in KC named the Worcesters who do some. We are probably looking to do some in the future as well.