Success Rate in Real Estate...Shockingly Low
Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes
Success Rate in Real Estate...Shockingly Low
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NH · Member since 2016 · 56 posts · 73 votes
3yGood real estate investing should be boring. You're not constantly dealing with problem tenants, talking about high COC returns, doing stupidly risky and time consuming flips, etc.
Buy in a good area, make sure it cash flows, put solid tenants in there, then sit and wait for 10+ years.
Sadly I think people overcomplicate or over glamorize real estate investing. Any time I see those or hear those folks, I assume they'll be one of the ones who fail.
I learned this lesson after chasing high COC returns in Akron OH. I got burnt, but I learned and pivoted at a young age. Now I buy locally in good areas, and I've seen my net worth go from 200k -> 1mil in a few years by the time I hit 30, w/ a portfolio of 8 solid cash flowing units. I just wish I listened to the successful real estate investors sooner, and didn't chase solely cash flow right out of the gate.
203 Replies
- 3yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Wow, I spent too much time on this post this morning. I though I was going to leave a simple quick comment and then started reading...
Here are 3 quick thoughts.
1. We, and that is a collective "we" including myself and a lot of other investors who have been doing this for a very long time, can sometimes have trouble allowing others to define their own success. I work with and have gotten to know so many investors that it is impossible to count the different ways different people define success. Cash flow, returns, hedge, preservation of capital, equity growth, ability to refinance, etc., etc.... Everyone gets to define their success - even the guy that says success is have some extra bucks each month to go on dates or rent cool cars. It may not be how "we" define it, but if they do then so be it.
By that logic, I would put the percentage of people being successful in real estate a little higher. I don't include in my logic anyone who hasn't actually invested. Tire kickers and lookie-loos that never get in the game shouldn't be counted in my opinion. Doesn't amtter if they arein a facebook group or bought a course or paid a mentor or guru. Until you've put your money into the market, I don't consider that person an investor. Those that have put their money in, I wouldn't be surprised if the number was greater than 50% would say they are successful. They get to define what it means to them.
2. I tip my hat to every investor who comes on here and shares. Even when their numbers or math are wrong. I'm big enough to say that I have learned a ton from other posters and am humble enough to admit at times I've written things on here that are incorrect from a returns standpoint. I say that to remind everyone who started investing after the 2008 crisis that the real strength of your portfolio, your decisions and your knowledge go on display when the next crisis starts. It has been an incredible run for many investors and everyone who bought and held in the last 8 years like the example in Arlington should be congratulated. But pulling out cash, keeping leverage high, re-leveraging that cash into new properties and eventually growing a monthly payment that far exceeds your day job income is exactly how many investors lost everything. When I start reading about pulling cash out as values rise and "infinite returns", I'm reminded of how many good properties I have been able to buy over the last decade plus where a bank wanted to off-load non-performing notes. When properties go vacant and they always do and then need work to be brought back to market and they always do, cash flow tightens. When investors suddenly have to use their day job to pay for repairs and notes because properties sit too long or repairs are super high, refinancing and pulling our equity is not an option. That ain't fun!
It's what we don't know that bites us in the a$$ every time and I have a feeling that investors who are not aware of the real danger they put themselves in are the same ones who won't recognize the time to sell and realize their return. At that point, they'll no longer define their success and instead blame a guru!
Lastly, I actually like reading what @james Hamling writes on here. I don't argue with him though...ever, lol. He always has data!
Quote from @James Hamling:
You are aware that trying to MIS-quote me is a fools errand, because anyone can see what I ACTUALLY wrote and the REAL CONTEXT of it, literally immediately above you right?Quote from @K S.:
Quote from @James Hamling:
Quote from @Peter W.:
That's because your conflating supply and demand. It would read more like,Quote from @Account Closed:
Your comment: "The reason why real estate has become unaffordable for the middle class is because we have too many consultants, books, seminars, videos, websites"Quote from @K S.:
Herein lies the rub with me, you do consulting and you're an agent. Many of these comments are sellers of something. I'm just trying to be realistic with my actual experience. The reason why real estate has become unaffordable for the middle class is because we have too many consultants, books, seminars, videos, websites like this etc. It's almost no different than pumping up a stock. We probably don't need more resources
That's like saying
"The reason why bread has become unaffordable for the middle class is because we have too many bakers, cook books, bakeries, videos of making bread & websites selling bread."
I'm not quite sure of the reasoning"The reason why bread has become unaffordable for the middle class is because we have too many nutritionists and life coaches espousing the ability of bread to improve your life. It'll defeat cancer (bread's intense healing powers give you the best chance to overcome cancer*), give you energy (you'll feel like tiger after eating a slice of bread*) and help you get laid (an elegant slice of bread with wine is the perfect way to a potential lover's heart*)."
*Results compare eating bread vs. eating nothing.
Unlike bread, real estate has limited supply (especially good real estate). So if you are creating more demand by convincing people it's the best investment vehicle, it'll drive prices higher.This argument that the promotion of Real Estate Investing is the "villain" in making, FORCING real estate prices UP, is just ridiculously infantile in it's nauseating reasoning.
Let's start with the simple obvious; your talking about INVESTMENT real estate actions. That means it holds an analysis basis of what it can monetize at. If there were some "PUMP" as declaring, that means NO TRUE DEMAND. If there were no demand, that monetization would NOT be there. That would be a SURPLUS of supply. Do we have a surplus of rental supply? Bueler.... Bueler.... Bueler....?
NO! We have a net-SHORTAGE. It is the net-SHORTAGE, and or the BALANCED supply-demand that is EMPOWERING the operational finances of, which is MONITIZATION, and that "profit" is what intones the VALUE for investors.
Saying home prices are too high for owner occupant buyers is childish, it just is. Any amount of actual data CLEARLY destroys that ridiculous notion, because it's simply NOT true. It's a Socialist talking point to say such and that's all that it is.
Fact is investors are MEETING demand.
You want villains for home prices, talk to your Comrade-in-Chief throwing out $ like it's confetti. Every dollar borrowed into existence, which is EXACTLY what happens when you spend more than you have and borrow it into existence better known as "The National Debt", cut's the "pie" into ever smaller and smaller pieces, because there is ONLY 1 pie! How do you get more slices? You make every slice a bit SMALLER. That's your purchasing power, getting SMALLER, which is reflected in items requiring MORE "slices of pie" to acquire them.
It's called inflation, maybe you heard of it?
Seriously kid's: "I can't buy the home I want because.... because.... because that nasty rich person is paying more than I have for it! Why can't everyone STOP buying what I want, it's MINE, I want it, make it LESS!", that's all I hear from this ridiculous argument. You blame everyone EXCEPT the actual people who are at fault for the way things are.
In "Rule Book For Radicals" they had a term for you: "useful idiots".
People this confident in their convictions aren't this obnoxious explaining them.
You can't just say data shows that our argument is false without providing this data. The onus would be on you to provide the data for your counter argument. You understand that it's not an argument to say "it's not true"
You said "saying home prices are too high for owner occupant buyers is childish because demand is being met" then I have to ask if you considered the fact that the only people buying the low inventory are top 5% of earners, small investors, institutions and cash buyers. I'd say the middle class family is the minority of buyers in every transaction if not nearly non existent. Have you also considered that data on the amount of denied mortgages due to not meeting the 40% DTI limit?. The fact that real estate was 3x income decades ago and now it's 12x income. Or the fact that investors meeting the demands as you stated is just investors accepting lower returns. Accepting lower returns is not proof that prices aren't too high nor does it mean we are childish for thinking so.
Look, what you posed for an argument, that homes prices are up BECAUSE investors acquiring properties, it IS simple flat-out-WRONG. It's as WRONG as coming arguing that the sun rises in the east, because your living room windows are on the east side of your home. Lol, it's simple flat-out-WRONG. The data to such is everywhere, simply put an ounce of effort into checking your theory and you will find 0 data support of it kid. And no, it's not my job to fact check for you, it's your job to fact-check YOURSELF, it's called the scientific method. You come up with a theory AND THAN look for supporting data for it, test the theory to confirm or deny theory.
And now you say "the ONLY people buying are are top 5% or earners".... really, yet another absolutely REDICULOUS statement. Ugh.... come on kid....
We are in pricing compression, thanks to Neo-Stagflation. With that volume has collapsed, which is definitively what stagflation does/is. But volume has NOT gone to 0. People, of ALL walks, incomes, shapes and kinds are STILL buying, just in reduced volumes, and with mitigated actions. Again, pricing compression and Neo-Stagflation.
And actually, per the laws of economics taught at EVERY school of economics, investors making purchases at the prices DOES mean the prices are not "too high". Prices are what they are, by the laws of economics and reality, BECAUSE "the market" as in potential buyers, ARE buying at these prices.
Look, it's as simple as the definition of "Market Price". A "market Price" is the price for a good or service at which a seller is willing to sell and a buyer is willing to buy. Full-stop. Your using a narcissistic market price valuation method, deciding since prices are too high FOR YOU that thus the market price, AND the market as a whole, is wrong, because it all is supposed to conform to YOU, your affordability, your desires, your valuation. And I am sorry to say but the world does not revolve around you. And I will add, your not alone in this narcissistic construct, there is a sizable movement of such. Why, I have no idea, I think it connects with how we've raised this generation, pumping your head with participation awards and all kinds of molly-coddling.
The market decides the market price. And as long as the market is accepting of these returns, which I will add are far more NORMAL than what your expecting which is of last decade levels that is NOT normal, came via specific convergence of events.
The fact that market prices are what they are, have held at what they are, IS the evidence and fact that the market prices are NOT "too high".
And here is the future. As the cost to buy LOWERS (rates decline) prices WILL-GO-UP. Today's prices REFLECT TODAYS RATE. This is so basic and simple but for some reason so many are missing this very basic, obvious simple fact. Todays prices reflect todays rate.
So as the rates change, prices will also change. Rates go DOWN prices will, with 100% certainty, NOT go down. Lower cost to purchase, INCREASING purchasing power, and median purchasing dollar amounts WILL-GO-UP.
And saying but you want it to be uber easy to buy an investment property, well too-bad, that's not how the world of business works, you missed that boat, the EZ Button is GONE. One has to actually work for it now. That's just the reality of the situation.
That's actually not what I was saying so it's pointless talking about it especially with someone so emotionally invested in strawman arguments.- I probably shouldn't get dragged into this, because I tend to agree with you, but here we go devil's advocate. The counter argument is if the fund investors go from 5 to 10% of the market share what does that do to prices assuming that supply is fixed and demand from other parties is relatively inelastic. On the high school level economics guess, you would see prices spike. You would also expect to see returns from real estate after management fees to drop to levels expected from other forms of investment (e.g. stocks and bonds). A 5% increase due to institutional investors could cause a 20-25% increase in prices even without monopolistic practices. As I have said before, I think it's more explainable by population shifts and inflation than an increase in investors, but on the surface even with the data you have provided it doesn't negate the K.S.'s thesis.
Quote from @James Hamling:
Quote from @K S.:
You can google counter arguments to arguments but the truth is that I did a simple zillow search filter for Open Door in one zip code and it was 8% of all listings. Maybe another zip may show 0 but that's missing the point. Also condensing these purchases can give one a monopoly on rent control as well.Lol, uhm, lol, what you start with here actually kind-of IS the point. You did a search, in "A" zip code, at what "A" entity had for listings..... You just defined Selective Data Bias.
And funny how you put your theory for a "monopoly" on rent control. Funny because, are you aware I am a Broker with, I believe we are now #2 in USA for the size of our SFR portfolio. In my personal home market, we have under management about the same/similar # of units as ALL the other SFR PMC's in market, combined. And we have 0 "monopoly" on rent control.
By the #'s, in general 74% of ALL SFR's in the USA are owned by small investors holding 1-7 total units. Yes, the industry is vastly controlled by Mom-and-pop operators. And I love that fact. I love small business. But the unique thing about Mom-and-pop Landlords is a very large % Self-manage, self-administrate. And than the next big chunk are transient in their operations, meaning the transition who and how they are administrating their Tenant Placement and PM operations. And that makes it near to impossible for anyone to get any foot-hold of "monopoly" in any manner beyond hyper-local.
BlackRock has been long at acquiring SFR's, is still at it today, and despite there gargantuan acquisition capital and now holdings, they are but a speck of market share.
All these fund level investors, COMBINED, make up less than 25% of market share. COMBINED.
The amount of trillions needed for any 1 entity to obtain a market monopoly is just bizonkers, and mathematically impossible. BlackRock, the king of them all, would have to buy, them ALL. Than, would have to DOUBLE in size, and than, maybe, MAYBE would start entering territory of monopolistic controls in some market areas.
- It's not the point actually because if you read further, you'd see the point I was actually trying to make. You're just wasting your time trying to fight against arguments I'm not making.
Quote from @James Hamling:
Quote from @K S.:
You can google counter arguments to arguments but the truth is that I did a simple zillow search filter for Open Door in one zip code and it was 8% of all listings. Maybe another zip may show 0 but that's missing the point. Also condensing these purchases can give one a monopoly on rent control as well.Lol, uhm, lol, what you start with here actually kind-of IS the point. You did a search, in "A" zip code, at what "A" entity had for listings..... You just defined Selective Data Bias.
And funny how you put your theory for a "monopoly" on rent control. Funny because, are you aware I am a Broker with, I believe we are now #2 in USA for the size of our SFR portfolio. In my personal home market, we have under management about the same/similar # of units as ALL the other SFR PMC's in market, combined. And we have 0 "monopoly" on rent control.
By the #'s, in general 74% of ALL SFR's in the USA are owned by small investors holding 1-7 total units. Yes, the industry is vastly controlled by Mom-and-pop operators. And I love that fact. I love small business. But the unique thing about Mom-and-pop Landlords is a very large % Self-manage, self-administrate. And than the next big chunk are transient in their operations, meaning the transition who and how they are administrating their Tenant Placement and PM operations. And that makes it near to impossible for anyone to get any foot-hold of "monopoly" in any manner beyond hyper-local.
BlackRock has been long at acquiring SFR's, is still at it today, and despite there gargantuan acquisition capital and now holdings, they are but a speck of market share.
All these fund level investors, COMBINED, make up less than 25% of market share. COMBINED.
The amount of trillions needed for any 1 entity to obtain a market monopoly is just bizonkers, and mathematically impossible. BlackRock, the king of them all, would have to buy, them ALL. Than, would have to DOUBLE in size, and than, maybe, MAYBE would start entering territory of monopolistic controls in some market areas.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes3y
Quote from @Jim K.:
Mai tais in Tahiti? Pshaw. Feast your eyes on THIS!Quote from @Andrew Syrios:
I would hope not but with all the gurus out there selling their BS courses on how to make it big in real estate and then sip mai tai's in Tahiti, I suspect there are still a good number who think they will make large amounts of money very quickly
Wow, can I pay you $5000/month for real estate training bootcamps???
- Oh gotcha.
Quote from @Nicholas L.:
K S, I think we're agreeing. As requested, I was providing a data source (Vox). You provided another one (Zillow.)
- 3yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
@Peter Woerner
Good points. RE is just so much more variable than stocks and bonds, though. I saw that some institutional investors are selling properties because they can get better "returns" in savings accounts or treasuries. That's fine. But investors buy properties in all sorts of different ways and so the returns are all over the place. You really don't know much about someone's return without a whole bunch of data that you don't have.
And if the entry by the institutional landlords, especially after 2012, caused rents to go up, then it increased the returns of the mom and pop investors who bought pre-2019 and had fixed debt.
I am not even sure why I am off on this tangent. I guess the subject just interests me.
Quote from @Nicholas L.:
the article says that - that the impact in certain neighborhoods is much higher.
i actually don't know what the impact is on prices - do you? i don't have any data sources to say "institutional investors are responsible for 17% of the increase in prices in the last 3 years." but my point is - they still own only a small fraction of all SF rentals.
No I personally don't but I bet the data exists but honestly I'm not concerned because it's just one factor of many creating the perfect storm of un-affordability. Focusing on just one data set is interesting but like you said is just a fraction overall across the country. Most of the people that out bid me last year were all cash buyers. I wasn't sure who they were but I doubt they were starter families. Institutions aren't the only problem, small investors like I previously mentioned which got people upset are buying more than they ever have thanks to as I have previously mentioned all the advertising and resources we have for real estate investing that didn't exist prior to Rich Dad Poor Dad. There's also foreign investors but I would guess is also small and maybe insignificant.
Now that I think of it, the ADU boom may also be a contributing factor. I haven't heard anyone talk about it so I'll be the first lol. Anyone realize that single family land and R3 homes can have 3-6 properties creating another gold rush? I think we might hear more about this as I personally just purchased a piece of land because of the higher density rules or at least the 2 ADUs don't count against your density rules I should say.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Peter W.:
I probably shouldn't get dragged into this, because I tend to agree with you, but here we go devil's advocate. The counter argument is if the fund investors go from 5 to 10% of the market share what does that do to prices assuming that supply is fixed and demand from other parties is relatively inelastic. On the high school level economics guess, you would see prices spike. You would also expect to see returns from real estate after management fees to drop to levels expected from other forms of investment (e.g. stocks and bonds). A 5% increase due to institutional investors could cause a 20-25% increase in prices even without monopolistic practices. As I have said before, I think it's more explainable by population shifts and inflation than an increase in investors, but on the surface even with the data you have provided it doesn't negate the K.S.'s thesis.Quote from @James Hamling:
Quote from @K S.:
You can google counter arguments to arguments but the truth is that I did a simple zillow search filter for Open Door in one zip code and it was 8% of all listings. Maybe another zip may show 0 but that's missing the point. Also condensing these purchases can give one a monopoly on rent control as well.Lol, uhm, lol, what you start with here actually kind-of IS the point. You did a search, in "A" zip code, at what "A" entity had for listings..... You just defined Selective Data Bias.
And funny how you put your theory for a "monopoly" on rent control. Funny because, are you aware I am a Broker with, I believe we are now #2 in USA for the size of our SFR portfolio. In my personal home market, we have under management about the same/similar # of units as ALL the other SFR PMC's in market, combined. And we have 0 "monopoly" on rent control.
By the #'s, in general 74% of ALL SFR's in the USA are owned by small investors holding 1-7 total units. Yes, the industry is vastly controlled by Mom-and-pop operators. And I love that fact. I love small business. But the unique thing about Mom-and-pop Landlords is a very large % Self-manage, self-administrate. And than the next big chunk are transient in their operations, meaning the transition who and how they are administrating their Tenant Placement and PM operations. And that makes it near to impossible for anyone to get any foot-hold of "monopoly" in any manner beyond hyper-local.
BlackRock has been long at acquiring SFR's, is still at it today, and despite there gargantuan acquisition capital and now holdings, they are but a speck of market share.
All these fund level investors, COMBINED, make up less than 25% of market share. COMBINED.
The amount of trillions needed for any 1 entity to obtain a market monopoly is just bizonkers, and mathematically impossible. BlackRock, the king of them all, would have to buy, them ALL. Than, would have to DOUBLE in size, and than, maybe, MAYBE would start entering territory of monopolistic controls in some market areas.
The argument that median home prices have gone up so much, or are holding so high, due solely or in large part from institutional investors acquisitions activities has been lodged by some persons and journalistic outfit's of some substantial size.
Which resulted in some follow-up journalism of digging deep into data, to test out theory, with results consistently stating it was a false narrative. And the data actually showed that, to some surprise, the impact was actually that it helped insulate rental rates from suffering even more substantial market price increases it would have incurred if that additional inventory had not come to market.
Now your Devil's advocate thesis, yeah I agree it holds theoretical merit. If supply and the market remains relatively inelastic, and institutional investors continue to expand acquisitions operations, at what point does the scale start tipping and impacting market median pricing. To me, this is a universal argument, at what point does a action move into excess and in return start negatively impacting the whole. Yeah, of course, in theory if, if, if, right. But with running down the various if's, we have to temper those "if's" with viability, how probable or viable is that "if" to occur.
As of yet, in general, institutional investor acquisitions is such a small % of market share in activity it's a nothing-burger of impact. Sure, "if" they didn't exist, and there were no purchases at all from any of them, would things looks different. This is just a play with fiction because fact is they are here and did enter market. We could say what if people didn't believe in tesla and nobody bought shares wouldn't share price have than dropped, well of course but again, playing with fiction.
And when it comes to Institutional Investors, they don't operate in a state of perpetuity. There primary resource, capital, is finite. They acquire a capital amount from underlying investors, and than deploy that capital into assets. End of day these Institutional investors are just money managers, that's it, think of it as a different kind of savings deposit. Each time they obtain a set capital amount, it's framed as a certain "project", a fund. They than deploy it into performing assets, and it's done, they are done, that $ only deploys that 1 time and there it sit's. There is a limit to how much they scale, because they have an impact on internal management operations from the size of the fund management.
So, our posing that all Institutional Investors double there scale, it's not a viable thesis. Many, if not most, have a set target for the size they want to be at onset. And they work to grow, and scale, to achieve that size of funds managed. And, when get there, most often it's done, they are on cruise control, no interest in additionally scaling that operation. It often has a long term game plan for evolutions, such as future liquidation actions to than open a fund moving into commercial residential, or other commercial spaces, etc..
Even Blackrock, the biggest of them all, has stated of set limiting size for the scale of there operations.
Remember, at heart they are not investors, they are money managers, REI operations is a big headache for them most often.
Could this change? Sure, in world of theory anything is possible. Could they double in scale, triple, quadruple, in theory sure. It "could" hit a tipping point. But again, viability of hypothesis. These are not foolish people, they are very sharp in many ways. And in my experience, they very much like living in anonymity. To hit a certain scale starts drawing attention, and at a market share of impact that brings significant attention, an item they very much do not want. So there nature has a incentive to remain below that threshold of systemic market impact.
I apolagize if this is getting a bit technical down this rabbit hole for all, but this segment of things, the items in discussion, they are very technical.
Quote from @James Hamling:
Reported for constant trolling and name calling. Just chill out and go with the flow of traffic here. We all moved on from whatever thing you were arguing with many pages ago.
Quote from @Jim K.:
Quote from @James Hamling:
You are aware that trying to MIS-quote me is a fools errand, because anyone can see what I ACTUALLY wrote and the REAL CONTEXT of it, literally immediately above you right?Quote from @K S.:
Quote from @James Hamling:
Quote from @Peter W.:
That's because your conflating supply and demand. It would read more like,Quote from @Account Closed:
Your comment: "The reason why real estate has become unaffordable for the middle class is because we have too many consultants, books, seminars, videos, websites"Quote from @K S.:
Herein lies the rub with me, you do consulting and you're an agent. Many of these comments are sellers of something. I'm just trying to be realistic with my actual experience. The reason why real estate has become unaffordable for the middle class is because we have too many consultants, books, seminars, videos, websites like this etc. It's almost no different than pumping up a stock. We probably don't need more resources
That's like saying
"The reason why bread has become unaffordable for the middle class is because we have too many bakers, cook books, bakeries, videos of making bread & websites selling bread."
I'm not quite sure of the reasoning"The reason why bread has become unaffordable for the middle class is because we have too many nutritionists and life coaches espousing the ability of bread to improve your life. It'll defeat cancer (bread's intense healing powers give you the best chance to overcome cancer*), give you energy (you'll feel like tiger after eating a slice of bread*) and help you get laid (an elegant slice of bread with wine is the perfect way to a potential lover's heart*)."
*Results compare eating bread vs. eating nothing.
Unlike bread, real estate has limited supply (especially good real estate). So if you are creating more demand by convincing people it's the best investment vehicle, it'll drive prices higher.This argument that the promotion of Real Estate Investing is the "villain" in making, FORCING real estate prices UP, is just ridiculously infantile in it's nauseating reasoning.
Let's start with the simple obvious; your talking about INVESTMENT real estate actions. That means it holds an analysis basis of what it can monetize at. If there were some "PUMP" as declaring, that means NO TRUE DEMAND. If there were no demand, that monetization would NOT be there. That would be a SURPLUS of supply. Do we have a surplus of rental supply? Bueler.... Bueler.... Bueler....?
NO! We have a net-SHORTAGE. It is the net-SHORTAGE, and or the BALANCED supply-demand that is EMPOWERING the operational finances of, which is MONITIZATION, and that "profit" is what intones the VALUE for investors.
Saying home prices are too high for owner occupant buyers is childish, it just is. Any amount of actual data CLEARLY destroys that ridiculous notion, because it's simply NOT true. It's a Socialist talking point to say such and that's all that it is.
Fact is investors are MEETING demand.
You want villains for home prices, talk to your Comrade-in-Chief throwing out $ like it's confetti. Every dollar borrowed into existence, which is EXACTLY what happens when you spend more than you have and borrow it into existence better known as "The National Debt", cut's the "pie" into ever smaller and smaller pieces, because there is ONLY 1 pie! How do you get more slices? You make every slice a bit SMALLER. That's your purchasing power, getting SMALLER, which is reflected in items requiring MORE "slices of pie" to acquire them.
It's called inflation, maybe you heard of it?
Seriously kid's: "I can't buy the home I want because.... because.... because that nasty rich person is paying more than I have for it! Why can't everyone STOP buying what I want, it's MINE, I want it, make it LESS!", that's all I hear from this ridiculous argument. You blame everyone EXCEPT the actual people who are at fault for the way things are.
In "Rule Book For Radicals" they had a term for you: "useful idiots".
People this confident in their convictions aren't this obnoxious explaining them.
You can't just say data shows that our argument is false without providing this data. The onus would be on you to provide the data for your counter argument. You understand that it's not an argument to say "it's not true"
You said "saying home prices are too high for owner occupant buyers is childish because demand is being met" then I have to ask if you considered the fact that the only people buying the low inventory are top 5% of earners, small investors, institutions and cash buyers. I'd say the middle class family is the minority of buyers in every transaction if not nearly non existent. Have you also considered that data on the amount of denied mortgages due to not meeting the 40% DTI limit?. The fact that real estate was 3x income decades ago and now it's 12x income. Or the fact that investors meeting the demands as you stated is just investors accepting lower returns. Accepting lower returns is not proof that prices aren't too high nor does it mean we are childish for thinking so.
Look, what you posed for an argument, that homes prices are up BECAUSE investors acquiring properties, it IS simple flat-out-WRONG. It's as WRONG as coming arguing that the sun rises in the east, because your living room windows are on the east side of your home. Lol, it's simple flat-out-WRONG. The data to such is everywhere, simply put an ounce of effort into checking your theory and you will find 0 data support of it kid. And no, it's not my job to fact check for you, it's your job to fact-check YOURSELF, it's called the scientific method. You come up with a theory AND THAN look for supporting data for it, test the theory to confirm or deny theory.
And now you say "the ONLY people buying are are top 5% or earners".... really, yet another absolutely REDICULOUS statement. Ugh.... come on kid....
We are in pricing compression, thanks to Neo-Stagflation. With that volume has collapsed, which is definitively what stagflation does/is. But volume has NOT gone to 0. People, of ALL walks, incomes, shapes and kinds are STILL buying, just in reduced volumes, and with mitigated actions. Again, pricing compression and Neo-Stagflation.
And actually, per the laws of economics taught at EVERY school of economics, investors making purchases at the prices DOES mean the prices are not "too high". Prices are what they are, by the laws of economics and reality, BECAUSE "the market" as in potential buyers, ARE buying at these prices.
Look, it's as simple as the definition of "Market Price". A "market Price" is the price for a good or service at which a seller is willing to sell and a buyer is willing to buy. Full-stop. Your using a narcissistic market price valuation method, deciding since prices are too high FOR YOU that thus the market price, AND the market as a whole, is wrong, because it all is supposed to conform to YOU, your affordability, your desires, your valuation. And I am sorry to say but the world does not revolve around you. And I will add, your not alone in this narcissistic construct, there is a sizable movement of such. Why, I have no idea, I think it connects with how we've raised this generation, pumping your head with participation awards and all kinds of molly-coddling.
The market decides the market price. And as long as the market is accepting of these returns, which I will add are far more NORMAL than what your expecting which is of last decade levels that is NOT normal, came via specific convergence of events.
The fact that market prices are what they are, have held at what they are, IS the evidence and fact that the market prices are NOT "too high".
And here is the future. As the cost to buy LOWERS (rates decline) prices WILL-GO-UP. Today's prices REFLECT TODAYS RATE. This is so basic and simple but for some reason so many are missing this very basic, obvious simple fact. Todays prices reflect todays rate.
So as the rates change, prices will also change. Rates go DOWN prices will, with 100% certainty, NOT go down. Lower cost to purchase, INCREASING purchasing power, and median purchasing dollar amounts WILL-GO-UP.
And saying but you want it to be uber easy to buy an investment property, well too-bad, that's not how the world of business works, you missed that boat, the EZ Button is GONE. One has to actually work for it now. That's just the reality of the situation.
James, you have more important things to do than this.
Quote from @John Morgan:
My properties are affordable that average 250-300k in the Dallas area with these 80-120% returns on my 20% down payments between principal pay down, 5% appreciation and monthly cash flow. I can’t make nearly that kind of return in the stock market with my Roth IRAs and 401k like you suggest. I pull out my equity in 3-5 years on some to buy more real estate with zero money out of pocket for the new purchases. I’m happy with making 15% in the stock market. But I’m really happy with an internal rate of return of around 100% on my SFR. Some of my internal rates exceed 200% off my down payments. But most in the 80-120% range which I’m really happy with.Quote from @K S.:
This should be put into context. When someone says 120% returns what does that mean? Well if you purchased a 10k house in the ghetto for 2k down payment and collect rents with a shotgun, then all you need is for the house to increase to 12k and you just made 100% return so in perspective that's not good as HVAC alone can wipe out a years worth of profits, plus you must I'm going to assume you're managing them yourself. Not something most people with a 9-5 can do.Quote from @John Morgan:
I fully leverage so I’m only 20% into a house. Between principal pay down on my mortgage, monthly cash flow and appreciation, I’m making an internal rate of return around 80-120% on most of my properties off my small 20% down payments. AQuote from @K S.:
Quote from @John Morgan:
I’d say 50% if someone is willing to give themselves 10 years slowly buying and holding. Most people need to hit home runs with no work. Those who are willing to do the work and slowly grow over time will crush it if they give themselves 10 years.
I have been slowly buying and holding for 15 years and for the most part, the theory doesn't hold up. Sure a few properties doubled in value but at about the same pace as inflation which is less than the stock market plus, the cash they return has not changed in 15 years as the increase in rent is negated by the increase in property taxes, hoa and maintenance on an aging house. I just sold a condo because the HOA has increased faster than rents can keep up and I'm selling a home because its age is becoming a liabilbity despite being paid off. They don't teach you that in the books. I'm beginning to think nobody making these comments has owned a house for 15 years or really crunched the numbers and compared it to the stock market or 20 years of maxing out a 401k with employer matching.
I know someone who go a late start in his 401k and also purchased a house during the lowest point in the recession. His house has tripled but his 401k has around the same amount as his house has equity. Tell me you can do that today at these prices and rates?
You'll be taxed very little if you retire with no 1099 income and a roth is tax free. I'd imagine most people have both.
I took out a 401k loan on one of them for 50k to buy a fixer upper 5 years ago. It rents for $1550/month and I paid back my 401k loan with the profits. Then did a cash out refi on it to buy 3 more houses a year ago. Between all 4 of these houses I got for basically only 50k from my 401k loan, they net me $3300/month after all my expenses. I’ve paid my 401k loan off and have infinite cash flow of $3300/month plus my tenants are paying off my mortgages and they’re appreciating about 5%/year (50-60k/year). So this is about a 220% return I’m getting off my initial investment of 50k which I paid initial 401k loan back a couple years ago when you calculate principal pay down, monthly cash flow and 5% appreciation. Numbers don’t lie.
So real estate can do as good or even better than the stock market when you calculate your numbers over time with leverage. Those who pay cash obviously won’t do nearly as well. But those who are smart and leverage their way to wealth will crush it over time and create generational wealth.Can you do me a favor and send me the street address to this property and I'll do my own research to see how lucrative that would be today. I mean I also bought a property years ago with 10% infinitum returns as you say but call me skeptical on how easy cheesy that would be today as you make it sound. It's not like we can all go back to 2012 again and leverage ourselves. Of course I know there are cheaper states with pockets of undervalued properties but I'm guessing with higher risk or other compromises.
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes3y
Quote from @Chris Clothier:
Wow, I spent too much time on this post this morning. I though I was going to leave a simple quick comment and then started reading...
Here are 3 quick thoughts.
1. We, and that is a collective "we" including myself and a lot of other investors who have been doing this for a very long time, can sometimes have trouble allowing others to define their own success. I work with and have gotten to know so many investors that it is impossible to count the different ways different people define success. Cash flow, returns, hedge, preservation of capital, equity growth, ability to refinance, etc., etc.... Everyone gets to define their success - even the guy that says success is have some extra bucks each month to go on dates or rent cool cars. It may not be how "we" define it, but if they do then so be it.
By that logic, I would put the percentage of people being successful in real estate a little higher. I don't include in my logic anyone who hasn't actually invested. Tire kickers and lookie-loos that never get in the game shouldn't be counted in my opinion. Doesn't amtter if they arein a facebook group or bought a course or paid a mentor or guru. Until you've put your money into the market, I don't consider that person an investor. Those that have put their money in, I wouldn't be surprised if the number was greater than 50% would say they are successful. They get to define what it means to them.
2. I tip my hat to every investor who comes on here and shares. Even when their numbers or math are wrong. I'm big enough to say that I have learned a ton from other posters and am humble enough to admit at times I've written things on here that are incorrect from a returns standpoint. I say that to remind everyone who started investing after the 2008 crisis that the real strength of your portfolio, your decisions and your knowledge go on display when the next crisis starts. It has been an incredible run for many investors and everyone who bought and held in the last 8 years like the example in Arlington should be congratulated. But pulling out cash, keeping leverage high, re-leveraging that cash into new properties and eventually growing a monthly payment that far exceeds your day job income is exactly how many investors lost everything. When I start reading about pulling cash out as values rise and "infinite returns", I'm reminded of how many good properties I have been able to buy over the last decade plus where a bank wanted to off-load non-performing notes. When properties go vacant and they always do and then need work to be brought back to market and they always do, cash flow tightens. When investors suddenly have to use their day job to pay for repairs and notes because properties sit too long or repairs are super high, refinancing and pulling our equity is not an option. That ain't fun!
It's what we don't know that bites us in the a$$ every time and I have a feeling that investors who are not aware of the real danger they put themselves in are the same ones who won't recognize the time to sell and realize their return. At that point, they'll no longer define their success and instead blame a guru!
Lastly, I actually like reading what @james Hamling writes on here. I don't argue with him though...ever, lol. He always has data!
Very refreshingly positive way of putting things. I totally see your points.
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes3y
Quote from @Bill F.:
Quote from @Jim K.:
Quote from @James Hamling:
You are aware that trying to MIS-quote me is a fools errand, because anyone can see what I ACTUALLY wrote and the REAL CONTEXT of it, literally immediately above you right?Quote from @K S.:
Quote from @James Hamling:
Quote from @Peter W.:
That's because your conflating supply and demand. It would read more like,Quote from @Account Closed:
Your comment: "The reason why real estate has become unaffordable for the middle class is because we have too many consultants, books, seminars, videos, websites"Quote from @K S.:
Herein lies the rub with me, you do consulting and you're an agent. Many of these comments are sellers of something. I'm just trying to be realistic with my actual experience. The reason why real estate has become unaffordable for the middle class is because we have too many consultants, books, seminars, videos, websites like this etc. It's almost no different than pumping up a stock. We probably don't need more resources
That's like saying
"The reason why bread has become unaffordable for the middle class is because we have too many bakers, cook books, bakeries, videos of making bread & websites selling bread."
I'm not quite sure of the reasoning"The reason why bread has become unaffordable for the middle class is because we have too many nutritionists and life coaches espousing the ability of bread to improve your life. It'll defeat cancer (bread's intense healing powers give you the best chance to overcome cancer*), give you energy (you'll feel like tiger after eating a slice of bread*) and help you get laid (an elegant slice of bread with wine is the perfect way to a potential lover's heart*)."
*Results compare eating bread vs. eating nothing.
Unlike bread, real estate has limited supply (especially good real estate). So if you are creating more demand by convincing people it's the best investment vehicle, it'll drive prices higher.This argument that the promotion of Real Estate Investing is the "villain" in making, FORCING real estate prices UP, is just ridiculously infantile in it's nauseating reasoning.
Let's start with the simple obvious; your talking about INVESTMENT real estate actions. That means it holds an analysis basis of what it can monetize at. If there were some "PUMP" as declaring, that means NO TRUE DEMAND. If there were no demand, that monetization would NOT be there. That would be a SURPLUS of supply. Do we have a surplus of rental supply? Bueler.... Bueler.... Bueler....?
NO! We have a net-SHORTAGE. It is the net-SHORTAGE, and or the BALANCED supply-demand that is EMPOWERING the operational finances of, which is MONITIZATION, and that "profit" is what intones the VALUE for investors.
Saying home prices are too high for owner occupant buyers is childish, it just is. Any amount of actual data CLEARLY destroys that ridiculous notion, because it's simply NOT true. It's a Socialist talking point to say such and that's all that it is.
Fact is investors are MEETING demand.
You want villains for home prices, talk to your Comrade-in-Chief throwing out $ like it's confetti. Every dollar borrowed into existence, which is EXACTLY what happens when you spend more than you have and borrow it into existence better known as "The National Debt", cut's the "pie" into ever smaller and smaller pieces, because there is ONLY 1 pie! How do you get more slices? You make every slice a bit SMALLER. That's your purchasing power, getting SMALLER, which is reflected in items requiring MORE "slices of pie" to acquire them.
It's called inflation, maybe you heard of it?
Seriously kid's: "I can't buy the home I want because.... because.... because that nasty rich person is paying more than I have for it! Why can't everyone STOP buying what I want, it's MINE, I want it, make it LESS!", that's all I hear from this ridiculous argument. You blame everyone EXCEPT the actual people who are at fault for the way things are.
In "Rule Book For Radicals" they had a term for you: "useful idiots".
People this confident in their convictions aren't this obnoxious explaining them.
You can't just say data shows that our argument is false without providing this data. The onus would be on you to provide the data for your counter argument. You understand that it's not an argument to say "it's not true"
You said "saying home prices are too high for owner occupant buyers is childish because demand is being met" then I have to ask if you considered the fact that the only people buying the low inventory are top 5% of earners, small investors, institutions and cash buyers. I'd say the middle class family is the minority of buyers in every transaction if not nearly non existent. Have you also considered that data on the amount of denied mortgages due to not meeting the 40% DTI limit?. The fact that real estate was 3x income decades ago and now it's 12x income. Or the fact that investors meeting the demands as you stated is just investors accepting lower returns. Accepting lower returns is not proof that prices aren't too high nor does it mean we are childish for thinking so.
Look, what you posed for an argument, that homes prices are up BECAUSE investors acquiring properties, it IS simple flat-out-WRONG. It's as WRONG as coming arguing that the sun rises in the east, because your living room windows are on the east side of your home. Lol, it's simple flat-out-WRONG. The data to such is everywhere, simply put an ounce of effort into checking your theory and you will find 0 data support of it kid. And no, it's not my job to fact check for you, it's your job to fact-check YOURSELF, it's called the scientific method. You come up with a theory AND THAN look for supporting data for it, test the theory to confirm or deny theory.
And now you say "the ONLY people buying are are top 5% or earners".... really, yet another absolutely REDICULOUS statement. Ugh.... come on kid....
We are in pricing compression, thanks to Neo-Stagflation. With that volume has collapsed, which is definitively what stagflation does/is. But volume has NOT gone to 0. People, of ALL walks, incomes, shapes and kinds are STILL buying, just in reduced volumes, and with mitigated actions. Again, pricing compression and Neo-Stagflation.
And actually, per the laws of economics taught at EVERY school of economics, investors making purchases at the prices DOES mean the prices are not "too high". Prices are what they are, by the laws of economics and reality, BECAUSE "the market" as in potential buyers, ARE buying at these prices.
Look, it's as simple as the definition of "Market Price". A "market Price" is the price for a good or service at which a seller is willing to sell and a buyer is willing to buy. Full-stop. Your using a narcissistic market price valuation method, deciding since prices are too high FOR YOU that thus the market price, AND the market as a whole, is wrong, because it all is supposed to conform to YOU, your affordability, your desires, your valuation. And I am sorry to say but the world does not revolve around you. And I will add, your not alone in this narcissistic construct, there is a sizable movement of such. Why, I have no idea, I think it connects with how we've raised this generation, pumping your head with participation awards and all kinds of molly-coddling.
The market decides the market price. And as long as the market is accepting of these returns, which I will add are far more NORMAL than what your expecting which is of last decade levels that is NOT normal, came via specific convergence of events.
The fact that market prices are what they are, have held at what they are, IS the evidence and fact that the market prices are NOT "too high".
And here is the future. As the cost to buy LOWERS (rates decline) prices WILL-GO-UP. Today's prices REFLECT TODAYS RATE. This is so basic and simple but for some reason so many are missing this very basic, obvious simple fact. Todays prices reflect todays rate.
So as the rates change, prices will also change. Rates go DOWN prices will, with 100% certainty, NOT go down. Lower cost to purchase, INCREASING purchasing power, and median purchasing dollar amounts WILL-GO-UP.
And saying but you want it to be uber easy to buy an investment property, well too-bad, that's not how the world of business works, you missed that boat, the EZ Button is GONE. One has to actually work for it now. That's just the reality of the situation.
James, you have more important things to do than this.
LOL....couldn't have said it better myself.
- 3yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votesI bought another one near it in Arlington, TX for 200k recently that rents for $2465/month. I spent 14k on a rehab so all in for 214k. It nets $700/month and I put down 25k to pay for it and the rehab. So my ROI is 33% CoC. So you don’t need to go back to 2012 to make great returns. There are still deals available today.
Quote from @K S.:
Quote from @John Morgan:
My properties are affordable that average 250-300k in the Dallas area with these 80-120% returns on my 20% down payments between principal pay down, 5% appreciation and monthly cash flow. I can’t make nearly that kind of return in the stock market with my Roth IRAs and 401k like you suggest. I pull out my equity in 3-5 years on some to buy more real estate with zero money out of pocket for the new purchases. I’m happy with making 15% in the stock market. But I’m really happy with an internal rate of return of around 100% on my SFR. Some of my internal rates exceed 200% off my down payments. But most in the 80-120% range which I’m really happy with.Quote from @K S.:
This should be put into context. When someone says 120% returns what does that mean? Well if you purchased a 10k house in the ghetto for 2k down payment and collect rents with a shotgun, then all you need is for the house to increase to 12k and you just made 100% return so in perspective that's not good as HVAC alone can wipe out a years worth of profits, plus you must I'm going to assume you're managing them yourself. Not something most people with a 9-5 can do.Quote from @John Morgan:
I fully leverage so I’m only 20% into a house. Between principal pay down on my mortgage, monthly cash flow and appreciation, I’m making an internal rate of return around 80-120% on most of my properties off my small 20% down payments. AQuote from @K S.:
Quote from @John Morgan:
I’d say 50% if someone is willing to give themselves 10 years slowly buying and holding. Most people need to hit home runs with no work. Those who are willing to do the work and slowly grow over time will crush it if they give themselves 10 years.
I have been slowly buying and holding for 15 years and for the most part, the theory doesn't hold up. Sure a few properties doubled in value but at about the same pace as inflation which is less than the stock market plus, the cash they return has not changed in 15 years as the increase in rent is negated by the increase in property taxes, hoa and maintenance on an aging house. I just sold a condo because the HOA has increased faster than rents can keep up and I'm selling a home because its age is becoming a liabilbity despite being paid off. They don't teach you that in the books. I'm beginning to think nobody making these comments has owned a house for 15 years or really crunched the numbers and compared it to the stock market or 20 years of maxing out a 401k with employer matching.
I know someone who go a late start in his 401k and also purchased a house during the lowest point in the recession. His house has tripled but his 401k has around the same amount as his house has equity. Tell me you can do that today at these prices and rates?
You'll be taxed very little if you retire with no 1099 income and a roth is tax free. I'd imagine most people have both.
I took out a 401k loan on one of them for 50k to buy a fixer upper 5 years ago. It rents for $1550/month and I paid back my 401k loan with the profits. Then did a cash out refi on it to buy 3 more houses a year ago. Between all 4 of these houses I got for basically only 50k from my 401k loan, they net me $3300/month after all my expenses. I’ve paid my 401k loan off and have infinite cash flow of $3300/month plus my tenants are paying off my mortgages and they’re appreciating about 5%/year (50-60k/year). So this is about a 220% return I’m getting off my initial investment of 50k which I paid initial 401k loan back a couple years ago when you calculate principal pay down, monthly cash flow and 5% appreciation. Numbers don’t lie.
So real estate can do as good or even better than the stock market when you calculate your numbers over time with leverage. Those who pay cash obviously won’t do nearly as well. But those who are smart and leverage their way to wealth will crush it over time and create generational wealth.Can you do me a favor and send me the street address to this property and I'll do my own research to see how lucrative that would be today. I mean I also bought a property years ago with 10% infinitum returns as you say but call me skeptical on how easy cheesy that would be today as you make it sound. It's not like we can all go back to 2012 again and leverage ourselves. Of course I know there are cheaper states with pockets of undervalued properties but I'm guessing with higher risk or other compromises.
And I’m going to AR to look at two houses tomorrow for 50k for both of them. One rents for $500 and the other rents for $600. My ROI will only be 17% not including cap ex and vacancies. But that’s because I’m paying all cash vs leveraging. But meets the 2% rule so I’m ok with it. And I’m getting them 60% off from a wholesaler. - Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Chris Clothier:
Wow, I spent too much time on this post this morning. I though I was going to leave a simple quick comment and then started reading...
Here are 3 quick thoughts.
1. We, and that is a collective "we" including myself and a lot of other investors who have been doing this for a very long time, can sometimes have trouble allowing others to define their own success. I work with and have gotten to know so many investors that it is impossible to count the different ways different people define success. Cash flow, returns, hedge, preservation of capital, equity growth, ability to refinance, etc., etc.... Everyone gets to define their success - even the guy that says success is have some extra bucks each month to go on dates or rent cool cars. It may not be how "we" define it, but if they do then so be it.
By that logic, I would put the percentage of people being successful in real estate a little higher. I don't include in my logic anyone who hasn't actually invested. Tire kickers and lookie-loos that never get in the game shouldn't be counted in my opinion. Doesn't amtter if they arein a facebook group or bought a course or paid a mentor or guru. Until you've put your money into the market, I don't consider that person an investor. Those that have put their money in, I wouldn't be surprised if the number was greater than 50% would say they are successful. They get to define what it means to them.
2. I tip my hat to every investor who comes on here and shares. Even when their numbers or math are wrong. I'm big enough to say that I have learned a ton from other posters and am humble enough to admit at times I've written things on here that are incorrect from a returns standpoint. I say that to remind everyone who started investing after the 2008 crisis that the real strength of your portfolio, your decisions and your knowledge go on display when the next crisis starts. It has been an incredible run for many investors and everyone who bought and held in the last 8 years like the example in Arlington should be congratulated. But pulling out cash, keeping leverage high, re-leveraging that cash into new properties and eventually growing a monthly payment that far exceeds your day job income is exactly how many investors lost everything. When I start reading about pulling cash out as values rise and "infinite returns", I'm reminded of how many good properties I have been able to buy over the last decade plus where a bank wanted to off-load non-performing notes. When properties go vacant and they always do and then need work to be brought back to market and they always do, cash flow tightens. When investors suddenly have to use their day job to pay for repairs and notes because properties sit too long or repairs are super high, refinancing and pulling our equity is not an option. That ain't fun!
It's what we don't know that bites us in the a$$ every time and I have a feeling that investors who are not aware of the real danger they put themselves in are the same ones who won't recognize the time to sell and realize their return. At that point, they'll no longer define their success and instead blame a guru!
Lastly, I actually like reading what @james Hamling writes on here. I don't argue with him though...ever, lol. He always has data!
You, Sir, are a Gentleman and a Scholar.
Your 1., brings to mind a somewhat lead I am currently dragging my feet on working. It's actually an all but done deal, but, I just keep procrastinating on it. The seller, a MR in his 80's, was a successful land investor, Ag.. Has many acres tillable, many for cattle, all leased up. The issue, he's been bleeding capital for last several years as he won't pass on increased expenses, won't raise the rents.
The wife is certain they have to sell, and happy to do so. And he, well his brain knows and wants to, but his heart is a different story. But despite where his heart is, he was ready to make it happen. And, I have a buyer all set to close. But, as times gone on, speaking with Mr Seller, he absolutely loves these properties, the life, walking the pastures, talking with the farmers, it is very literally his whole life. And I fear it's gonna kill him, i fear Mr Seller will not just sell his property, but his reason for getting out of bed along with it.
Your right. He is far from our conventional definition of success, he's chewing through life savings at a fairly substantial clip. But then again, he's happy, really happy. And at his age, well as they say you never see a U-haul following the Hurst.
I suspect if I ask, he'd be hard pressed to put a dollar amount on the quality of his life right now, money pit and all.
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes3y
Quote from @John Morgan:
I bought another one near it in Arlington, TX for 200k recently that rents for $2465/month. I spent 14k on a rehab so all in for 214k. It nets $700/month and I put down 25k to pay for it and the rehab. So my ROI is 33% CoC. So you don’t need to go back to 2012 to make great returns. There are still deals available today.Quote from @K S.:
Quote from @John Morgan:
My properties are affordable that average 250-300k in the Dallas area with these 80-120% returns on my 20% down payments between principal pay down, 5% appreciation and monthly cash flow. I can’t make nearly that kind of return in the stock market with my Roth IRAs and 401k like you suggest. I pull out my equity in 3-5 years on some to buy more real estate with zero money out of pocket for the new purchases. I’m happy with making 15% in the stock market. But I’m really happy with an internal rate of return of around 100% on my SFR. Some of my internal rates exceed 200% off my down payments. But most in the 80-120% range which I’m really happy with.Quote from @K S.:
This should be put into context. When someone says 120% returns what does that mean? Well if you purchased a 10k house in the ghetto for 2k down payment and collect rents with a shotgun, then all you need is for the house to increase to 12k and you just made 100% return so in perspective that's not good as HVAC alone can wipe out a years worth of profits, plus you must I'm going to assume you're managing them yourself. Not something most people with a 9-5 can do.Quote from @John Morgan:
I fully leverage so I’m only 20% into a house. Between principal pay down on my mortgage, monthly cash flow and appreciation, I’m making an internal rate of return around 80-120% on most of my properties off my small 20% down payments. AQuote from @K S.:
Quote from @John Morgan:
I’d say 50% if someone is willing to give themselves 10 years slowly buying and holding. Most people need to hit home runs with no work. Those who are willing to do the work and slowly grow over time will crush it if they give themselves 10 years.
I have been slowly buying and holding for 15 years and for the most part, the theory doesn't hold up. Sure a few properties doubled in value but at about the same pace as inflation which is less than the stock market plus, the cash they return has not changed in 15 years as the increase in rent is negated by the increase in property taxes, hoa and maintenance on an aging house. I just sold a condo because the HOA has increased faster than rents can keep up and I'm selling a home because its age is becoming a liabilbity despite being paid off. They don't teach you that in the books. I'm beginning to think nobody making these comments has owned a house for 15 years or really crunched the numbers and compared it to the stock market or 20 years of maxing out a 401k with employer matching.
I know someone who go a late start in his 401k and also purchased a house during the lowest point in the recession. His house has tripled but his 401k has around the same amount as his house has equity. Tell me you can do that today at these prices and rates?
You'll be taxed very little if you retire with no 1099 income and a roth is tax free. I'd imagine most people have both.
I took out a 401k loan on one of them for 50k to buy a fixer upper 5 years ago. It rents for $1550/month and I paid back my 401k loan with the profits. Then did a cash out refi on it to buy 3 more houses a year ago. Between all 4 of these houses I got for basically only 50k from my 401k loan, they net me $3300/month after all my expenses. I’ve paid my 401k loan off and have infinite cash flow of $3300/month plus my tenants are paying off my mortgages and they’re appreciating about 5%/year (50-60k/year). So this is about a 220% return I’m getting off my initial investment of 50k which I paid initial 401k loan back a couple years ago when you calculate principal pay down, monthly cash flow and 5% appreciation. Numbers don’t lie.
So real estate can do as good or even better than the stock market when you calculate your numbers over time with leverage. Those who pay cash obviously won’t do nearly as well. But those who are smart and leverage their way to wealth will crush it over time and create generational wealth.Can you do me a favor and send me the street address to this property and I'll do my own research to see how lucrative that would be today. I mean I also bought a property years ago with 10% infinitum returns as you say but call me skeptical on how easy cheesy that would be today as you make it sound. It's not like we can all go back to 2012 again and leverage ourselves. Of course I know there are cheaper states with pockets of undervalued properties but I'm guessing with higher risk or other compromises.
And I’m going to AR to look at two houses tomorrow for 50k for both of them. One rents for $500 and the other rents for $600. My ROI will only be 17% not including cap ex and vacancies. But that’s because I’m paying all cash vs leveraging. But meets the 2% rule so I’m ok with it. And I’m getting them 60% off from a wholesaler.Makes sense. But as you and I both know most investors dont have access to enough cash to really scale the cash flow. Most investors also dont have enough knowledge to invest in different areas across the US. Having said that, sounds like you have figured out your personal lane in real estate, and congratulations on that!
Quote from @John Morgan:
I bought another one near it in Arlington, TX for 200k recently that rents for $2465/month. I spent 14k on a rehab so all in for 214k. It nets $700/month and I put down 25k to pay for it and the rehab. So my ROI is 33% CoC. So you don’t need to go back to 2012 to make great returns. There are still deals available today.Quote from @K S.:
Quote from @John Morgan:
My properties are affordable that average 250-300k in the Dallas area with these 80-120% returns on my 20% down payments between principal pay down, 5% appreciation and monthly cash flow. I can’t make nearly that kind of return in the stock market with my Roth IRAs and 401k like you suggest. I pull out my equity in 3-5 years on some to buy more real estate with zero money out of pocket for the new purchases. I’m happy with making 15% in the stock market. But I’m really happy with an internal rate of return of around 100% on my SFR. Some of my internal rates exceed 200% off my down payments. But most in the 80-120% range which I’m really happy with.Quote from @K S.:
This should be put into context. When someone says 120% returns what does that mean? Well if you purchased a 10k house in the ghetto for 2k down payment and collect rents with a shotgun, then all you need is for the house to increase to 12k and you just made 100% return so in perspective that's not good as HVAC alone can wipe out a years worth of profits, plus you must I'm going to assume you're managing them yourself. Not something most people with a 9-5 can do.Quote from @John Morgan:
I fully leverage so I’m only 20% into a house. Between principal pay down on my mortgage, monthly cash flow and appreciation, I’m making an internal rate of return around 80-120% on most of my properties off my small 20% down payments. AQuote from @K S.:
Quote from @John Morgan:
I’d say 50% if someone is willing to give themselves 10 years slowly buying and holding. Most people need to hit home runs with no work. Those who are willing to do the work and slowly grow over time will crush it if they give themselves 10 years.
I have been slowly buying and holding for 15 years and for the most part, the theory doesn't hold up. Sure a few properties doubled in value but at about the same pace as inflation which is less than the stock market plus, the cash they return has not changed in 15 years as the increase in rent is negated by the increase in property taxes, hoa and maintenance on an aging house. I just sold a condo because the HOA has increased faster than rents can keep up and I'm selling a home because its age is becoming a liabilbity despite being paid off. They don't teach you that in the books. I'm beginning to think nobody making these comments has owned a house for 15 years or really crunched the numbers and compared it to the stock market or 20 years of maxing out a 401k with employer matching.
I know someone who go a late start in his 401k and also purchased a house during the lowest point in the recession. His house has tripled but his 401k has around the same amount as his house has equity. Tell me you can do that today at these prices and rates?
You'll be taxed very little if you retire with no 1099 income and a roth is tax free. I'd imagine most people have both.
I took out a 401k loan on one of them for 50k to buy a fixer upper 5 years ago. It rents for $1550/month and I paid back my 401k loan with the profits. Then did a cash out refi on it to buy 3 more houses a year ago. Between all 4 of these houses I got for basically only 50k from my 401k loan, they net me $3300/month after all my expenses. I’ve paid my 401k loan off and have infinite cash flow of $3300/month plus my tenants are paying off my mortgages and they’re appreciating about 5%/year (50-60k/year). So this is about a 220% return I’m getting off my initial investment of 50k which I paid initial 401k loan back a couple years ago when you calculate principal pay down, monthly cash flow and 5% appreciation. Numbers don’t lie.
So real estate can do as good or even better than the stock market when you calculate your numbers over time with leverage. Those who pay cash obviously won’t do nearly as well. But those who are smart and leverage their way to wealth will crush it over time and create generational wealth.Can you do me a favor and send me the street address to this property and I'll do my own research to see how lucrative that would be today. I mean I also bought a property years ago with 10% infinitum returns as you say but call me skeptical on how easy cheesy that would be today as you make it sound. It's not like we can all go back to 2012 again and leverage ourselves. Of course I know there are cheaper states with pockets of undervalued properties but I'm guessing with higher risk or other compromises.
And I’m going to AR to look at two houses tomorrow for 50k for both of them. One rents for $500 and the other rents for $600. My ROI will only be 17% not including cap ex and vacancies. But that’s because I’m paying all cash vs leveraging. But meets the 2% rule so I’m ok with it. And I’m getting them 60% off from a wholesaler.So you're not going to share the relative street address of one of the Dallas properties, ok. I know you don't need to go back to 2012 but real estate professionals work in the field and is their 9-5 , they research markets around the country and become road warriors which appears to be the common story on this thread. That doesn't disprove that it's becoming near impossible for the majority of investors with a their day job to become successful in real estate.
So the rent is $2500/month so I'm going to guess $1500 net after expenses. Did you include cap expenditures yet, vacancy, pm fees? Not everyone can take on two jobs. The 180k mortgage would eat the rest up quickly. $700 sounds like you're including principal which is weird. I never include that in my returns.- 3yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votesI don’t know why you keep insisting on the addresses of my properties, but I’ll give it to you. 603 Marlow place, Arlington I bought this year and all in for 214k with a light rehab that took a week. It rents for $2465/month and nets me around $750/month. This does not include cap ex or vacancies. But it has a brand new roof, new HVAC and the house was recently rehabbed. So I don’t expect much cap ex issues for the next 15 years. And vacancies around here are practically zero due to the growth and high demand for rentals in Texas. I rarely ever have a vacancy. And when I do have one, I’ve got the next tenant moving in within a couple days. And $750 doesn’t count principal pay down. Now sure why you would assume I would count that in my monthly cash flow. Lol. But if I did add that and appreciation to the $750/month I’m making, it would be around $2200/month. Not bad for a 25k investment for a house I just bought. And the returns only get better over time while market rent goes up and my mortgage stays fixed for 30 years. The power of leverage is key to generating a lot of wealth with very little out of pocket. Keeping 100% of the profits with only 10 or 20% down is huge. No other investment is like this. Not to mention the cash flow is all tax free due to the tax code.
Quote from @K S.:
Quote from @John Morgan:
I bought another one near it in Arlington, TX for 200k recently that rents for $2465/month. I spent 14k on a rehab so all in for 214k. It nets $700/month and I put down 25k to pay for it and the rehab. So my ROI is 33% CoC. So you don’t need to go back to 2012 to make great returns. There are still deals available today.Quote from @K S.:
Quote from @John Morgan:
My properties are affordable that average 250-300k in the Dallas area with these 80-120% returns on my 20% down payments between principal pay down, 5% appreciation and monthly cash flow. I can’t make nearly that kind of return in the stock market with my Roth IRAs and 401k like you suggest. I pull out my equity in 3-5 years on some to buy more real estate with zero money out of pocket for the new purchases. I’m happy with making 15% in the stock market. But I’m really happy with an internal rate of return of around 100% on my SFR. Some of my internal rates exceed 200% off my down payments. But most in the 80-120% range which I’m really happy with.Quote from @K S.:
This should be put into context. When someone says 120% returns what does that mean? Well if you purchased a 10k house in the ghetto for 2k down payment and collect rents with a shotgun, then all you need is for the house to increase to 12k and you just made 100% return so in perspective that's not good as HVAC alone can wipe out a years worth of profits, plus you must I'm going to assume you're managing them yourself. Not something most people with a 9-5 can do.Quote from @John Morgan:
I fully leverage so I’m only 20% into a house. Between principal pay down on my mortgage, monthly cash flow and appreciation, I’m making an internal rate of return around 80-120% on most of my properties off my small 20% down payments. AQuote from @K S.:
Quote from @John Morgan:
I’d say 50% if someone is willing to give themselves 10 years slowly buying and holding. Most people need to hit home runs with no work. Those who are willing to do the work and slowly grow over time will crush it if they give themselves 10 years.
I have been slowly buying and holding for 15 years and for the most part, the theory doesn't hold up. Sure a few properties doubled in value but at about the same pace as inflation which is less than the stock market plus, the cash they return has not changed in 15 years as the increase in rent is negated by the increase in property taxes, hoa and maintenance on an aging house. I just sold a condo because the HOA has increased faster than rents can keep up and I'm selling a home because its age is becoming a liabilbity despite being paid off. They don't teach you that in the books. I'm beginning to think nobody making these comments has owned a house for 15 years or really crunched the numbers and compared it to the stock market or 20 years of maxing out a 401k with employer matching.
I know someone who go a late start in his 401k and also purchased a house during the lowest point in the recession. His house has tripled but his 401k has around the same amount as his house has equity. Tell me you can do that today at these prices and rates?
You'll be taxed very little if you retire with no 1099 income and a roth is tax free. I'd imagine most people have both.
I took out a 401k loan on one of them for 50k to buy a fixer upper 5 years ago. It rents for $1550/month and I paid back my 401k loan with the profits. Then did a cash out refi on it to buy 3 more houses a year ago. Between all 4 of these houses I got for basically only 50k from my 401k loan, they net me $3300/month after all my expenses. I’ve paid my 401k loan off and have infinite cash flow of $3300/month plus my tenants are paying off my mortgages and they’re appreciating about 5%/year (50-60k/year). So this is about a 220% return I’m getting off my initial investment of 50k which I paid initial 401k loan back a couple years ago when you calculate principal pay down, monthly cash flow and 5% appreciation. Numbers don’t lie.
So real estate can do as good or even better than the stock market when you calculate your numbers over time with leverage. Those who pay cash obviously won’t do nearly as well. But those who are smart and leverage their way to wealth will crush it over time and create generational wealth.Can you do me a favor and send me the street address to this property and I'll do my own research to see how lucrative that would be today. I mean I also bought a property years ago with 10% infinitum returns as you say but call me skeptical on how easy cheesy that would be today as you make it sound. It's not like we can all go back to 2012 again and leverage ourselves. Of course I know there are cheaper states with pockets of undervalued properties but I'm guessing with higher risk or other compromises.
And I’m going to AR to look at two houses tomorrow for 50k for both of them. One rents for $500 and the other rents for $600. My ROI will only be 17% not including cap ex and vacancies. But that’s because I’m paying all cash vs leveraging. But meets the 2% rule so I’m ok with it. And I’m getting them 60% off from a wholesaler.So you're not going to share the relative street address of one of the Dallas properties, ok. I know you don't need to go back to 2012 but real estate professionals work in the field and is their 9-5 , they research markets around the country and become road warriors which appears to be the common story on this thread. That doesn't disprove that it's becoming near impossible for the majority of investors with a their day job to become successful in real estate.
So the rent is $2500/month so I'm going to guess $1500 net after expenses. Did you include cap expenditures yet, vacancy, pm fees? Not everyone can take on two jobs. The 180k mortgage would eat the rest up quickly. $700 sounds like you're including principal which is weird. I never include that in my returns.
I work full time so I don’t spend much time with my rentals even though I self manage 21 properties. It’s easy to do since I don’t work on them. I just text people to go fix them when they break. I’d rather spend my free time with my family so I hire it all out.
I bought another one in Arlington a month ago that does good too. However, im ok with just “base hits” at first. I know after 3-5 years these hits start producing runs when market rent comes up and appreciation builds lots of equity. @Peter Vekselman the right question is how many are actually in real estate vs part-timers are those that don't commit.
I think far too often like most things in life people don't actually commit.
The secondary question would be, what is success in real estate?
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes3y
@logan M
Very good points. There are of course different ways of asking this and classifying this. My point in starting this whole conversation is that in the end, this industry has a huge amount of people interested in it, and very few people making real money...
- I said "relative address" like just a street or neighborhood, not your actual address if that was it. I removed it from this quote and you might want to edit it out. I was interested in looking at that block to crunch the actual numbers. What type of loan do you have? And I tried the calling someone approach and it was a disaster with just a single house. Been using a property management company ever since. You must have a chill 9-5 to handle that.
Quote from @John Morgan:
I don’t know why you keep insisting on the addresses of my properties, but I’ll give it to you. , Arlington I bought this year and all in for 214k with a light rehab that took a week. It rents for $2465/month and nets me around $750/month. This does not include cap ex or vacancies. But it has a brand new roof, new HVAC and the house was recently rehabbed. So I don’t expect much cap ex issues for the next 15 years. And vacancies around here are practically zero due to the growth and high demand for rentals in Texas. I rarely ever have a vacancy. And when I do have one, I’ve got the next tenant moving in within a couple days. And $750 doesn’t count principal pay down. Now sure why you would assume I would count that in my monthly cash flow. Lol. But if I did add that and appreciation to the $750/month I’m making, it would be around $2200/month. Not bad for a 25k investment for a house I just bought. And the returns only get better over time while market rent goes up and my mortgage stays fixed for 30 years. The power of leverage is key to generating a lot of wealth with very little out of pocket. Keeping 100% of the profits with only 10 or 20% down is huge. No other investment is like this. Not to mention the cash flow is all tax free due to the tax code.Quote from @K S.:
Quote from @John Morgan:
I bought another one near it in Arlington, TX for 200k recently that rents for $2465/month. I spent 14k on a rehab so all in for 214k. It nets $700/month and I put down 25k to pay for it and the rehab. So my ROI is 33% CoC. So you don’t need to go back to 2012 to make great returns. There are still deals available today.Quote from @K S.:
Quote from @John Morgan:
My properties are affordable that average 250-300k in the Dallas area with these 80-120% returns on my 20% down payments between principal pay down, 5% appreciation and monthly cash flow. I can’t make nearly that kind of return in the stock market with my Roth IRAs and 401k like you suggest. I pull out my equity in 3-5 years on some to buy more real estate with zero money out of pocket for the new purchases. I’m happy with making 15% in the stock market. But I’m really happy with an internal rate of return of around 100% on my SFR. Some of my internal rates exceed 200% off my down payments. But most in the 80-120% range which I’m really happy with.Quote from @K S.:
This should be put into context. When someone says 120% returns what does that mean? Well if you purchased a 10k house in the ghetto for 2k down payment and collect rents with a shotgun, then all you need is for the house to increase to 12k and you just made 100% return so in perspective that's not good as HVAC alone can wipe out a years worth of profits, plus you must I'm going to assume you're managing them yourself. Not something most people with a 9-5 can do.Quote from @John Morgan:
I fully leverage so I’m only 20% into a house. Between principal pay down on my mortgage, monthly cash flow and appreciation, I’m making an internal rate of return around 80-120% on most of my properties off my small 20% down payments. AQuote from @K S.:
Quote from @John Morgan:
I’d say 50% if someone is willing to give themselves 10 years slowly buying and holding. Most people need to hit home runs with no work. Those who are willing to do the work and slowly grow over time will crush it if they give themselves 10 years.
I have been slowly buying and holding for 15 years and for the most part, the theory doesn't hold up. Sure a few properties doubled in value but at about the same pace as inflation which is less than the stock market plus, the cash they return has not changed in 15 years as the increase in rent is negated by the increase in property taxes, hoa and maintenance on an aging house. I just sold a condo because the HOA has increased faster than rents can keep up and I'm selling a home because its age is becoming a liabilbity despite being paid off. They don't teach you that in the books. I'm beginning to think nobody making these comments has owned a house for 15 years or really crunched the numbers and compared it to the stock market or 20 years of maxing out a 401k with employer matching.
I know someone who go a late start in his 401k and also purchased a house during the lowest point in the recession. His house has tripled but his 401k has around the same amount as his house has equity. Tell me you can do that today at these prices and rates?
You'll be taxed very little if you retire with no 1099 income and a roth is tax free. I'd imagine most people have both.
I took out a 401k loan on one of them for 50k to buy a fixer upper 5 years ago. It rents for $1550/month and I paid back my 401k loan with the profits. Then did a cash out refi on it to buy 3 more houses a year ago. Between all 4 of these houses I got for basically only 50k from my 401k loan, they net me $3300/month after all my expenses. I’ve paid my 401k loan off and have infinite cash flow of $3300/month plus my tenants are paying off my mortgages and they’re appreciating about 5%/year (50-60k/year). So this is about a 220% return I’m getting off my initial investment of 50k which I paid initial 401k loan back a couple years ago when you calculate principal pay down, monthly cash flow and 5% appreciation. Numbers don’t lie.
So real estate can do as good or even better than the stock market when you calculate your numbers over time with leverage. Those who pay cash obviously won’t do nearly as well. But those who are smart and leverage their way to wealth will crush it over time and create generational wealth.Can you do me a favor and send me the street address to this property and I'll do my own research to see how lucrative that would be today. I mean I also bought a property years ago with 10% infinitum returns as you say but call me skeptical on how easy cheesy that would be today as you make it sound. It's not like we can all go back to 2012 again and leverage ourselves. Of course I know there are cheaper states with pockets of undervalued properties but I'm guessing with higher risk or other compromises.
And I’m going to AR to look at two houses tomorrow for 50k for both of them. One rents for $500 and the other rents for $600. My ROI will only be 17% not including cap ex and vacancies. But that’s because I’m paying all cash vs leveraging. But meets the 2% rule so I’m ok with it. And I’m getting them 60% off from a wholesaler.So you're not going to share the relative street address of one of the Dallas properties, ok. I know you don't need to go back to 2012 but real estate professionals work in the field and is their 9-5 , they research markets around the country and become road warriors which appears to be the common story on this thread. That doesn't disprove that it's becoming near impossible for the majority of investors with a their day job to become successful in real estate.
So the rent is $2500/month so I'm going to guess $1500 net after expenses. Did you include cap expenditures yet, vacancy, pm fees? Not everyone can take on two jobs. The 180k mortgage would eat the rest up quickly. $700 sounds like you're including principal which is weird. I never include that in my returns.
I work full time so I don’t spend much time with my rentals even though I self manage 21 properties. It’s easy to do since I don’t work on them. I just text people to go fix them when they break. I’d rather spend my free time with my family so I hire it all out.
I bought another one in Arlington a month ago that does good too. However, im ok with just “base hits” at first. I know after 3-5 years these hits start producing runs when market rent comes up and appreciation builds lots of equity. - I crunched some numbers on that house you gave me in Arlington, TX 76014.
Quote from @John Morgan:
I don’t know why you keep insisting on the addresses of my properties, but I’ll give it to you. , Arlington I bought this year and all in for 214k with a light rehab that took a week. It rents for $2465/month and nets me around $750/month. This does not include cap ex or vacancies. But it has a brand new roof, new HVAC and the house was recently rehabbed. So I don’t expect much cap ex issues for the next 15 years. And vacancies around here are practically zero due to the growth and high demand for rentals in Texas. I rarely ever have a vacancy. And when I do have one, I’ve got the next tenant moving in within a couple days. And $750 doesn’t count principal pay down. Now sure why you would assume I would count that in my monthly cash flow. Lol. But if I did add that and appreciation to the $750/month I’m making, it would be around $2200/month. Not bad for a 25k investment for a house I just bought. And the returns only get better over time while market rent goes up and my mortgage stays fixed for 30 years. The power of leverage is key to generating a lot of wealth with very little out of pocket. Keeping 100% of the profits with only 10 or 20% down is huge. No other investment is like this. Not to mention the cash flow is all tax free due to the tax code.Quote from @K S.:
Quote from @John Morgan:
I bought another one near it in Arlington, TX for 200k recently that rents for $2465/month. I spent 14k on a rehab so all in for 214k. It nets $700/month and I put down 25k to pay for it and the rehab. So my ROI is 33% CoC. So you don’t need to go back to 2012 to make great returns. There are still deals available today.Quote from @K S.:
Quote from @John Morgan:
My properties are affordable that average 250-300k in the Dallas area with these 80-120% returns on my 20% down payments between principal pay down, 5% appreciation and monthly cash flow. I can’t make nearly that kind of return in the stock market with my Roth IRAs and 401k like you suggest. I pull out my equity in 3-5 years on some to buy more real estate with zero money out of pocket for the new purchases. I’m happy with making 15% in the stock market. But I’m really happy with an internal rate of return of around 100% on my SFR. Some of my internal rates exceed 200% off my down payments. But most in the 80-120% range which I’m really happy with.Quote from @K S.:
This should be put into context. When someone says 120% returns what does that mean? Well if you purchased a 10k house in the ghetto for 2k down payment and collect rents with a shotgun, then all you need is for the house to increase to 12k and you just made 100% return so in perspective that's not good as HVAC alone can wipe out a years worth of profits, plus you must I'm going to assume you're managing them yourself. Not something most people with a 9-5 can do.Quote from @John Morgan:
I fully leverage so I’m only 20% into a house. Between principal pay down on my mortgage, monthly cash flow and appreciation, I’m making an internal rate of return around 80-120% on most of my properties off my small 20% down payments. AQuote from @K S.:
Quote from @John Morgan:
I’d say 50% if someone is willing to give themselves 10 years slowly buying and holding. Most people need to hit home runs with no work. Those who are willing to do the work and slowly grow over time will crush it if they give themselves 10 years.
I have been slowly buying and holding for 15 years and for the most part, the theory doesn't hold up. Sure a few properties doubled in value but at about the same pace as inflation which is less than the stock market plus, the cash they return has not changed in 15 years as the increase in rent is negated by the increase in property taxes, hoa and maintenance on an aging house. I just sold a condo because the HOA has increased faster than rents can keep up and I'm selling a home because its age is becoming a liabilbity despite being paid off. They don't teach you that in the books. I'm beginning to think nobody making these comments has owned a house for 15 years or really crunched the numbers and compared it to the stock market or 20 years of maxing out a 401k with employer matching.
I know someone who go a late start in his 401k and also purchased a house during the lowest point in the recession. His house has tripled but his 401k has around the same amount as his house has equity. Tell me you can do that today at these prices and rates?
You'll be taxed very little if you retire with no 1099 income and a roth is tax free. I'd imagine most people have both.
I took out a 401k loan on one of them for 50k to buy a fixer upper 5 years ago. It rents for $1550/month and I paid back my 401k loan with the profits. Then did a cash out refi on it to buy 3 more houses a year ago. Between all 4 of these houses I got for basically only 50k from my 401k loan, they net me $3300/month after all my expenses. I’ve paid my 401k loan off and have infinite cash flow of $3300/month plus my tenants are paying off my mortgages and they’re appreciating about 5%/year (50-60k/year). So this is about a 220% return I’m getting off my initial investment of 50k which I paid initial 401k loan back a couple years ago when you calculate principal pay down, monthly cash flow and 5% appreciation. Numbers don’t lie.
So real estate can do as good or even better than the stock market when you calculate your numbers over time with leverage. Those who pay cash obviously won’t do nearly as well. But those who are smart and leverage their way to wealth will crush it over time and create generational wealth.Can you do me a favor and send me the street address to this property and I'll do my own research to see how lucrative that would be today. I mean I also bought a property years ago with 10% infinitum returns as you say but call me skeptical on how easy cheesy that would be today as you make it sound. It's not like we can all go back to 2012 again and leverage ourselves. Of course I know there are cheaper states with pockets of undervalued properties but I'm guessing with higher risk or other compromises.
And I’m going to AR to look at two houses tomorrow for 50k for both of them. One rents for $500 and the other rents for $600. My ROI will only be 17% not including cap ex and vacancies. But that’s because I’m paying all cash vs leveraging. But meets the 2% rule so I’m ok with it. And I’m getting them 60% off from a wholesaler.So you're not going to share the relative street address of one of the Dallas properties, ok. I know you don't need to go back to 2012 but real estate professionals work in the field and is their 9-5 , they research markets around the country and become road warriors which appears to be the common story on this thread. That doesn't disprove that it's becoming near impossible for the majority of investors with a their day job to become successful in real estate.
So the rent is $2500/month so I'm going to guess $1500 net after expenses. Did you include cap expenditures yet, vacancy, pm fees? Not everyone can take on two jobs. The 180k mortgage would eat the rest up quickly. $700 sounds like you're including principal which is weird. I never include that in my returns.
I work full time so I don’t spend much time with my rentals even though I self manage 21 properties. It’s easy to do since I don’t work on them. I just text people to go fix them when they break. I’d rather spend my free time with my family so I hire it all out.
I bought another one in Arlington a month ago that does good too. However, im ok with just “base hits” at first. I know after 3-5 years these hits start producing runs when market rent comes up and appreciation builds lots of equity.
You said you purchased at market value for 200k but the current and recent sold prices in that area average 280k for the few 4 bed 1600sqft comps I found within walking distance.
Purchasing a comp with 20% down with an 8% mortgage at that price, new tax rate, 10% pm fee, and insurance and you're breaking even. That is if rents are actually $2500 at the moment as I can only find 1 comp listed for $2200. Otherwise, one would be underwater. I still think that's a good place to invest though as it's better than Austin, Round Rock and Tampa where rents are around $1700-2000 with about the same purchase price.
I get it, one can find these deals, manage yourself and take time off work to handle issues, renovate yourself and hustle but I think that answers the OPs question. Most people don't have the ability to side hustle or be located near such a neighborhood. Good for you though. - 3yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
25 year commercial loan with 5 years fixed. I only had to put 10% down and the lender threw in 20k for the rehab on top of the loan. So I was only out of pocket 25k which included closing costs. And my rehab went under budget at 14k.
I just text handymen to go fix things when they break, so self managing is easy and doesn’t take much time at all. Plus it saves me about 30-35k/year in PM fees.And I just signed a contract to buy two rentals in Arkansas that have sec 8 tenants in place today for only 25k per house. They were in really good condition too! With clean long term tenants. So there are still good cash flowing deals out there in 2023! I’ve bought 4 houses this year and can’t complain!
- 3yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votesYour numbers are off. The net cashflow after all my expenses is $750/month. And it’s section 8 which is $2465/mo, the going rate in that zip for a 4 bedroom.
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I crunched some numbers on that house you gave me in Arlington, TX 76014.Quote from @John Morgan:
I don’t know why you keep insisting on the addresses of my properties, but I’ll give it to you. , Arlington I bought this year and all in for 214k with a light rehab that took a week. It rents for $2465/month and nets me around $750/month. This does not include cap ex or vacancies. But it has a brand new roof, new HVAC and the house was recently rehabbed. So I don’t expect much cap ex issues for the next 15 years. And vacancies around here are practically zero due to the growth and high demand for rentals in Texas. I rarely ever have a vacancy. And when I do have one, I’ve got the next tenant moving in within a couple days. And $750 doesn’t count principal pay down. Now sure why you would assume I would count that in my monthly cash flow. Lol. But if I did add that and appreciation to the $750/month I’m making, it would be around $2200/month. Not bad for a 25k investment for a house I just bought. And the returns only get better over time while market rent goes up and my mortgage stays fixed for 30 years. The power of leverage is key to generating a lot of wealth with very little out of pocket. Keeping 100% of the profits with only 10 or 20% down is huge. No other investment is like this. Not to mention the cash flow is all tax free due to the tax code.Quote from @K S.:
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I bought another one near it in Arlington, TX for 200k recently that rents for $2465/month. I spent 14k on a rehab so all in for 214k. It nets $700/month and I put down 25k to pay for it and the rehab. So my ROI is 33% CoC. So you don’t need to go back to 2012 to make great returns. There are still deals available today.Quote from @K S.:
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My properties are affordable that average 250-300k in the Dallas area with these 80-120% returns on my 20% down payments between principal pay down, 5% appreciation and monthly cash flow. I can’t make nearly that kind of return in the stock market with my Roth IRAs and 401k like you suggest. I pull out my equity in 3-5 years on some to buy more real estate with zero money out of pocket for the new purchases. I’m happy with making 15% in the stock market. But I’m really happy with an internal rate of return of around 100% on my SFR. Some of my internal rates exceed 200% off my down payments. But most in the 80-120% range which I’m really happy with.Quote from @K S.:
This should be put into context. When someone says 120% returns what does that mean? Well if you purchased a 10k house in the ghetto for 2k down payment and collect rents with a shotgun, then all you need is for the house to increase to 12k and you just made 100% return so in perspective that's not good as HVAC alone can wipe out a years worth of profits, plus you must I'm going to assume you're managing them yourself. Not something most people with a 9-5 can do.Quote from @John Morgan:
I fully leverage so I’m only 20% into a house. Between principal pay down on my mortgage, monthly cash flow and appreciation, I’m making an internal rate of return around 80-120% on most of my properties off my small 20% down payments. AQuote from @K S.:
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I’d say 50% if someone is willing to give themselves 10 years slowly buying and holding. Most people need to hit home runs with no work. Those who are willing to do the work and slowly grow over time will crush it if they give themselves 10 years.
I have been slowly buying and holding for 15 years and for the most part, the theory doesn't hold up. Sure a few properties doubled in value but at about the same pace as inflation which is less than the stock market plus, the cash they return has not changed in 15 years as the increase in rent is negated by the increase in property taxes, hoa and maintenance on an aging house. I just sold a condo because the HOA has increased faster than rents can keep up and I'm selling a home because its age is becoming a liabilbity despite being paid off. They don't teach you that in the books. I'm beginning to think nobody making these comments has owned a house for 15 years or really crunched the numbers and compared it to the stock market or 20 years of maxing out a 401k with employer matching.
I know someone who go a late start in his 401k and also purchased a house during the lowest point in the recession. His house has tripled but his 401k has around the same amount as his house has equity. Tell me you can do that today at these prices and rates?
You'll be taxed very little if you retire with no 1099 income and a roth is tax free. I'd imagine most people have both.
I took out a 401k loan on one of them for 50k to buy a fixer upper 5 years ago. It rents for $1550/month and I paid back my 401k loan with the profits. Then did a cash out refi on it to buy 3 more houses a year ago. Between all 4 of these houses I got for basically only 50k from my 401k loan, they net me $3300/month after all my expenses. I’ve paid my 401k loan off and have infinite cash flow of $3300/month plus my tenants are paying off my mortgages and they’re appreciating about 5%/year (50-60k/year). So this is about a 220% return I’m getting off my initial investment of 50k which I paid initial 401k loan back a couple years ago when you calculate principal pay down, monthly cash flow and 5% appreciation. Numbers don’t lie.
So real estate can do as good or even better than the stock market when you calculate your numbers over time with leverage. Those who pay cash obviously won’t do nearly as well. But those who are smart and leverage their way to wealth will crush it over time and create generational wealth.Can you do me a favor and send me the street address to this property and I'll do my own research to see how lucrative that would be today. I mean I also bought a property years ago with 10% infinitum returns as you say but call me skeptical on how easy cheesy that would be today as you make it sound. It's not like we can all go back to 2012 again and leverage ourselves. Of course I know there are cheaper states with pockets of undervalued properties but I'm guessing with higher risk or other compromises.
And I’m going to AR to look at two houses tomorrow for 50k for both of them. One rents for $500 and the other rents for $600. My ROI will only be 17% not including cap ex and vacancies. But that’s because I’m paying all cash vs leveraging. But meets the 2% rule so I’m ok with it. And I’m getting them 60% off from a wholesaler.So you're not going to share the relative street address of one of the Dallas properties, ok. I know you don't need to go back to 2012 but real estate professionals work in the field and is their 9-5 , they research markets around the country and become road warriors which appears to be the common story on this thread. That doesn't disprove that it's becoming near impossible for the majority of investors with a their day job to become successful in real estate.
So the rent is $2500/month so I'm going to guess $1500 net after expenses. Did you include cap expenditures yet, vacancy, pm fees? Not everyone can take on two jobs. The 180k mortgage would eat the rest up quickly. $700 sounds like you're including principal which is weird. I never include that in my returns.
I work full time so I don’t spend much time with my rentals even though I self manage 21 properties. It’s easy to do since I don’t work on them. I just text people to go fix them when they break. I’d rather spend my free time with my family so I hire it all out.
I bought another one in Arlington a month ago that does good too. However, im ok with just “base hits” at first. I know after 3-5 years these hits start producing runs when market rent comes up and appreciation builds lots of equity.
You said you purchased at market value for 200k but the current and recent sold prices in that area average 280k for the few 4 bed 1600sqft comps I found within walking distance.
Purchasing a comp with 20% down with an 8% mortgage at that price, new tax rate, 10% pm fee, and insurance and you're breaking even. That is if rents are actually $2500 at the moment as I can only find 1 comp listed for $2200. Otherwise, one would be underwater. I still think that's a good place to invest though as it's better than Austin, Round Rock and Tampa where rents are around $1700-2000 with about the same purchase price.
I get it, one can find these deals, manage yourself and take time off work to handle issues, renovate yourself and hustle but I think that answers the OPs question. Most people don't have the ability to side hustle or be located near such a neighborhood. Good for you though.
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