Living off rentals
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Living off rentals will take a long, long time for the average REI. 15-20 years, probably. You'll need 7-10 quality doors.
Going the full scale--- lower barrier to entry, lots of doors, etc. You got to remember the more houses, the more capex, the more tenants. Bad areas then you're talking bad tenants. So on paper, sure, you'll get there maybe in 8-10 years but reality will hit. You'll get higher turnover, more damage to the properties, higher vacancies.
The average BP folk on a W2 making $80k/year. Needs to save up to buy 1 rental property in a favorable location every 3-4 years. By year 12-15, re-fi 1 and sell 1. Take that cash do capex, and pay down the debts. Have 2-3 rentals that make you probably $7500/mo. To really get into the part where you're having 8-10 fully paid off rentals in year 12-15, you'll need to make a $400-500k/year at least for a 4-5 year stretch.
This whole jump in and get rich on REI passed us in 08-22. It's going to be the even longer game now.
187 Replies
Quote from @Jeff S.:
Not knowing more details @Peter W. I would hope just for ballpark figures that your PI (principal and interest) are not much more than $950 with rent being $1900 if all other things are average.
I like your long-term views. For me nothing made sense until I made my present include 10 years out.
Including appreciation in your forecasts are tricky because you want to be able to do well even when things move down. That is when the long-view comes in handy. If values decline and you stick it out it usually pays in the long run. Have watched people bail in a downturn and give it all back then watch prices skyrocket with their old properties becoming worth millions.
Pretty much anything you buy should be viewed at that 15-20 year time frame, 7 minimum, ideally the 12-15. Even equity on a house, in today's rate's you're looking to really tap if you lock in today at Nov 28, 2023 in probably 2030-2031 to utilize. If you take the long approach, and keep cash reserves meaning not scale another 2-3 properties to now you're thin you'll do wonderful. Hard assets is the best hedge right now if you can afford it and can afford the means of (minute) subsidy of it. If you cannot own the physical risk, equities and private debt is the best solution for income. Not leverage your HELOC to speculate on a house.
I am not a financial advisor, but if you have good means. Meaning you're an accredited person($200k + for 2 yrs+). After you eliminate all personal debt besides your mortgage & max out retirement accounts & have a healthy savings account, you need to set aside downpayment + reserves to buy 1 house every 2-3 years and allocate a % to equities & private debt offerings as the rest. And just keep doing that, let it season.
If you're in the 50k-75k, you need to eliminate debt. If you're in the 75k-125k, you need to eliminate debt + focus on retirement, equities, savings. If you're $125k-$200k, even more of the previous group. I am not Dave Ramsey, clearly I agree with him on some of this stuff but too many people on this board are digging themselves in. I get it, it's an REI board, but most of the stuff I read I fear themselves just getting caught on the system of the decade prior while not understanding the dynamics are apples to oranges.
- Member since 2019 路 7k+ posts 路 4k+ votes2y
Quote from @Account Closed:
Quote from @V.G Jason:
Living off rentals will take a long, long time for the average REI. 15-20 years, probably. You'll need 7-10 quality doors.
Going the full scale--- lower barrier to entry, lots of doors, etc. You got to remember the more houses, the more capex, the more tenants. Bad areas then you're talking bad tenants. So on paper, sure, you'll get there maybe in 8-10 years but reality will hit. You'll get higher turnover, more damage to the properties, higher vacancies.
The average BP folk on a W2 making $80k/year. Needs to save up to buy 1 rental property in a favorable location every 3-4 years. By year 12-15, re-fi 1 and sell 1. Take that cash do capex, and pay down the debts. Have 2-3 rentals that make you probably $7500/mo. To really get into the part where you're having 8-10 fully paid off rentals in year 12-15, you'll need to make a $400-500k/year at least for a 4-5 year stretch.This whole jump in and get rich on REI passed us in 08-22. It's going to be the even longer game now.
"Living off rentals will take a long, long time for the average REI. 15-20 years, probably."
Seeing someone actually say the truth about this on these forums is refreshing.
One of my gripes with Brandon Turner was him constantly selling people on this 7 year plan from zero to your first million. It wasn't reality then- but for maybe a few skilled or lucky perhaps operators -and it sure as hell isn't reality now.
You can do that too like him if you are GP and you invest other people money when money is expanding like in 2009 timeframe.
That's their actual recipe.
GP is like leveraging other people money for your own personal benefits. Left or right you would win when money is expanding LOL
Even during downturn like today, GP would have the benefit while regular investor is taking all the risks.
The thing is , for 98% of us, what @Jay Hinrichs mentioned above is the reality.
Mathmatically speaking it's only possible to have massive income from passive or active/selling/flip at year 8 of real estate investment and that's only if real estate appreciates double than inflation.
The first 200k is extremely difficult but after that you know how to do it .... - Member since 2019 路 7k+ posts 路 4k+ votes2y
Quote from @V.G Jason:
Quote from @Jeff S.:
Not knowing more details @Peter W. I would hope just for ballpark figures that your PI (principal and interest) are not much more than $950 with rent being $1900 if all other things are average.
I like your long-term views. For me nothing made sense until I made my present include 10 years out.
Including appreciation in your forecasts are tricky because you want to be able to do well even when things move down. That is when the long-view comes in handy. If values decline and you stick it out it usually pays in the long run. Have watched people bail in a downturn and give it all back then watch prices skyrocket with their old properties becoming worth millions.
Pretty much anything you buy should be viewed at that 15-20 year time frame, 7 minimum, ideally the 12-15. Even equity on a house, in today's rate's you're looking to really tap if you lock in today at Nov 28, 2023 in probably 2030-2031 to utilize. If you take the long approach, and keep cash reserves meaning not scale another 2-3 properties to now you're thin you'll do wonderful. Hard assets is the best hedge right now if you can afford it and can afford the means of (minute) subsidy of it. If you cannot own the physical risk, equities and private debt is the best solution for income. Not leverage your HELOC to speculate on a house.
I am not a financial advisor, but if you have good means. Meaning you're an accredited person($200k + for 2 yrs+). After you eliminate all personal debt besides your mortgage & max out retirement accounts & have a healthy savings account, you need to set aside downpayment + reserves to buy 1 house every 2-3 years and allocate a % to equities & private debt offerings as the rest. And just keep doing that, let it season.
yes, the trick is the same:
1. buy house that appreciate double than inflation, double than nationwide average
2. put 30-40% LTV
3. financing as long as possible.
for that to work, we need reserve, that reserve is coming from other money printing system that we have, it could be w2 as cardiologist or car mechanic, but the way is the same.
And if someone is really really good , try to raise capital, and do the same (I'm not on this level lol)Btw, Miami appreciation looks super good for next ten years.
@JD Martin such a great story. Refreshing to hear people loving this country and interesting how those that work the hardest appreciate this country most. Work hard become grateful. Awesome job!
Agree @Mike Klarman if one can make money fixing up properties that is a talent that be useful in accumulating properties. We hear many regret always selling but the quick cash is tempting. Locking up equity forces one to gain wealth without using the cash which is a good way to go as far as I am concerned.
- Cleveland, OH 路 Member since 2022 路 826 posts 路 578 votes2y
Quote from @Jeff S.:
Looks like a great plan for your future @Benjamin Sulka. Look forward to hearing your plans going forward.
Jeff,
I really appreciate that! Trying to learn, improve, and meet new people every day.All the best!
- Rock Star Extraordinaire 路 Northeast, TN 路 Member since 2015 路 10k+ posts 路 17k+ votes2y
Quote from @V.G Jason:
Credit to you for doing all that, but make no mistake about it. And a lot of that opportunity is luck depending on the time frame you bought. If anything was bought in the great recession, then yes that was excellent preparation but absolutely excellent luck too.Quote from @JD Martin:
Well, I will tell you how I did it (or you can just listen to me on the podcast in my signature below).
I spent a career working in local government. While I was doing that I saved a chunk of money. Eventually I had enough money saved that I was able to buy 3 houses for cash in one year: a 2br/1ba 1000sf tired old rental for $37k; a 2br/1ba 1400sf home with several extra rooms for $46k from a court-ordered estate sale; and a 2br/1.5ba 1100sf repo I called the cat piss house for $37k (interestingly enough I have bought 5 houses for $37k, not sure why this number was successful). That was essentially the entirety of my life savings. During that year, I worked every day after work and all weekends rehabbing the houses with my own money. I spent about $13k fixing up the first one, including a new roof; $5k on the second one; and about $3k on the last one. I got the first two rented for $600 per month and the third for $650. That was $1850 per month on about $140k worth of investment. Considering that then taxes and insurance were virtually nothing, it worked out to about a 15% annual ROI.
Because I had a decent W2 job, I took every bit of that cash flow and saved it, along with money I was saving from living beneath my means (how I had saved the original $100k in the first place). I think the next house I bought cost me $25k because it was a disgusting hoarder house. The one after that was maybe $37k again. I literally bought two houses for cash with credit cards while I was short on cash because of a rehab with no interest for 18 months and 24 months respectively on the two cards. During this whole time I mucked around in tiny crawl spaces with mouse crap and snakes, cleaned sewage off of myself more than once, made at least two emergency room visits (one for drilling a hole straight through my hand installing cabinet knobs), sweated my *** off in attics in the summer. I once spent all night pumping 3 feet of water out of a basement, in a monsoon, using a DC pump attached to my truck battery because there was no electricity to the house and the sump pump couldn't work. I planned my holiday days off at work around rehab and inspection work. My vacations were "staycations" where I spent a week ripping up rotted floorboards or tearing out toilets and tubs. In between my agent and I would walk houses where human feces was smeared all over walls, flea infestations were so bad you had to spray yourself down in the front yard when you came out, and rugs with years of dog and cat urine baked into it. Twice I fell through rotted floors into the crawlspace, luckily both times I was in the shallow end of the crawlspace and only went 3-4 feet down.
I did this for years. After almost a decade one day I noticed that my net rental income brought in more money than my job. I worked a few more years then turned in my retirement and started collecting my pension. My pension brings in enough money to cover my own personal living expenses. The rentals pay for all the fun stuff. I'm ex-military so I have VA health care and purchase supplemental for my wife.
There was nothing glamorous or lucky about it, other than seeing an opportunity (buying houses for cheap) and taking advantage of it. I worked my *** off, but I also got to retire at 50. Yes, I gave up something in the process but I also now get to do whatever I want, whenever I want it. I was able to buy my grandkids cars (used, of course - I'm still frugal) for their HS graduations. I was able to buy a second home in Florida for family to use. I paid for my own education along the way (I have a doctorate) and have been able to be the bank of choice for family members (0% interest).
I tell my grandkids all the time: hard work and vision trumps everything else. Make a plan and work it. We live in the greatest nation in the history of the earth when it comes to opportunities. If you want to live off of rentals, bust *** and get it done.
That opportunity isn't there today. The main points I've mentioned before:
1) Higher barrier to entry
2) Cost of capital increase
3) Average living expenses completely disproportionate to back 15-25 years ago. I mean I am talking in all aspects.
You could no re-do what you did then and do it now. It doesn't work that way. You have to apply advice to the this era. This era the best bet on your money is hard assets & owning debt, not taking debt(in most cases). That changes this entire set up.
I know my background was a topic in another thread, and I don't want to open those cans of worms again, but if I had to re-do what made me successful, it could not be repeated like that. I can't go to the industry I had success in and tell them look at what I did and do that, it's a completely different ball game. Risk management is the only common thing that's applied, and it has to be done differently right now.It doesn't make any difference that some things are different. RE is a long game and should always be looked at as such. Saying what I did then couldn't be done now is nonsense. The homes I was buying had been those prices for 20 years where I live, not anything to do with the Great Recession. And I didn't use any debt at the beginning, all cash. I saved about $100k to work with at the beginning by living below my means, making some side money when possible, and then looking around to see where my skills and abilities lined up with current opportunities and long term goals. It probably took me 10 years to save that first $100k that let me buy those first three properties; I didn't use any debt back then. What is stopping people from saving money to use for investing today - high housing prices? No, what's happened is that people look around at people like me and think "Hey if that guy could do it so can I, but I don't want to spend 20 years building this - I want to drink appletinis on the beach next year, living off my rentals".
Someone said luck is the intersection of hard work and opportunity. I agree with that wholeheartedly. If housing prices had been prohibitive back then, I would have found a different opportunity and worked it instead. Anyone can do that today. If you think that today the best bet is owning debt, it's not hard to save up money and become a private lender.
Skyline Properties Quote from @V.G Jason:
You did get lucky, there's no argument otherwise. I say that to compliment not take away from what you've done, but don't confuse it. None of this kind of luck happens in todays world. You're still missing the fact that median income: household ratio was completely different back then and the overall price of living in all other metrics are significantly and disproportionately higher than the 90s and early 2000s. It's not even a fair comparison. Lending rules then versus now is also in another stratosphere, show me one person in today's W2 world with a solid one($80k) that'd be able to buy 5 condos in 6 years, let alone 2. You literally bottom fed and bought in the great recession, that's the definition of being lucky.Quote from @Bob Ritner:
Living off the income is very realistic, I live comfortably off of 7 doors in So Cal but........it is a long game. Bought a beach duplex in 1999 and 5 condos from 2009 through 2014 and fully retired at 52 in 2017 with all units paid off and the rentals as my only source of income. Many would say that I got lucky buying most of my properties during the great recession and that this cannot be duplicated, but I disagree on both counts.
Real estate is a cyclical industry, though it may not seem that way to the 20 and 30 somethings who have only seen things going up. Sure, you may be able buy high and still be ok long term if not over leveraged, but your hands will be tied by debt and negative equity properties when things go south and thus not be in a position to buy when everyone else wants to sell and there are great opportunities.
I graduated from college at a time with very high relative valuations and I was sure I would not be able to buy for a long time. I saved and lived frugally, housing prices crashed in the early 90's and all of a sudden I had a house. For the next 5 years real estate valuations stayed relatively low, I saved and saved and before I knew it I had a duplex. The early 2000's were even crazier than now and I did not want to touch anything, as I wanted to have both cash flow and opportunity for appreciation in anything I bought. I saved and saved and the great recession hit and it was the greatest thing that ever happened to me. Prices crashed and I bought 5 condos in 6 years. I retired from my firm after paying everything off in 2017. The common theme here is that I was patient and bought when prices corrected/crashed, not when they were crazy. I read a lot on this forum about people striking it rich or wanting to in a few years and I am sure it is possible and I am sure that some do it, but I also know many people personally who tried to in the late 80's/early 90's and lost everything and in 2000-2007 and lost everything. Becoming self sufficient slowly, and conservatively is not sexy but it does work. This means saving, saving, saving, and only buying when it makes clear sense and it means having the self control to sit on the sidelines and just save when the numbers are questionable.
As an interesting side note, I did some detailed calculations and I could have achieved a slightly higher net worth by just investing in the S&P500, though I would not currently be enjoying the benefits of depreciation and the resulting lower income taxes that real estate affords. Also, I would have probably gone crazy giving up control and leaving my retirement funds to the whims of corporate CEOs that mainly have their own self interests at heart.
We're literally in an 40-year affordability crisis, you can't tell me what you were able to accomplish is realistic. It's just as discouraging as the 2010-2020 folks saying you can scale and make it all the way to top. Sure, when valuations crash into a third and the rental market skyrockets; that's a feat that may never, ever happen again. The chickens have come home to roost--we are going to sit in a period of higher inflation, higher rates, limited inventory(due to less homebuilding + low rates). It's just not possible to scale like you for the average person out there in todays world.With the recent rate hikes the affordability is the worst since the 1980s, not the worse ever Prior to those rate hikes, the affordability was decent/good even after 10 years of high RE appreciation.
I have purchased regular and now work RE as a hobby. However, between the value adds and the market appreciation in less than 2 years I have nearly doubled my last RE investments (75% LTV). Granted they were purchased Dec 2021 (shortly before the rates started to climb).
There is more education material available today than ever. This includes BP and other investment sites, RDPD and plethora of other investment books, easy access to information including census data, job data, development data, city plans, etc.This can enlighten to alternate rental models: LTR, STR, MTR, NNN, etc. multiple finance options: subject to, owner financed, lease/rent to own, assumable, NACA, the just started 95% LTV for OO up to quad, etc. multiple value adds: BRRRR, coops, ADU, utilizing under utilized zoning, etc. multiple purchase options: MLS, off market, auctions, FSBO, short sales, etc. multiple investment classes: non-commercial residential, commercial residential, self storage, MHP, industrial, office, merchant space, glamping and traditional camping, hotels/motels, raw land, lumber sales, mineral rights, etc.
Your view is not enough opportunities, my view is there are too many to learn and understand. I have been doing this a while and have not done many of the above. Glass half empty or glass half full? I chose to believe for those that educate proper and put in the work, the glass is half full.
Most years I have had moderate income (last year less than 6 digits of taxable income).Do you really believe it is not possible? Do you not hear various success stories? Do you really believe this time/market is that unique?
My son is 21. Just starting in life. He literally has never had income above taxable limit yet he has enough to put down money on a Santa Barbara OO home (Santa Barbara is expensive). 95% LTV results in minimal money required (or FHA at 96.5% LTV). To do this, he is currently living out of his car and subletting his BR at a significant profit (UCSB has severe student housing shortage). Sacrifice? He seems to enjoy it but I suspect it will get old.
Where there鈥檚 a will there鈥檚 a way!
best wishes- Member since 2019 路 7k+ posts 路 4k+ votes2yJust want to send nicer picture :)
Quote from @Steve Vaughan:
Quote from @Jay Hinrichs:
it is a constant theme you see here in the Forums .. folks cant wait to quit the Job because rentals are so much easier etc etc.
U have to put your own money into your retirement accounts no matching funds.@Steve Vaughan Steve I believe gives the best reality check on living on rentals and what it takes the sacrifices he had to make scaling and well thought out exit strategy.. His post should be mandatory reading for anyone thinking they are going to quit their job in 3 years and live off of rental income.
Thank you, Jay. Means a lot coming from you. And you're right about retirement matches. I've only done ROTHs for 21 years. No 401s, 403s or social insecurity contributions.
Sacrifice was definitely a thing early on. Not many willing to buy a doublewide in a trailer park and live there for 5 years after you quit your job.
We were able to acquire 35 doors in large part because our shelter expenses were under $300/mo. Most want both the Barbara Corcoran lifestyle and the passive income. Doesn't work that way,
I haven't had a w2 since 2002. Got creative with seller-financing buys of 7 and 10unit buildings. Bought 3 2003-2007. Did SF to BRRRs long before it was named. Had a wonderful private lender reach out to me and we had a great run for 15 years. He still has 3 of my mortgages and we are still friends.
It's all about your why, sacrifice and creativity. Do good things out there. Conscious / compassionate was my mantra and I have been blessed with more than expected because of it.
- Rock Star Extraordinaire 路 Northeast, TN 路 Member since 2015 路 10k+ posts 路 17k+ votes2yAmen, brother! Honestly, sometimes I am literally overwhelmed at the number of opportunities for making money I see all around me every day. Hardly a day goes by where I don't see at least two or three different opportunities for earning good money that never occurred to me before. If I was immortal there's no question in my mind I'd eventually be the richest man on earth 馃ぃ . The problem isn't lack of opportunities, especially in the USA - it's lack of discipline, willpower, and the ability to postpone gratification that is the problem. No one wants to work a 5 or 10 year plan, much less a 20 year plan. I have two college-age grandsons. One works part-time on midnight shifts for UPS while going to college full-time, and I can see is "getting the RE bug" watching grandpa being retired already. The other one sits at home and aspires to be "an influencer" 馃檮. OK, even that - which I think is ridiculous - can be done but you have to have a vision, a plan to get there, and the willingness to get out there and bust ***. I read an article about one of these top 'influencers', and this guy literally spends 10-12 hours per day story lining his upcoming videos, planning out the settings and props, figuring out his marketing, etc. He makes it work because he gets out there and busts ***; it doesn't just fall into his lap.
Quote from @Dan H.:
Your view is not enough opportunities, my view is there are too many to learn and understand. I have been doing this a while and have not done many of the above. Glass half empty or glass half full? I chose to believe for those that educate proper and put in the work, the glass is half full.
Skyline Properties - Rental Property Investor 路 East Wenatchee, WA 路 Member since 2014 路 10k+ posts 路 16k+ votes2y
Quote from @Carlos Ptriawan:
Yours is def much more 'blessed' but I stand by mouse double bonus as the better than expected馃槑
- Rental Property Investor 路 Boston, Massachusetts (MA) 路 Member since 2016 路 2k+ posts 路 2k+ votes2y
A shout out to spouses who make this work! Our combined income was a baseline that allowed for us to invest. I had the higher earning w2s for the most part, but was able to go full time and still have reportable income from her which made everything work. Able to concentrate on building anssets and equity with occasional cash outs when she changed jobs. And she never blinked when I went full time real estate investing and being the Dad with a 2 year runway in the bank 6 years ago at 48. It鈥檚 fun to make it work with someone. Still building amd would have been quicker if I鈥檇 stayed longer, but wouldn鈥檛 trade it.
Quote from @Jeff S.:
Not knowing more details @Peter W. I would hope just for ballpark figures that your PI (principal and interest) are not much more than $950 with rent being $1900 if all other things are average.
I like your long-term views. For me nothing made sense until I made my present include 10 years out.
Including appreciation in your forecasts are tricky because you want to be able to do well even when things move down. That is when the long-view comes in handy. If values decline and you stick it out it usually pays in the long run. Have watched people bail in a downturn and give it all back then watch prices skyrocket with their old properties becoming worth millions.
Cash flow is about 0, so yea principle and interest is a little more than 900. I did the opposite of paying for points, took a higher interest rate for money off closing costs so I am sitting at 8.5%. If rates get down to 6% or so, it鈥檒l do alight in cash flow. If appreciation is zero, I will end up right side up, but it will have been a bad investment. I think chances of good appreciation is high. It鈥檚 a B- neighbor sandwiched between the three best neighborhoods in the metropolitan area (and it鈥檚 schools have been improving).
- Member since 2019 路 7k+ posts 路 4k+ votes2y
Quote from @Jonathan R McLaughlin:
A shout out to spouses who make this work! Our combined income was a baseline that allowed for us to invest. I had the higher earning w2s for the most part, but was able to go full time and still have reportable income from her which made everything work. Able to concentrate on building anssets and equity with occasional cash outs when she changed jobs. And she never blinked when I went full time real estate investing and being the Dad with a 2 year runway in the bank 6 years ago at 48. It鈥檚 fun to make it work with someone. Still building amd would have been quicker if I鈥檇 stayed longer, but wouldn鈥檛 trade it.
yes, having spouse that is very aggressive in researching Zillow is big plus for us ;-) lol
my spouse is sending more MLS than my realtor actually
- 2yBradley BuxtonBusiness MemberReal Estate Agent 路 NV 路 Member since 2023 路 1k+ posts 路 720 votes
@Elisabeth Lernhardt is spot on with the Reno Tahoe area. Reno is still "affordable" compared to California, Boise, Austin, Portland, Seatle, SLC comparison and there are plenty of properties in B areas next to A areas that you can get for under 400K. It's not going to cash flow like cash flow Columbus OH for sure. The strength in wealth building is in appreciation. Cash flow is good but rent and equity will build wealth better in a stronger area than rents and appreciation in locations which are slow to increase like the south and mid-west. Reno / Tahoe is not building out much because of the geography creating a supply issue over the next 2-5 years, there is strong tech, manufacturing (Tesla), and logistical job growth. Nevada also has lower property taxes and is landlord-friendly compared to Portland. Might be worth another look for wealth-building opportunities. Feel free to reach out.
- We have rentals and have been picking up some for years now. It is not practical to live off of income for many years after starting. We do flips to offset our income.
Quote from @Jeff S.:
While listening to Barbara Corcoran she emphasized the need to have other income while building your real estate holdings. I wonder how many actually live off rental income alone without having put in years of building equity and having other main sources of income. I know in my area starting out cash flow is low and while holding RE over the long-term is lucrative pulling money out to live would be a constant drain on equity.
I imagine if you buy low cost properties and get lots of doors and frugally manage them you could earn a living. If you are a good RE agent or builder/developer or have a great source of income and can delay gratification then you are golden. As she says after 20 years or so she can easily pull cash out for personal use. Living off rentals is the plan just wonder if it is realistic.
- Member since 2019 路 7k+ posts 路 4k+ votes2y
Quote from @Bradley Buxton:
@Elisabeth Lernhardt is spot on with the Reno Tahoe area. Reno is still "affordable" compared to California, Boise, Austin, Portland, Seatle, SLC comparison and there are plenty of properties in B areas next to A areas that you can get for under 400K. It's not going to cash flow like cash flow Columbus OH for sure. The strength in wealth building is in appreciation. Cash flow is good but rent and equity will build wealth better in a stronger area than rents and appreciation in locations which are slow to increase like the south and mid-west. Reno / Tahoe is not building out much because of the geography creating a supply issue over the next 2-5 years, there is strong tech, manufacturing (Tesla), and logistical job growth. Nevada also has lower property taxes and is landlord-friendly compared to Portland. Might be worth another look for wealth-building opportunities. Feel free to reach out.
Relocating some part of Californian business to Reno is very smart move by CA corporation to get better tax and more streamlined cost, it does create higher job demand as well. The fact that it's only 3 hrs driving makes it quite good long term investment.
Quote from @Dan H.:
Quote from @V.G Jason:
You did get lucky, there's no argument otherwise. I say that to compliment not take away from what you've done, but don't confuse it. None of this kind of luck happens in todays world. You're still missing the fact that median income: household ratio was completely different back then and the overall price of living in all other metrics are significantly and disproportionately higher than the 90s and early 2000s. It's not even a fair comparison. Lending rules then versus now is also in another stratosphere, show me one person in today's W2 world with a solid one($80k) that'd be able to buy 5 condos in 6 years, let alone 2. You literally bottom fed and bought in the great recession, that's the definition of being lucky.Quote from @Bob Ritner:
Living off the income is very realistic, I live comfortably off of 7 doors in So Cal but........it is a long game. Bought a beach duplex in 1999 and 5 condos from 2009 through 2014 and fully retired at 52 in 2017 with all units paid off and the rentals as my only source of income. Many would say that I got lucky buying most of my properties during the great recession and that this cannot be duplicated, but I disagree on both counts.
Real estate is a cyclical industry, though it may not seem that way to the 20 and 30 somethings who have only seen things going up. Sure, you may be able buy high and still be ok long term if not over leveraged, but your hands will be tied by debt and negative equity properties when things go south and thus not be in a position to buy when everyone else wants to sell and there are great opportunities.
I graduated from college at a time with very high relative valuations and I was sure I would not be able to buy for a long time. I saved and lived frugally, housing prices crashed in the early 90's and all of a sudden I had a house. For the next 5 years real estate valuations stayed relatively low, I saved and saved and before I knew it I had a duplex. The early 2000's were even crazier than now and I did not want to touch anything, as I wanted to have both cash flow and opportunity for appreciation in anything I bought. I saved and saved and the great recession hit and it was the greatest thing that ever happened to me. Prices crashed and I bought 5 condos in 6 years. I retired from my firm after paying everything off in 2017. The common theme here is that I was patient and bought when prices corrected/crashed, not when they were crazy. I read a lot on this forum about people striking it rich or wanting to in a few years and I am sure it is possible and I am sure that some do it, but I also know many people personally who tried to in the late 80's/early 90's and lost everything and in 2000-2007 and lost everything. Becoming self sufficient slowly, and conservatively is not sexy but it does work. This means saving, saving, saving, and only buying when it makes clear sense and it means having the self control to sit on the sidelines and just save when the numbers are questionable.
As an interesting side note, I did some detailed calculations and I could have achieved a slightly higher net worth by just investing in the S&P500, though I would not currently be enjoying the benefits of depreciation and the resulting lower income taxes that real estate affords. Also, I would have probably gone crazy giving up control and leaving my retirement funds to the whims of corporate CEOs that mainly have their own self interests at heart.
We're literally in an 40-year affordability crisis, you can't tell me what you were able to accomplish is realistic. It's just as discouraging as the 2010-2020 folks saying you can scale and make it all the way to top. Sure, when valuations crash into a third and the rental market skyrockets; that's a feat that may never, ever happen again. The chickens have come home to roost--we are going to sit in a period of higher inflation, higher rates, limited inventory(due to less homebuilding + low rates). It's just not possible to scale like you for the average person out there in todays world.With the recent rate hikes the affordability is the worst since the 1980s, not the worse ever Prior to those rate hikes, the affordability was decent/good even after 10 years of high RE appreciation.
I have purchased regular and now work RE as a hobby. However, between the value adds and the market appreciation in less than 2 years I have nearly doubled my last RE investments (75% LTV). Granted they were purchased Dec 2021 (shortly before the rates started to climb).
There is more education material available today than ever. This includes BP and other investment sites, RDPD and plethora of other investment books, easy access to information including census data, job data, development data, city plans, etc.This can enlighten to alternate rental models: LTR, STR, MTR, NNN, etc. multiple finance options: subject to, owner financed, lease/rent to own, assumable, NACA, the just started 95% LTV for OO up to quad, etc. multiple value adds: BRRRR, coops, ADU, utilizing under utilized zoning, etc. multiple purchase options: MLS, off market, auctions, FSBO, short sales, etc. multiple investment classes: non-commercial residential, commercial residential, self storage, MHP, industrial, office, merchant space, glamping and traditional camping, hotels/motels, raw land, lumber sales, mineral rights, etc.
Your view is not enough opportunities, my view is there are too many to learn and understand. I have been doing this a while and have not done many of the above. Glass half empty or glass half full? I chose to believe for those that educate proper and put in the work, the glass is half full.
Most years I have had moderate income (last year less than 6 digits of taxable income).Do you really believe it is not possible? Do you not hear various success stories? Do you really believe this time/market is that unique?
My son is 21. Just starting in life. He literally has never had income above taxable limit yet he has enough to put down money on a Santa Barbara OO home (Santa Barbara is expensive). 95% LTV results in minimal money required (or FHA at 96.5% LTV). To do this, he is currently living out of his car and subletting his BR at a significant profit (UCSB has severe student housing shortage). Sacrifice? He seems to enjoy it but I suspect it will get old.
Where there鈥檚 a will there鈥檚 a way!
best wishesI think you got it mistaken. Worst affordability since the 80s, no offense to the super seniors here that pretty much covers the crux of our gap assuming people are primarily investing in their W2 tenure(22-62).
And the fact you think value adds and appreciation the last two years isn't also anomalous is also quite telling. You realize the facts are you bought at the absolute bottom of the market, right? And also sold, or re-financed or flipped, in one of the greatest run-ups ever, right? In regards to YoY appreciation and 5-year look back. This is like me telling people in my career no luck was involved, given my previous W2 profession involved buying the lows/selling the highs(commodities). I got incredibly lucky, and I couldn't replicate that same exact way of translating success. But I definitely believe I could do it starting today and be successful again.
They're separated by about 12-14 years, so that speaks to your longevity which is commendable but if we were to use these narrow years as benchmarks for REI-- I think you'll realize where your luck played in. It's a pretty indefensible fact.
Secondly, I don't agree there aren't opportunities. My point is the same opportunities won't happen. I (frequently) say history is irrelevant, because no one can tell the future. When I state that it's because history teaches us to change how we operate, which creates a new problem. You've been a first-hand benefit of that, so I assume you agree with me on that notion.
There's plenty of opportunity, it's just different. If people think they are going to buy the lows(2008-2010) and be able to capture YoY appreciation like 21, H1 22 versus the 5 year lookback-- you're mistaken. If people think that luck wasn't involved to be in that timeframe, then you guys are definitely delusional.
But make no mistake about it--there's opportunity. I've said it before the game is now owning debt, not necessarily taking it.
- Your two college-aged grandsons and the other poster's sons are going to have to make more sacrifices and likely go through harder times to achieve 75% of your success. You do realize that right?
Quote from @JD Martin:
Amen, brother! Honestly, sometimes I am literally overwhelmed at the number of opportunities for making money I see all around me every day. Hardly a day goes by where I don't see at least two or three different opportunities for earning good money that never occurred to me before. If I was immortal there's no question in my mind I'd eventually be the richest man on earth 馃ぃ . The problem isn't lack of opportunities, especially in the USA - it's lack of discipline, willpower, and the ability to postpone gratification that is the problem. No one wants to work a 5 or 10 year plan, much less a 20 year plan. I have two college-age grandsons. One works part-time on midnight shifts for UPS while going to college full-time, and I can see is "getting the RE bug" watching grandpa being retired already. The other one sits at home and aspires to be "an influencer" 馃檮. OK, even that - which I think is ridiculous - can be done but you have to have a vision, a plan to get there, and the willingness to get out there and bust ***. I read an article about one of these top 'influencers', and this guy literally spends 10-12 hours per day story lining his upcoming videos, planning out the settings and props, figuring out his marketing, etc. He makes it work because he gets out there and busts ***; it doesn't just fall into his lap.Quote from @Dan H.:
Your view is not enough opportunities, my view is there are too many to learn and understand. I have been doing this a while and have not done many of the above. Glass half empty or glass half full? I chose to believe for those that educate proper and put in the work, the glass is half full.
It's different now. That's not synonymous with harder or easier, but I'm willing to bet it'll be harder. The facts will show that; median income: household ratio, cost of capital, etc. Your floor was a ton lower than there's will be in almost all necessities.
Don't confuse that for me saying they won't have success. Just realize it'll be significantly harder, sure there are those quick money things that could happen but those minute chances. Quote from @Carlos Ptriawan:
Quote from @V.G Jason:
Quote from @Jeff S.:
Not knowing more details @Peter W. I would hope just for ballpark figures that your PI (principal and interest) are not much more than $950 with rent being $1900 if all other things are average.
I like your long-term views. For me nothing made sense until I made my present include 10 years out.
Including appreciation in your forecasts are tricky because you want to be able to do well even when things move down. That is when the long-view comes in handy. If values decline and you stick it out it usually pays in the long run. Have watched people bail in a downturn and give it all back then watch prices skyrocket with their old properties becoming worth millions.
Pretty much anything you buy should be viewed at that 15-20 year time frame, 7 minimum, ideally the 12-15. Even equity on a house, in today's rate's you're looking to really tap if you lock in today at Nov 28, 2023 in probably 2030-2031 to utilize. If you take the long approach, and keep cash reserves meaning not scale another 2-3 properties to now you're thin you'll do wonderful. Hard assets is the best hedge right now if you can afford it and can afford the means of (minute) subsidy of it. If you cannot own the physical risk, equities and private debt is the best solution for income. Not leverage your HELOC to speculate on a house.
I am not a financial advisor, but if you have good means. Meaning you're an accredited person($200k + for 2 yrs+). After you eliminate all personal debt besides your mortgage & max out retirement accounts & have a healthy savings account, you need to set aside downpayment + reserves to buy 1 house every 2-3 years and allocate a % to equities & private debt offerings as the rest. And just keep doing that, let it season.
yes, the trick is the same:
1. buy house that appreciate double than inflation, double than nationwide average
2. put 30-40% LTV
3. financing as long as possible.
for that to work, we need reserve, that reserve is coming from other money printing system that we have, it could be w2 as cardiologist or car mechanic, but the way is the same.
And if someone is really really good , try to raise capital, and do the same (I'm not on this level lol)Btw, Miami appreciation looks super good for next ten years.
I tapped out of Miami. I sold our place, for family reasons. Got two places, Rockies and mid-Cali that are our seasonal houses now.
But yes, absolutely, hard assets are the best bet. And cash reserves are the necessity if you want to take debt. If you can't take debt like this without reserves, go own debt. If you can do both, wonderful.
Quote from @V.G Jason:
Quote from @Dan H.:
Quote from @V.G Jason:
You did get lucky, there's no argument otherwise. I say that to compliment not take away from what you've done, but don't confuse it. None of this kind of luck happens in todays world. You're still missing the fact that median income: household ratio was completely different back then and the overall price of living in all other metrics are significantly and disproportionately higher than the 90s and early 2000s. It's not even a fair comparison. Lending rules then versus now is also in another stratosphere, show me one person in today's W2 world with a solid one($80k) that'd be able to buy 5 condos in 6 years, let alone 2. You literally bottom fed and bought in the great recession, that's the definition of being lucky.Quote from @Bob Ritner:
Living off the income is very realistic, I live comfortably off of 7 doors in So Cal but........it is a long game. Bought a beach duplex in 1999 and 5 condos from 2009 through 2014 and fully retired at 52 in 2017 with all units paid off and the rentals as my only source of income. Many would say that I got lucky buying most of my properties during the great recession and that this cannot be duplicated, but I disagree on both counts.
Real estate is a cyclical industry, though it may not seem that way to the 20 and 30 somethings who have only seen things going up. Sure, you may be able buy high and still be ok long term if not over leveraged, but your hands will be tied by debt and negative equity properties when things go south and thus not be in a position to buy when everyone else wants to sell and there are great opportunities.
I graduated from college at a time with very high relative valuations and I was sure I would not be able to buy for a long time. I saved and lived frugally, housing prices crashed in the early 90's and all of a sudden I had a house. For the next 5 years real estate valuations stayed relatively low, I saved and saved and before I knew it I had a duplex. The early 2000's were even crazier than now and I did not want to touch anything, as I wanted to have both cash flow and opportunity for appreciation in anything I bought. I saved and saved and the great recession hit and it was the greatest thing that ever happened to me. Prices crashed and I bought 5 condos in 6 years. I retired from my firm after paying everything off in 2017. The common theme here is that I was patient and bought when prices corrected/crashed, not when they were crazy. I read a lot on this forum about people striking it rich or wanting to in a few years and I am sure it is possible and I am sure that some do it, but I also know many people personally who tried to in the late 80's/early 90's and lost everything and in 2000-2007 and lost everything. Becoming self sufficient slowly, and conservatively is not sexy but it does work. This means saving, saving, saving, and only buying when it makes clear sense and it means having the self control to sit on the sidelines and just save when the numbers are questionable.
As an interesting side note, I did some detailed calculations and I could have achieved a slightly higher net worth by just investing in the S&P500, though I would not currently be enjoying the benefits of depreciation and the resulting lower income taxes that real estate affords. Also, I would have probably gone crazy giving up control and leaving my retirement funds to the whims of corporate CEOs that mainly have their own self interests at heart.
We're literally in an 40-year affordability crisis, you can't tell me what you were able to accomplish is realistic. It's just as discouraging as the 2010-2020 folks saying you can scale and make it all the way to top. Sure, when valuations crash into a third and the rental market skyrockets; that's a feat that may never, ever happen again. The chickens have come home to roost--we are going to sit in a period of higher inflation, higher rates, limited inventory(due to less homebuilding + low rates). It's just not possible to scale like you for the average person out there in todays world.With the recent rate hikes the affordability is the worst since the 1980s, not the worse ever Prior to those rate hikes, the affordability was decent/good even after 10 years of high RE appreciation.
I have purchased regular and now work RE as a hobby. However, between the value adds and the market appreciation in less than 2 years I have nearly doubled my last RE investments (75% LTV). Granted they were purchased Dec 2021 (shortly before the rates started to climb).
There is more education material available today than ever. This includes BP and other investment sites, RDPD and plethora of other investment books, easy access to information including census data, job data, development data, city plans, etc.This can enlighten to alternate rental models: LTR, STR, MTR, NNN, etc. multiple finance options: subject to, owner financed, lease/rent to own, assumable, NACA, the just started 95% LTV for OO up to quad, etc. multiple value adds: BRRRR, coops, ADU, utilizing under utilized zoning, etc. multiple purchase options: MLS, off market, auctions, FSBO, short sales, etc. multiple investment classes: non-commercial residential, commercial residential, self storage, MHP, industrial, office, merchant space, glamping and traditional camping, hotels/motels, raw land, lumber sales, mineral rights, etc.
Your view is not enough opportunities, my view is there are too many to learn and understand. I have been doing this a while and have not done many of the above. Glass half empty or glass half full? I chose to believe for those that educate proper and put in the work, the glass is half full.
Most years I have had moderate income (last year less than 6 digits of taxable income).Do you really believe it is not possible? Do you not hear various success stories? Do you really believe this time/market is that unique?
My son is 21. Just starting in life. He literally has never had income above taxable limit yet he has enough to put down money on a Santa Barbara OO home (Santa Barbara is expensive). 95% LTV results in minimal money required (or FHA at 96.5% LTV). To do this, he is currently living out of his car and subletting his BR at a significant profit (UCSB has severe student housing shortage). Sacrifice? He seems to enjoy it but I suspect it will get old.
Where there鈥檚 a will there鈥檚 a way!
best wishesI think you got it mistaken. Worst affordability since the 80s, no offense to the super seniors here that pretty much covers the crux of our gap assuming people are primarily investing in their W2 tenure(22-62).
And the fact you think value adds and appreciation the last two years isn't also anomalous is also quite telling. You realize the facts are you bought at the absolute bottom of the market, right? And also sold, or re-financed or flipped, in one of the greatest run-ups ever, right? In regards to YoY appreciation and 5-year look back. This is like me telling people in my career no luck was involved, given my previous W2 profession involved buying the lows/selling the highs(commodities). I got incredibly lucky, and I couldn't replicate that same exact way of translating success. But I definitely believe I could do it starting today and be successful again.
They're separated by about 12-14 years, so that speaks to your longevity which is commendable but if we were to use these narrow years as benchmarks for REI-- I think you'll realize where your luck played in. It's a pretty indefensible fact.
Secondly, I don't agree there aren't opportunities. My point is the same opportunities won't happen. I (frequently) say history is irrelevant, because no one can tell the future. When I state that it's because history teaches us to change how we operate, which creates a new problem. You've been a first-hand benefit of that, so I assume you agree with me on that notion.
There's plenty of opportunity, it's just different. If people think they are going to buy the lows(2008-2010) and be able to capture YoY appreciation like 21, H1 22 versus the 5 year lookback-- you're mistaken. If people think that luck wasn't involved to be in that timeframe, then you guys are definitely delusional.
But make no mistake about it--there's opportunity. I've said it before the game is now owning debt, not necessarily taking it.
I agree that 2010 to 2020 was outstanding, but I have investments purchased before then and 2 purchased late Dec 2021 (so basically 2022) that also have done good/great. The two purchased in Dec 2021 took less than 2 years to recover my investment in unrealized equity increase (I chose not to refi due to the higher rates). If I was starting out I could refi and redeploy those gains and be scaling in less than 2 years. It likely would be on a smaller scale as these were not first time investor purchases (total of $4m value).
When I was purchasing 2012 to 2018, I had a lot of confidence the prices were going to rise. Maybe you can say I was lucky to be correct but I would not agree as I do my research. I would say it would have had to be bad luck for me to have been wrong. Maybe you can say I got lucky it rose as much as it has and I would respond that we are talking degrees and even with my expected appreciation, I would have done great.
In addition I have purchases post 2018 that I was less confident of the appreciation. However, I was confident that those purchases would make me significant return. It is because I did my research. In two of the purchases I had a plan for creating worth. All purchases were at below market price. i do not consider it luck. I did my research and had a plan. I would have considered it bad luck if i had not achieved expected return (but I have exceeded expected return, which again is degree of success and not necessary for those to have been great investments).
I have a lot of confidence that if I was starting today with same passion and work ethic that I had a 20 years ago, I could hit same level of success as I achieved. Not because the market is as good (it is not), but because my level of knowledge is much greater. It is greater in large part because all the information that is available.
There is a thread were @Henry Clark is providing step by step process of acquiring self storage in more detail than I have provided my prot茅g茅s about RE investing (and experiencing some of the same frustrations I have experienced with some of my prot茅g茅s). I do not know what value to place on his guidance, but my guess is 5 digits. This is free on BP. There is so much free info on the internet. I have attended 3 BP boot camps. Each priced so that someone with a low salary that prioritizes the boot camp could afford it
My son is starting his journey. He is 21. Having more fun than I had by far at his age and not as focused as I was (probably the difference between upper middle class and lower middle/lower class). He has been told not to expect any significant value from our estate. He is living out of his car, subletting his BR to make money while attending UCSB. He has been in discussions with my lender on what is necessary to purchase RE in Santa Barbara (NACA, FHA, the new high LTV loan for OO on multiplexes, etc). I have discussed various options with him including creating a coop (TIC - buying 4 plex but owning 25% or 50% and selling the other 59% or 75% for more than he invested on that percentage), house hacking, STR/MTR, rent by room, BRRRR (traditional rehab to create sweat equity). If he finds the right property and can write up a plan that is highly likely to produce a good return, I will co-sign. I am placing a high bar in this market, but he has the knowledge to be able to clear that high bar. by the way 2 of prot茅g茅s who have yet to launch have similar offers.
We will see how he does, but I suspect he will do great with his RE investments.
There are lots of opportunities. Recognizing them, acting upon them, executing on them is the challenge.
By the way if I was starting today I would be creating coops in expensive (but growing) RE markets. Not going to provide the details that Henry provided for self storage, but providing a nugget that maybe a reader or two will leverage to find their path in RE (I usually reserve these types of hints for those I know).
good luck
It doesn't make any difference that some things are different. RE is a long game and should always be looked at as such. Saying what I did then couldn't be done now is nonsense. The homes I was buying had been those prices for 20 years where I live, not anything to do with the Great Recession. And I didn't use any debt at the beginning, all cash. I saved about $100k to work with at the beginning by living below my means, making some side money when possible, and then looking around to see where my skills and abilities lined up with current opportunities and long term goals. It probably took me 10 years to save that first $100k that let me buy those first three properties; I didn't use any debt back then. What is stopping people from saving money to use for investing today - high housing prices? No, what's happened is that people look around at people like me and think "Hey if that guy could do it so can I, but I don't want to spend 20 years building this - I want to drink appletinis on the beach next year, living off my rentals".Someone said luck is the intersection of hard work and opportunity. I agree with that wholeheartedly. If housing prices had been prohibitive back then, I would have found a different opportunity and worked it instead. Anyone can do that today. If you think that today the best bet is owning debt, it's not hard to save up money and become a private lender.
It is interesting that your recipe for success did include working and building your rentals at the same time where combining those forces were very powerful and also interesting that you don't now need rental income to live. The rental equity is a cushion and not being depleted.
As far as doing what I did then and doing it now it would require a total different strategy but then as now I did and would continue working doubling the effects of my efforts.
- Rock Star Extraordinaire 路 Northeast, TN 路 Member since 2015 路 10k+ posts 路 17k+ votes2y
Quote from @Jeff S.:
It doesn't make any difference that some things are different. RE is a long game and should always be looked at as such. Saying what I did then couldn't be done now is nonsense. The homes I was buying had been those prices for 20 years where I live, not anything to do with the Great Recession. And I didn't use any debt at the beginning, all cash. I saved about $100k to work with at the beginning by living below my means, making some side money when possible, and then looking around to see where my skills and abilities lined up with current opportunities and long term goals. It probably took me 10 years to save that first $100k that let me buy those first three properties; I didn't use any debt back then. What is stopping people from saving money to use for investing today - high housing prices? No, what's happened is that people look around at people like me and think "Hey if that guy could do it so can I, but I don't want to spend 20 years building this - I want to drink appletinis on the beach next year, living off my rentals".Someone said luck is the intersection of hard work and opportunity. I agree with that wholeheartedly. If housing prices had been prohibitive back then, I would have found a different opportunity and worked it instead. Anyone can do that today. If you think that today the best bet is owning debt, it's not hard to save up money and become a private lender.
It is interesting that your recipe for success did include working and building your rentals at the same time where combining those forces were very powerful and also interesting that you don't now need rental income to live. The rental equity is a cushion and not being depleted.
As far as doing what I did then and doing it now it would require a total different strategy but then as now I did and would continue working doubling the effects of my efforts.
Exactly. I used leverage, just not the kind most people here think of. My leverage was my intimate knowledge of housing systems and construction techniques and my willingness to apply time and energy to the problem when I didn't have money. I don't do all the work on my properties any more, but back when I did I conservatively estimate my labor and knowledge added 7 figures of value to my portfolio, money I would have otherwise had to obtain elsewhere for the same results. That leverage allowed me to grow faster than my working class income otherwise would have allowed. And by keeping my day job, I was able to compound all of those rental earnings.
I don't think my way is the only way, but it was a way that worked well given my skill set and interests. Other people might be better at pitching and raising income. At the end of the day, though, it virtually always comes back to hard work, vision and opportunity. You need all three to succeed. Opportunity is everywhere in this country, so all you really need is vision and the willingness to work hard.
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