Investor · Albany, GA · Member since 2014 · 70 posts · 8 votes
Hi Everyone,
In a casual conversation the other day a friend said: 'You can't look for a quick return. Any money made will be over the long term.'
That has been bugging me ever since he said it.
Here's my question...
Where do you plan to make your money from a rental? Short term (monthly cash flow) or long term (what does that even mean; appreciation upon selling out) ?
I will admit that when I got into rentals (I own 6 SFHs) I was trying to increase income in the short term. But my friend's comment has kinda rocked my understanding of what it's all about. If I'm investing now to make money LATER then why bother with all the aggravation. Is it worth it?
Another question:
Is it still practical to continue acquiring rental units later in life? If a person is over 50 years old, are long term rentals still a good vehicle for investment?
Look forward to your responses. Thanks in advance...
Hello joe my name is Keith and I am looking to invest into realestate multi unit / single family but I dont know where to start any advice for a beginner.
I don't have the statistics, but I certainly see older folks controlling far more real estate. Especially in the prime areas. Also for new purchases for larger apartment buildings, older people are dominant.
Hello joe my name is Keith and I am looking to invest into realestate multi unit / single family but I dont know where to start any advice for a beginner.
Yes,...alot. Learn:
1 - How to Analyze Markets. Focus on the Markets, and not the properties...then focus on the deals...not the properties
2 - How Money Works. This means learn more and more strategies. The strategies are the ways you move money through your investments,...and not leave them in investments.
3 - How to design a REI Plan. This plan deals in specific Financial Goals, and specific ways to use #'s 1 and 2 to make it all happen.
4 - Learn the 2 Golden Rules
5 - Learn the meaning of this number sequence, and apply it to EVERY decision you make in REI.
6 - Learn what the actual cost is to a REI of a deal.
7 - Learn how to analyze using $$$$ and not %%%%
8 - Understand you can't compare REI to the Stock Market...and how the SM can't compete with REI,...and why.
We don’t discuss mortality on here...cause it’s uncomfortable. At 50...the average American has about 30 yrs left. Which means the 30 yr mortgage plan is totally shot.
I would say not useful at 50+ unless either of you have a spending problem, or have money laying around and just like owning and managing stuff.
It also depends on your estate goals and if the plan is leaving money behind in the form of properties on a stepped up basis. Can you buy in cash? If so, go for it.
They key for the average American in securing retirement is coming up with as much money/down payment leverage in their 20s and 30s, so they can pre-pay their future in the form of 30 year mortgages.
They leverage that paltry down payment with a 5% house hack and turn it into a 30 year mortgage paid for by tenants who paid for the investors retirement when the home is finally paid off.
Do this a few times, and then that’s it - you are no longer living to secure retirement. You are living to enjoy the next 3 decades and make your way out of the rat race early.
@CL Tumlin - if you’re buying them right, it’s never too late. Don’t buy skinny deals and you’ll never regret investing. Find your conservative underwriting criteria and stick with it. I’m 54 and have bought 10–12 rentals in the last 5 years. I plan to buy many more.
How hard do you want to work? After buying 7 single-family properties, I turned to multifamily investing to get out of the daily single-family grind and to scale up my real estate investing quickly. It can also be a more passive investment, while still giving you the tax benefits (more, actually).
@CL Tumlin to invest after the age of 50. I hope that’s a good idea. I was 60 when I bought my first rental. Had a friend who got caught in the 2008 market cash and saved her from bankruptcy by buying two condos from her in short sales. They have been very good investments and now I have 7 properties bought after the age of 59 1/2 by using 401 K. Now that’s a different question. Should you use 401K money to buy rental property. My property values have at least doubled, some of the short sales have tripled. For my goal of having retirement income it has been a great strategy as well. I get around 5-6K per month of cash flow ( no mortgage payments on 5 of 7 units). I would say that if you invest late in life like me try to do so without carrying a load of debt. I will retire this year at 71 with around 100K of almost guaranteed annual income, and 1.7 million of debt free properties. When I started 12 years ago after a divorce I had 100k in 401K and 125k in home equity. In today’s market it is much harder. I want to buy a few more but property prices are very high in Florida and can’t find what I am looking for. My wife and I self manage. My wife just happens to be the friend I saved from bankruptcy. So not all good deeds are bad investments.
@CL Tumlin. Many people, including me on occasion, are guilty of offering advice or commentary on topics which they know little about. Your friend may fall in this camp. A person in their 50’s has a life expectancy of close to 80, more for females. So the investment horizon is potentially more than 20 years. Real estate investing can generate a good return in year one. Determine your reasons for investing and goals, then develop your strategy from that. Also read Rich Dad Poor Dad to help you put advice from friends in perspective.
Last month, I bought my first rental house (12 days before my 55th birthday). I grew up in real estate and working on my parents houses. Now that there are a lot of systems (management, turn keys, wholesalers/flippers, YouTube, books, BP), real estate is easier to understand and manage.
A lessons learned from my parents is estate planning - trusts, trustees, wills, etc. - so there is a smooth transition for the inevitable of caretaking and worse. I was fortunate in setting this up with my mom making me an active trustee for trust management.
The problem is not about age, the problem is about whether you would start investing in RE now....
And no one should start to invest in RE now, is my opinion....
Coastal expensive cities peaked in price in Q1 2018 and have seen a 10%-15% drop so far ... the rest of the country is just getting start to top off too.....similar to 2008....in my opinion
And there will be 2-4 more years of price drop ahead of us....
So, no, I don’t suggest anyone getting started now...sit on the sideline for 2 more years
My father in law is a 68 year old farmer in Iowa. He told me he used to read the obituaries and think about how the mid 80s people who past must have lived a long and fulfilling life. Now he says when he reads about an 84 year old passing away he thinks, “damn, struck down in his prime”! We are only as old as we feel!
At 50 you could enjoy 30 years of cash flow and pay the things off. 50 is too young to take the foot off the gas IMO.
In my experiences this would be an accurate statement for someone late 60s and beyond. Most people I see are starting to get out of the game and shed most of thier rentals around that time. Even with that, it depends on the person. They usually want to get out because it's mentally and sometimes physically taxing for that age or they just want to be fully retired from everything. I have no idea why 50 would be a marker for anything like this. People are living to 80s and 90s on average now. If you started picking up all your rentals at 50 and sold them all at 70, if you do it correctly you will make out very well.
I recently turned 50 and have every intention to continue acquiring rentals. I currently own and manage 23 doors (small multis and SFHs) and I have a full time job. My goal is to get to 50 doors by 2023. At that point, I will give serious thought to quitting my day job (I'll be able to financially, just not sure if I'll be ready to give up the social aspect/coworker comaraderie). It's important to focus on cashflow - especially as you get older. I only purchase properties that will cashflow enough to warrant my time to self manage ($228/door monthly for my most recent acquisition). I plan to continue acquiring as long as it makes financial sense. At some point, I'll probably have to hire out PM on new acquisitions (not sure I'll want to self manage more than 50 doors). But, assuming I remain in relatively good health, I plan to continue self managing as many units as possible - I never expected to enjoy it, but I do!
If this is what you want to do, go for it. Like any type of investment, there is always risk associated with it so you have to weigh that vs. not doing anything and staying in your comfort zone.
Well said, and I agree with most of your reply on the thread - except the part about moving your holdings into bonds.
Selling off a portfolio is tricky, cap gain rates are brutal, and if you are a 60 year old investor with good cash flowing rentals that supplement a retirement, why not just keep them and work to develop a tax minimization strategy, and who knows maybe you will live to be 90!
We were in our 50's before we purchased our first rental SFR. Our plan was to acquire about 10 by the time we retired in mid/late 60's. Then some life events happened and we decided to go into real estate investment full time. Within 3 years of making that plunge and not having any W2 income (or much of any other kind) we have enough cash flow from our 8 rentals and the one mortgage we hold on a seller finance deal to live on. Now in our early 60's, we work full time at refurbing fixer properties to hold. I averaged 42 hours per week of real estate activity in 2019. (just added that up this morning). We like what we do and will gradually grow our portfolio by adding one or two houses per year. So no, 50's not too old.
@CL Tumlin I turned 50 on December 7th. I’m a police officer and I work a lot of overtime with rotating shift work, so I put real estate off simply because I didn’t have the time. I just settled on my first duplex on Monday (purchased from my Dad, so I’m very familiar with the property). My intention is to purchase a few more units and turn all profits back into my properties in order to maximize my cash flow when I retire 7-8 yrs from now. My pension will be 50% of the average of my last 3 yrs salary, so I’m really seeking passive income to offset the other 50%.
@ 50 we were still buying like crazy & haven't stopped.
I just threw out a deal to a 65 year old who approached me to get into REI because he can't afford to retire. It will return $112k+ (interest only) over 10 years. His stressed out still working 60+ wife was all for it, but he turned it down because he bought silver @ $50/ounce & feels its about to go back up again. You can't fix stupid regardless of age !!!
Time is your biggest advantage in real estate. You can buy a bad deal when you are 20 and by the time you are 50, it has made you piles of cash.
You can start at 50, but your time line is compressed. Bottom line is when you are 50, you are on the downward slope of life. There is no time to recover from investing mistakes.
Is it a bad idea? It depends on the person. There are many people who lost their entire life savings making investing mistakes in their 50's. People cash in retirement accounts to play real estate roulette and lose. You have to be smart and careful.
I have partners who are up and down the age spectrum. I'm 30, my oldest partner is in his 60s. He's still buying. 50 is not too late in any sense. It's just an excuse and a limiting belief!
@CL Ziegler I sure hope 50 isn’t too old. No one told me, good thing I purchased 8 properties in the 2 years after 50. My husband and I plan to have 3-4 times this amount before 60. It’s never too late, unless you put that thought in your mind. If you want something, take steps and go after it. Goals are great. If you have a goal for 20 units and only end up with 10, you are still much better off.