Hey Real estate champions,
what option sounds best to you, if the intention is to get best return on real estate investment, good cashflow, cash on cash, less vacancy, low maintenance, least hassle, and expect property appreciation over time etc
might not go for BRRRR currently, due to time constraints, and it's tough in bay area.
but considering, open to anywhere in US (but not a fan of snow) , and down payment is not a problem (although there is a max limit, but let's assume it's not critical to put 100k - 500k down payment )
Option 1- Go big, all in, one apartment complex may be 20 -40 +units in TX, AZ, FL or where ever its possible, hire onsite manager.
Option 2 - Invest small, buy multiple duplex/ triplex etc. near by, try to manage self to save on prop mgmt
Option 3 - Go for multiple single family homes near by, manage self. easy to sell/buy individually if needed
Option 4 - Go for Land, rent space for RV parking, mobile homes etc .
Nothing is more dangerous to himself than a new investor sitting on cash. Money can fix almost anything in real estate and if the only tool you have is a hammer, everything looks like a nail.
Learn the biz on a limited scale - if you are hands on - buy a small property (1-4 units), maybe have some work done, advertise, rent it out and then manage it. You will make a lot of mistakes, but that's okay - it will keep you from making them again later on a larger scale!
Also, I believe only real estate "nerds" have long term success - you have to have a passion for the business. If you are just looking for ROI you will not make it through the lows. So I think you have to follow your passion more than the numbers - so the question becomes, what intrigues you most?
Option 1: Careful putting all your eggs in one basket. I'd do a lot of research and make sure to put in at least 2-3.
Option 2: You said near by. I'm not in the Bay Area, but I would be scared myself to buy 1-4 units in a market that seems so ridiculously expensive. If I did, I'd want to make sure it was super cash flowing, so that if the value of the property dropped, and the rental income dropped a lot, I'd still be ok. Think that's ahrd to find "near by." Also, never buy a property that only cash flows if you self manage. If it cash flows, and you decide to self manage to make it cash flow more, that's great, but if it doesn't cash flow without you it's probably not a deal.
Option 3: Same opinion as option 2.
Option 4: I like this one, but refer to option 1 about doing plenty of research and not putting all eggs in 1 basket.
Option 5: (You missed this one so I figured I'd throw it in for good measure) Real estate notes, probably not in the Bay Area (though possibly if you got lucky) You can pick a market not so inflated that still looks solid for appreciation and population growth and fund a fix and flip buy or possibly a builder (both shorter term hopefully) or a fix and flip to owner finance guy like me for a longer term safer returns. Depends on what return you want and how active you want to be, and how long you want your money invested.
Option 6: Buy land and resell on owner financing for 50-100% above the purchase price. Great idea. Works all over the place.
I know you only gave 4 options but I figured while I was a roll I'd run with it. Good luck.
@Tyler Bobo
Thanks for your response, I like the point 5 and 6 you added, I thought about them but for point 5 : I guess I would need bigger network, or channel / website so I can find out who's building / needs to borrow and deal with contract terms, etc...not sure if there is easy way available to connect borrowers and private lenders / hard money lenders.
correct me if this is not you ment in #5.
regarding point 6. I feel it takes alot of waiting time for your land to sell, I guess depends on location and marketing etc. so it is kind of locking the money for unknown time ? unless I am missing anything. I in fact explored option to buy land and get the solar plant setup or lease to farmers etc. but seems hassle and no guarantee there.
I like Option 6 as well. We were at a tax lien auction, bidding was insane so margins would be way too slim for us. A piece of land came up, 3.2 acres, dead flat, minimum site prep, high demand school district. Much to my wife's dismay I bought it for $22k & then sold it 18 months later for $60k. Then my wife complained that maybe we sold it too cheap :)
@Ron Singh, I’d go for option 1 since it opens up the opportunity for you to partner with professionals in that space via a syndicate. You can spread your risk by investing in multiple syndicates. Best of all, it’s entirely passive and the best way to leverage your capital.
All of the other strategies are time intensive and you are in effect creating another job for yourself so consider time spent when calculating return. Think how much more cash you could generate if your real estate investments didn’t use up your time.
Nothing is more dangerous to himself than a new investor sitting on cash. Money can fix almost anything in real estate and if the only tool you have is a hammer, everything looks like a nail.
Learn the biz on a limited scale - if you are hands on - buy a small property (1-4 units), maybe have some work done, advertise, rent it out and then manage it. You will make a lot of mistakes, but that's okay - it will keep you from making them again later on a larger scale!
Also, I believe only real estate "nerds" have long term success - you have to have a passion for the business. If you are just looking for ROI you will not make it through the lows. So I think you have to follow your passion more than the numbers - so the question becomes, what intrigues you most?
Lucky you @Pat L. :)
btw I also feel you sold it so cheap ... he he kidding
I assume you went to Auction in NY ? I thought about #6 but it seems time intensive in terms of researching and in due diligence etc, (unless you have any easy way Pat )
curious if you did analysis ahead or you just picked it randomly at auction, (here we need the check of exact bid amount)
here in bay area, what if I get a land on mountain or on slope so more parameter to check.
Hope you are planning for next deal soon :)
love it @Ronan Donnelly !
However I am still doubtful on how much time intensive option #1 would be , at least initial research, repair /rehab (depends)
etc
but ongoing, if tanent misses rent, or longer vacancy or whenever repair needed, more units means more probability for those issues.
or just relay on onsite manager / management company, not sure if they can deal with those issues or pass on to owner to deal :)
@Ron Singh There are always great people to invest with through notes, or you can invest with syndicators for good returns as well. Attend local meetups and find people looking for capital. So many good investors are always looking for capital. Then vet them and ask for references and look at the deal yourself before putting money in. This will teach you to recognize good stuff so you can do deals yourself later if you wish.
@Ron Singh
Syndication with $50k & lots of research. In this market environment & point in cycle I would stick with mobile homes.
@Ron Singh since you mentioned time constraints being an issue for, I would recommend a 2-10 unit value add property outside of CA with professional management to start. Really easy to find nicer newer properties in markets like TN, OK, MO, TX, FL that will offer double-digit returns and not require a lot of time.
Thanks, @Jennifer Beadles
I see some in TX, FL but mostly like 50+ years old.
now I am thinking how old is too old, as they might have reoccurring repairs and potentially major issues.
what do you feel how old property is okay to get into ?
also, if you have some recommendations on how to find the good ones, could you please dm me ?
any inputs are greatly appreciated.
thanks
Ron
Agreed @Marcus Auerbach , yes I am super enthusiastic and passionate about it, I guess it came from my parents and grand parents..
I have been to county sale, tax liens, auctions in few states, brought /sold couple SFR in this decade so far, but really interested in getting into multi FM or better cash flow ones now.
may be I am doing too much research and not pulling the trigger.. that why I am taking your suggestions :)
@Ron Singh I like properties built after the 1970s, the newer the better. East coast tends to have older properties, but Midwest can have newer multis.
I recently closed on an 8 unit outside of TN built in 1995, all brick and low maintenance but rents were lower than fair market so there was still value to add.
Where are you looking for properties? Most of what we look at is off market through our real estate agents. We have agents in 22 markets sending us deals, happy to share more details with you.
Hey @Matt Millard
I looked at the mobile home site, but wasn't sure how much time it would need to maintain and keep running smoothly ?
are there any weekly/monthly maintenance needed from owner or all maintenance can/should be done by tanents.
@Ron Singh
I recommend doing it passively in best syndications for least risks & highest returns. If you do it actively try the Mobile Home University with Frank Rolfe in Orange County. You rent the land. No ownership maintenance or moving homes. Good deal & good manager are key factors.
@Ron Singh
I buy land and sell owner financing. Generally, line up the purchaser or a couple of them before you close. This way you can test how hot they are to purchase, thatll give you some idea of how quickly it will move.
Best returns for the least amount of hassle and time in real estate is the role of lender. Of course this requires you not be a dummy and learn how to do it. It also requires a big pile of money, unless you're a bank and can borrow the money you want to lend - lol.
I think the advice from Marcus is sage. Start small. Work your way up to bigger things as you become more comfortable and earn your wings. The great thing, and maybe one of the maddening things too, is that real estate offers a wide range of investment options for a wide range of people with different ideas.
The stock market has done pretty darn well in the last 10 years. Hard to say real estate has been a better investment lately.
I don't do real estate because I think it's the best investment out there. I do real estate because I have a passion for housing and the art of architecture. I actually enjoy being the hammer. The possibility of a cash-flowing "retirement" and holding a tangible asset and making a living along the way are just things that fit in nicely to the grand scheme of my life. I have no delusions I am not on par with Bill Gates.
I thought this might be a story-telling thread. My best cash flow was my very first deal. $15k purchase, $15k in repairs, $750 a month in rent, $1000 a year in taxes. 23% annual cash flow. However, that nice return was only going to last so long, as a bunch of cap-ex issues were going to rear their ugly head sooner than later and the price was threatening to be high (though it would have still been a good cash-flow investment had I held it, appreciation was uncertain). So, as opportunity knocked, I sold it to my renter for a very small gain, and they began their own investment journey! The cash I earned along the way was used to help finance another project, and the cash I made from both was used to help finance the next. So, all of it has been a slow and patient go, but I have been able to work my way up in gross rents, total cash flow, quality/physical condition of buildings, property value and finally appreciation potential, all while learning the business with first-hand experience. I have only a total of $17k out-of-savings cash invested at this point and own many times that in property value. I have a silent partner but have never taken out a loan (starting to think about doing that). But before all that sounds really good factor in the time I have spent building the equity - that $17k is not really $17k when opportunity cost is factored. I dunno...they tell me if I do all this long enough I might have something someday - lol. Beats blowing it on a better vehicle or letting it sit in the bank while I watch television and turn into a zombie. What can I say - I'm building something.
But I'm a minnow. Don't listen to me. There are people on here who truly have this stuff figured out. I'm good for DIY construction tips once and a while. Sounds like your starting off with more resources and will therefore have the opportunity to grow faster.
Good luck!
thanks @Merritt S. and congrats again on finding great starter deal that too at sure nice price.
since I noticed you are from WI. I recently saw couple commercial ones there, one is land with wedding business and other is warehouse, do you feel it's easy to find a local manager to manage them as I am out of state ? I can visit monthly or so, but what do you suggest it would be worth owning a property and business in different state and can rely on local manager ?
thanks @Merritt S. and congrats again on finding great starter deal that too at sure nice price.
since I noticed you are from WI. I recently saw couple commercial ones there, one is land with wedding business and other is warehouse, do you feel it's easy to find a local manager to manage them as I am out of state ? I can visit monthly or so, but what do you suggest it would be worth owning a property and business in different state and can rely on local manager ?
Sorry, but I am a minnow investor (very small) and self-manage all my properties. Therefore, I don't have a reference I could stand behind for you.
My personal feeling on hiring a property manager and investing out of state is this. For starters, investing out of state can be extremely difficult because it is impossible to intimately understand a market to the degree necessary for success. I suppose there are exceptions to that general rule, but I would not try that with the Milwaukee metro market, or at least in the low-cost market (I suppose the more expensive suburbs are safer, but the margins are terrible - lol). I think the people who are successful at it are successful for a couple of reasons. First, they're not just starting out in real estate and know what they're doing. Second, they're able to find people to work with locally that can help them assess and manage properties. There is a podcast here on BP of a guy who has a large operation and he is on the west coast, his partner is on the east coast, and they invest all over the country - they do larger multi-family but the concept is the same. He said, and I could not agree with this sentiment more, that the most important thing, critical to success, is finding people he can trust to help him in these markets, and the level of trust is someone he could trust with his kids! Chew on that thought would be my best advice.
As far as hiring a property manager in general well, many people do it with good results. Many people also do it with very bad results. The problem is quite simply it's not the property managers money or property, and the business model of management is at odds with the goals of the investor. I guess you could say it's a necessary evil for some investors, and of course sometimes evil is evil. That doesn't mean there are not good management companies out there - there are. Again, the people you find to manage need to be people you can trust to a very high level. Finally, and there is no getting around this, management takes time and time is money. I've found in many cases the margins in real estate are not good enough if management is an expense.
As an alternate solution, and I'm not sure how many investors do this (I do, my partner lives out of state), but I would say a solution might be to partner with someone in the market you want to invest in. That way the local partner can manage the property and therefore minimize expenses/maximize profits with the hands-on attention real estate rentals require. Of course that is easier said than done, because that requires a business relationship and finding the right people you want and can work with is tough - lol - which is why people hire property managers!!!
I hope that helps. Careful if you ask me a question 'cause I'll talk your ear right off.
Good luck!
Agreed @Marcus Auerbach , yes I am super enthusiastic and passionate about it, I guess it came from my parents and grand parents..
I have been to county sale, tax liens, auctions in few states, brought /sold couple SFR in this decade so far, but really interested in getting into multi FM or better cash flow ones now.
may be I am doing too much research and not pulling the trigger.. that why I am taking your suggestions :)
Merrit is giving you good advice - I know, because I have been working with him. What I have found over the last ten years is that Robert Kiyosaki was right: the path to wealth is pretty mundane, almost boring, definitly repetitive. I see you are looking at all sorts of strategies, from land to tax liens - to start I would suggest to keep it simple and basic. Success stories on BP can make you feel like you have to buy 3000 units before you are 30 or create millions while traveling. What I found personally and working with lots of investors the real path is not that glamorous..
thanks @Merritt S. and congrats again on finding great starter deal that too at sure nice price.
since I noticed you are from WI. I recently saw couple commercial ones there, one is land with wedding business and other is warehouse, do you feel it's easy to find a local manager to manage them as I am out of state ? I can visit monthly or so, but what do you suggest it would be worth owning a property and business in different state and can rely on local manager ?
Well, I responded to this already, but now that Marcus has chimed in a bit too I thought I might say some more. I do not have a property manager referral for you. And in general, for full disclosure, I loathe to offer referrals, for all sorts of reasons.
That said, I am comfortable publicly referring Marcus as an agent. Marcus and I have not touched base in a while (we should do that), and I'm not going to pretend like I know everything about him, but I know he does more than just serving as an agent and is always expanding his own business so, maybe he could be of some help to you.
I like many things about Marcus, and not only that he's a pretty snappy dresser (for Wisconsin standards anyways - lol). I can offer this, I worked as a real estate appraiser for 14 years and during that time, developed a serious distaste for realtors in general. Marcus is among the few realtors I have respect for on more levels than simply being a great sales-person who can get the job done. Among his many attributes, he does a great job of really listening, identifying the true problem at hand, and providing good suggestions for solutions. I'll add an anecdote of the time the stager he hired backed out at the last second (can't remember why, scheduling conflict or illness or something), Marcus ran right out and staged the property himself, and the choices he made were brilliant, in the greatest taste, and were plenty enough and not too much to get the best bang for the buck - you can't teach that sort of thing. I've no doubt in my mind that the particular staging went a very long way to sell that house as fast as possible for the highest dollar possible.
I guess I'll tell one more story about my experience with Marcus, one that I'm a bit reluctant to say because I have tremendous respect for him and would never want to say something negative. But I've come to know Marcus and will gamble he won't mind, and this story lends itself to how hard it is to vet a person you might want to hire. I've never mentioned this to Marcus either - lol - but here goes. Marcus came into my life when he was doing a background check on a tenant I had previously rented to. Being the opportunistic type he is, the next thing I knew I was considering hiring him to sell my property I had just evicted my tenants from so I could sell it - lol. I thought gee, this guy is pretty slick. So as I mentioned, I have a serious distrust of realtors in general and as an appraiser, am skilled at research and trained to perform due diligence. So, I went on to vet Marcus as best I could before I hired him. I did in fact find information, and one of the things I found is one of those internet comment forums. All the comments were extremely flattering except for one. That one comment was pretty scathing, and while I know there is always one troll in the group and you can't please everyone all the time, I decided to see if I could track that commenter down and speak with them (their name happened to be part of the post). Because on the other hand let's face it, anyone can go on an internet comment forum and post nice things about themselves, or have their business partners post, or have their friends post, etc. So I actually track this guy down. I find the phone number and leave a message. The guy calls me back, mostly because he was shocked and frankly concerned, because he is the sort of investor who has gone to great lengths to hide his identity from everyone for all the typical reasons. So he and I chat, and it turns out he is in fact a very successful investor, one I admire and look up to, one I strive to emulate. He confirms for me that the things I'm doing and the strategies I'm implementing are good ones, and gave me some really great advice o how to be more successful. I still keep contact with this person to this day. But, he was still mad at Marcus and in fact, told me to steer clear. As the story goes, apparently Marcus was selling a house for him, and the house was pretty far away from civilization. After showing the property, Marcus forgot to turn the heat back down and seeing as the owner was out of state, he ended up with a larger than expected heat bill and he had to have someone go out and turn it back down. He said he was not thrilled with how Marcus handled the complaint, thought that all realtors ought to know better, and that was enough for him to move on to the next realtor. I took all that with a grain of salt, and agree that all realtors ought to know better, and as an appraiser myself am trained to lock all the doors and return the temperature to vacancy levels too - I get it. But, I also think that forgetting something like that is very easy to do and I highly doubt even the best of the best out there have never made a simple mistake like that. I also think in terms of how the complaint was handled, that again all sorts of people think all sorts of things about all sorts of things, and that maybe Marcus handled it as best he could, but maybe this guy just decided to hold a grudge no matter what. So, I took it with a grain of salt and decided to go with my gut, that said Marcus was a good guy and in all likelihood, felt horrible about the whole thing and probably doesn't make that sort of mistake often. I'm very glad I decided to go with my gut. The moral of the story and why I thought it was important to post it, is that in the best of circumstances it is very difficult to vet someone. And even after all possible due diligence is exhausted, we must all take a risk on someone at some point - no matter the reference, good or bad. I think the truth is sometimes it works out, and sometimes it doesn't. And sometimes service providers knock it out of the park for their clients and yes, sometimes, things don't go as great as planned. That my friends is life, and we all do the best we can.
Well, I'll say no more, I'm embarrassing myself and probably Marcus too. But he is one of the good guys as far as I'm concerned.
Option 1. Learn the multifamily space and go all in on one deal. Larger deals will make PM easier. You will have a VERY tough time finding a good PM for small plexes and single family homes if you are investing out of state.
correct, @Brock Mogensen the question is how to learn in not a hard way.
start with may be duplex /4plex near by ?
or if go directly all in, big... would it be easier to just relay on property management ? not sure how much involvement would be needed from owner, one of the reason I am preferring built year 1990 or newer to prevent major maintenance