50 too old for REI - Notes vs Rentals vs ?

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50 too old for REI - Notes vs Rentals vs ?

Daphne Barber
Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes

Hello BP Friends - 

Not sure where to post this, and looking for feedback. We are a couple of newbies ages 50 and 54, residing in NYC, and have been advised by an experienced investor (from BP) that we're too old to be getting into the game. He suggested that we take 500k in IRA money and roll it into a Roth IRA funded by notes (from his company). Next, completely divest ourselves from the stock market and invest the rest (about) 400K in various note funds, which return a minimum of 12%. Finally, keep $100k as cash reserves. He says this is the wisest thing to do because the returns are better than rentals, without any of the headaches. He says we're too far along in our timeline for buy and hold. Regarding any other strategies, he says for every "success story" on BP, there are 50 people you don't hear about who lost their shirts. Am I missing anything in this equation? All feedback greatly appreciated!

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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
9y

LOL.  It's never too late...unless you don't start at all.

Let me put it another way.  2 years from now, if you're asking that same question, you should feel ashamed.

Let me repeat.  It is never too late...unless you never start.

You are most definitely not to old for buy and hold.  I can show you where you can start getting cash flow in less than a month, and never have to spend your money...you will be using it though...many, many times.

It doesn't take that long to get into it and there are so many different ways to do it, you just follow the one(s) that work for you.  Oh, and age has nothing to do with "losing your shirt".  Whether you are 54 or 24, if you you lost your shirt, you would still need to get dressed again.

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y

    LOL.  It's never too late...unless you don't start at all.

    Let me put it another way.  2 years from now, if you're asking that same question, you should feel ashamed.

    Let me repeat.  It is never too late...unless you never start.

    You are most definitely not to old for buy and hold.  I can show you where you can start getting cash flow in less than a month, and never have to spend your money...you will be using it though...many, many times.

    It doesn't take that long to get into it and there are so many different ways to do it, you just follow the one(s) that work for you.  Oh, and age has nothing to do with "losing your shirt".  Whether you are 54 or 24, if you you lost your shirt, you would still need to get dressed again.

    19Reply
  • William MurrellPro Member
    Investor · Wilmington, NC · Member since 2013 · 276 posts · 169 votes
    9y
    Lots of red flags here. "You're too old" which makes no sense. Age only really prevents you from taking advantage of very long term appreciation which is basically a speculative approach. You could still find other worthwhile ways to invest. Real Estate provides all kinds of different avenues for creating income, regardless of age. Second, "your best bet and only bet is to divest everything and invest in my company." This is classic hard sell nonsense. Find another friend to listen to, because this one is trying to scare you into thinking that your only option is to put all your eggs into HIS basket. Go and listen to all of the podcasts (which are free and informative) and you'll get a good, high level summary of almost every single approach to Real Estate investing. Read the books that are recommended there and on the site. Then decide which approach feels best for what you're trying to achieve and pursue it. You aren't that old, and he isn't your only option!
    13Reply
  • Daphne Barber
    OP
    Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
    9y

    @Joe Villeneuve wow thanks for the reply! Would you mind sharing how we could start getting cash flow in less than a month, and would it be $3,500 after taxes? The point he was making is that the return on notes is better than the return on rentals, if we're just starting (without all the headaches) He's talking 12% immediately and it's hard to argue with that, considering how much time we've put into getting the foundation right. I ran across an old thread somewhere on BP where folks were saying the same thing about notes. 

    We were looking at a couple of Brrrr turnkey properties, but the cashflow was only like $300 a month and we'd need to accumulate a lot of those fast (looking to replace income from DH's lost job...)

    Of course if we were experienced flippers in a better market maybe it would be a different story....

    1Reply
  • Daphne Barber
    OP
    Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
    9y

    @William Murrell Thanks for your reply! We've put a lot of energy into getting a foundation - joined our local REIA, going to meetings, webcasts, podcasts (the investor is well regarded on BP and did a popular podcast....) I get your point about the red flags, but I also can see the point where making 12+ % on the note funds seems like a better return than rental properties. If we were experienced flippers in a different market it might be a different story.

    Again thanks for your perspective - much appreciated.

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    9y

    @Daphne Barber - First forget the age thing your never too old - there are these companies called property management firms that actually exist and can handle your rental portfolio for you. Really - they exist. 

    I am a note investor and yes you can get 12% return (or potentially more if you invest in NPN's). While notes are great, having a balanced portfolio would be my recommendation. I started with BRRR properties and still have several rentals, which will be paid off in 15 years and essentially I put no money in them as I cashed out refinanced.

    If you bought a $250k property, put 20% down and financed 15 years, say the property did not cash flow - at the end of 15 years you would have a property free and clear. That same 50k over 15 years would be $270k making 12% year over year. Would the property appreciate 10% over 15 years?  

    There is no right or wrong answer, it is more what your preference is and where your comfortable investing your $. Having someone tell you one is better than the other is their personal preference. I would talk with several investors and understand the process of each and do what suits you best.

    Just my 2 cents.

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    8Reply
  • Daphne Barber
    OP
    Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
    9y


    @Chris Seveney Hi Chris thanks for your perspective as a notes investor. What you're saying about having a balanced portfolio makes a lot of sense. I think the gist of what he's saying is that with notes you make the same or better than with rentals, without all the potential headaches. And LoL about property managers very true. I'm glad I asked the BP community! 

    1Reply
  • Account Closed
    Investor · Scottsdale, AZ · Member since 2016 · 1k+ posts · 885 votes
    9y

    @Daphne Barber What is he selling? ;-)        Option 1 is Buy & Hold which is slow going and that is what he might be  concerned about. However, if you pay cash for properties, mostly all of the rental goes into your pocket, plus you get any appreciation. Option 2 is using Subject To to buy multiple houses for cash flow which is more immediate than Buy & Hold. 

    So, the first thing I'd do is run comparative spreadsheets on the various options and what your options are. 

    By the way, Notes do lose money. That is what 2008 was all about. When they lose, they can lose big time.

    0Reply
  • Daphne Barber
    OP
    Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
    9y

    @Account Closed appreciate the reply. Well I wasn't going to name drop but the note seller is  Jeff Brown and he's a big deal on BP. Correct he was saying buy and hold wasn't in our best interest. We don't really have enough money to pay all cash for multiple properties. Interesting what you said about 2008 because I brought that up - I think he said he gets his notes at a large discount like 50 cents on the dollar. I suppose the biggest attraction is given our location, all investment would be long distance, so making 12% without the hassle of doing things long distance seemed like a good idea.

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y

    Notes are a % of return based on one use of the funds you use to get in.  You do with notes the same things you do with properties.  You can hold them, flip them, even rehab them.  If you just buy them to hold, however, any return on investment is an illusion.  Notes are exactly like properties (minus the tenants), but you still need to move your cash "through" them and not just "to" them.  In other words, your cash can't just stop there...or you are losing.

    Whether you ride the note or the property bus, the money must be moving in and out of the different buses, and every time you get off you have to take a new "friend" with you...in the form of cash profit or cash flow.

    That's the real secret to building cash flow fast....keep your seed money moving through one vehicle through the next...and not stopping in any of them to enjoy the view.  Never spend your seed money...use it an infinite number of times though.  This way, your returns are faster and not restricted to 12% per year.  You're going to say I'm nuts, but do it right and your should have over a 100% Cash on Cash return per year.

    4Reply
  • Daphne Barber
    OP
    Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
    9y

    @Joe Villeneuve wow appreciate the reply. I understand the notes keep "moving" - that's what his investment company does. I'm interested in how we would realize a 100% cash on cash return given the market we're in? (Nyc). OTOH, the leader of our local REIA heavily invests in Newark, NJ, a place a lot of people might fear to tread...and he's approx mid-30s and going to retire in two years...:-)

    1Reply
  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    9y

    That advise sounds a wee bit self-serving I must say. I see no reason that it's too late for you to get involved with real estate. It sounds like you've already got a decent amount of money, so my two cents would probably be to invest a bit more conservatively, but that's all I would say in this regards. 

    And yes, you generally hear the success stories, but it is nowhere close to 50 to 1. Indeed, the stories you usually don't hear are likely the "well, my real estate investment did alright, but it was nothing special" type.

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    0Reply
  • Account Closed
    San Diego, CA · Member since 2017 · 1 post · 1 vote
    9y

    I'm new to BiggerPockets and joined to have the same question answered that the original poster asked. I'm over 50 and looking for ways to retire starting promptly at age 60. I had a Turn Key investment program pitched to me with the same claims that my IRA/401K nest-egg could be rolled over to a directed IRA using real estate instead of a stocks and bonds. I'm skeptical of claims that one can get 12% ROI on these real estate notes. I'd like to know what is a reasonable expectation of monthly cash flow if I put 4 years of hard work into investing in multifamily or Brrrrr properties? I know it takes work, but is 4K+ positive cash flow per month in only 4 years really possible?

    1Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    9y
    I started 10 years ago and built up a nice portfolio. No reason you couldn't start now, do the same, and have a giant cash flow machine at 60
    4Reply
  • Dan Schwartz
    Real Estate Investor · Tempe, AZ · Member since 2012 · 874 posts · 648 votes
    9y
    1) walk before you run. But don't just sit still. 2) if it sounds too good to be true, it very well might be. 3) advanced age has lost the benefit of compounding interest, but (hopefully) gained the advantage of being able to better sniff out what feels right and what doesn't. Keep talking to investment advisors. If you want to grow your money quickly, you are more likely going to need the benefit of someone else's years of building a system (like Jeff Brown's, though I'm neither endorsing him nor anyone else), because you no longer have the luxury of time to build it yourself. Find a strategy or system that you understand and feel comfortable with. If someone wants $500k of your money and isn't interested in ensuring that you are 100% understanding of with what they'll do with it (again, not fingering anyone, just saying), find someone else to invest with. Or find five and spread you capital across them. Don't put all of your eggs in one unknown basket. If the minimums to participate are too high for you, oh well, move on. Minimums don't exist to be punitive; it's likely that a certain amount of money is needed to make the investment worthwhile. There's money to be made out there. But it's far easier to lose it. Even in real estate. And when nearing retirement age, that can be devastating. Good luck.
    2Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y
    Originally posted by @Daphne Barber:

    @Joe Villeneuve wow appreciate the reply. I understand the notes keep "moving" - that's what his investment company does. I'm interested in how we would realize a 100% cash on cash return given the market we're in? (Nyc). OTOH, the leader of our local REIA heavily invests in Newark, NJ, a place a lot of people might fear to tread...and he's approx mid-30s and going to retire in two years...:-)

     If the market of choice doesn't give you what you want, go find one that does.  If there are markets out there that will give you what you want (returns), go find them...camp out, and stay there until it changes or you get what you want.

    I read many times that it can't be done because "I can't do it in my market".  That doesn't mean it can't be done...it just means they can't do it in their market.

    2Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    9y
    Originally posted by @Dan Schwartz:

    1) walk before you run. But don't just sit still.
    2) if it sounds too good to be true, it very well might be.
    3) advanced age has lost the benefit of compounding interest, but (hopefully) gained the advantage of being able to better sniff out what feels right and what doesn't.

    1 - Jog...but stay in control.  The things that come to those who wait, are the things that are left behind, by those that get there first.

    2 - ...or, it is that good, and assuming it isn't because it sounds too good, means a missed opportunity.

    3 - Actually, the advanced age provides the perfect reason to take advantage of the power of compounding

    2Reply
  • Daphne Barber
    OP
    Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
    9y

    @Dan Schwartz thanks for taking the time to reply - Funny you should mention Jeff Brown because he is the one pitching this to us. He comes highly regarded here on BP....

    Unrelated - we were just in your neck of the woods and fell in love with the Phoenix area :)

    1Reply
  • Daphne Barber
    OP
    Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
    9y

    @Joe Villeneuve Lol yeah really. Thanks for your insight!

    1Reply
  • Dan Schwartz
    Real Estate Investor · Tempe, AZ · Member since 2012 · 874 posts · 648 votes
    9y
    @Daphne Barber I only mentioned Jeff because you did. I read his posts with gray interest, as I do with many of the seasoned veterans around here. If you fell in love with Phoenix this time of year, more power to you :-). It's brutal here in the summer.....but it sure is a beautiful part of the country. Good luck to you.
    1Reply
  • Dan Schwartz
    Real Estate Investor · Tempe, AZ · Member since 2012 · 874 posts · 648 votes
    9y
    "great" interest. Not "gray interest." Though gray interest might be more germane to the original subject of retirement.....
    1Reply
  • Daphne Barber
    OP
    Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
    9y

    @Dan Schwartz Ha, well actually I was there in March - and there was a heat wave. Beautiful country tho.

    Thanks for the good wishes.  Yes it seems like notes vs rentals vs many ways to skin a cat is a personal decision, but I think what the other posters are saying is correct - if someone says the only option at this point in life is to divest everything and invest with their company - that's a red flag. Even if they are a big deal here on BP.

    1Reply
  • Brian Ploszay
    Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
    9y

    I somewhat disagree with his advice.   People who buy real estate investments tend to be older, rather than younger.  25 year olds rarely have the financial strength to purchase properties.  

    But you're a newbie.  Start small with a limited amount of capital.   See how the investment performs and if you like the work.   I tell new investors that rentals (residential) are not passive investments.  

    I think one of the challenges if that you live in NYC, where real estate prices are very high - and there are few properties that cash flow.   If you leave the area, there are challenges with running properties that are far away.  

    0Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    I don't think Jeff is a big deal here on BP at all. I wasn't going to say anything, but after restating it a few times I have to say not all are in awe. LOL

    Anybody who has only one pony that can only do one trick isn't that impressive. Why not a stable of thoroughbreds that can do all kinds of things? When he recommends someone bet their nest egg on his one little pony? My opinion did not rise, that's for sure. 

    Joe and Andrew are far more impressive to me than Jeff.

    If one rushes this RE thing, they are bound to stumble. When you're swinging for the fences, you strike out a lot. Do what makes sense to you and learn about it first. You have time.

    Lastly, you mentioned wanting to hit an after tax number monthly. Lending and flipping are the highest taxed activities you can do. I had to go over this same thing with my bro in law, who is a high income earner. Complains about taxes, then tells me about his latest sale and new developments. How he flipped that. Dude- build an apt bldg and hold it. Cost segregate if you want. Do a monetised installment sale, maybe. Gotta hold for 366 days with rental intent then the tax gifts rain upon you.  Holding inventory takes you to the same tax slaughterhouse as all your w-2 frends. Earning interest is worse.

    Learn and diversify. Keep it simple. Welcome to BP and the wonderful world of RE!

    4Reply
  • Jorge Borges
    Investor · Port St Lucie, FL · Member since 2015 · 37 posts · 14 votes
    9y

    https://itunes.apple.com/us/podcast/old-dawgs-rei-...

    Description

    Welcome to the Old Dawg's REI Network where cash flow is king, real estate investing the means, so you can enjoy your retirement dreams! Your host is Bill Manassero who started investing in real estate at the youthful age of 58 years. In this show, he will share his real-life successes and blunders as he seeks his quest to acquire 1,000 doors/units in 6 years. This podcast is a fun, information-packed program that features knowledgeable, engaging guests who will provide practical and easy-to-understand tips on how to succeed in real estate investing. Geared toward 50plusers seniors who are approaching retirement or already there, each episode addresses real estate investing in light of the challenges of retirement living and fixed incomes.

    No affiliation but heard a few episodes. Good Luck!

    3Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    9y

    Newbies with money and the sharks are circling. First of all being a poster on an open web site doesnt mean squat in terms of credibility. Invest with me. You can make 12% or 100%!! Anyone heard of Bernie Madoff? If returns were so assured with no risk why would anyone invest in anything other than what these guys are peddling?

    There are a million ways to make money. All have risks. There is no single best way to invest. Educate yourself and make your own decisions. Never put more than 10-20% of your nest egg in any one investment. 50 is not too old to invest but it is too old to take stupid risks based on "well known" personalities on a web site.

    5Reply
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