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!
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.
Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
9y
@Brian Ploszay Yes I was a tenant long enough to understand that land lording isn't passive.
You are correct NYC is a terrible market unless you're a hedge fund. Or unless you had the vision to invest in one of the hoods 10 - 15 years ago. So yeah Northern NJ would be very easy, but other than that, investing long distance is something I haven't figured out yet. Another option would be to see what's happening on Long Island, or along the Hudson River towns.
Investor · Charlestown, NH · Member since 2016 · 48 posts · 15 votes
9y
@Daphne Barber This has been a very interesting thread. I will try to keep this short. I have learned a lot from BP
about investing in realestate. My wife and I are in our late fifties we started 3 years ago investing in rentals. The question that comes to my mind is who is in control of your investments. If you want to generate cash flow, with a hands off approach. Notes might be a good pick for you and your husband. I do agree with looking back to 2008 to see that notes can loose money. You can loose in any investment. We have invested in rentals for many reasons. One is We make all the decisions. We have a property manager she is great. I have tried to study this but there is very little information out there.
We think, if housing takes a tumble again and prices go down that will not be good for us, but I have not seen much information out there that says rent will go down too. I have never seen this in my life time. like I said I have seen a few decades myself. I have invested in the stock market for the last 40 years. It is very easy, you pick your funds and check your statement 4 times a year. Some times you are up some times you are down. We are in the process of moving most of our
money out ot the stock market.
Investing is realestate is very different. For the most part your money is in your hands. You are not counting on some one
or some fund manager to guide you or your money. I would think that with 900 hundred thousand dollars you could make a nice protfolio that could produce the cash flow you are looking for. That is what we are doing. There is a cost of taking out IRA money. But that is managable. My final thoughts are, I would be very carefull of giving my life savings to anyone.
And you are not to old to invest in realestate. The only question is are you willing to put in the time and energy to realestate. I would like to wish you luck with your decision. It has been great reading this post. There are many of people on BP that are willing to help.
Rental Property Investor · Las Vegas, NV · Member since 2013 · 19 posts · 5 votes
9y
Looks like a lot of good responses here, but I couldn't resist adding to the run away as fast as your little feet will carry you sentiment.
We didn't even begin thinking about re investing until 4 years ago... when I was 58. Did some higher end flipping, and then moved to smaller properties & markets, selling with financing, and either keeping or selling the notes. Now building a rental portfolio for diversification and future wealth. No matter how much you saved before retirement, it's nice to know you'll always be able to make money with your money... and that's where real estate is king.
Just stay away from the Gurus-De-Jour who tell you you can become an investor with none of your own money. Go find a really great accountant that gets real estate investing and pay attention to him/her.
Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
9y
@Jesse Hargrove thanks so much for your reply! I'm just blown away by how great everyone has been on this post. I think it's interesting you're getting everything out of your IRA - into RE I presume? I agree even if RE tanks again, rentals will not be affected. And yes words to the wise investing everything with one person clearly isn't a good idea. Again appreciate the feedback, and wishing you well in your investing :)
Rental Property Investor · Las Vegas, NV · Member since 2013 · 19 posts · 5 votes
9y
Actually my IRA (and my husband's as well) is a big part of our strategy. You can invest in real estate, within your IRA account, again something best discussed with a great accountant. We moved our IRAs to American IRA, which is a self directed IRA custodian. Quicker profit deals, like flips which would be short term capital gains, aka high tax rate, we do within the IRA. Ours are traditional, so there's no tax implication until we take dispursments. Longer term deals like rentals, we do in an LLC. There are a ton of ways to invest in real estate. That's what makes it fun :)
Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
9y
@Shari Bertsch Hi Shari thanks for chiming in - this has certainly turned into a lively commentary and I'm loving all the feedback! I'm very glad I asked this amazing community and I've gotten amazing perspective. I did actually figure out the whole guru thing is a scam. They charge a fortune for info that can be learned right here. Good for you for getting in the game, and wishing you well in your investments :)
Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
9y
@Cody L. then we're definitely in the same boat. If you don't mind me asking, was it hard to get into long distance investing? We have NJ very close by, so a lot of folks from NYC invest there. I always thought Californians went to Texas or Arizona? Oh, also the stereotype New Yorker still invests in Florida Lol. BTW Thanks for the vote :)
Real Estate Investor · Bristol County, MA · Member since 2010 · 153 posts · 37 votes
9y
The short answer is that is is not too late, @Daphne Barber.
There has been a lot of buzz lately about starting a new career or business after age 50. It's a totally different mindset now. :-) Some people are making the change because you cannot depend on your employer to "take care of you" until retirement any longer and some people just are burned out and want to make a change. I know several people who changed career paths or started businesses from their late 40s on up.
Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
9y
@Steph C.thanks for the good wishes, the link (I read the article) and the book recommendation. There's definitely the feeling of F Korporate Amerika in our house these days :) I have received awesome replies, I'm humbled and I look forward to contributing a success story and posting a link to this thread with it...;-) All the best in your investment success!
Don't know why its "too late". My own opinion (and just that an opinion), the original person may have been referring to common perceptions about "age", i.e. that you have a short time horizon, lower risk tolerance etc. So rather than focus on age I would focus on what your situation is. How long do you want the money to be out there? How much can you afford to lose? How much hands on time can you spend on this worse case? What is your risk tolerance? What are good at? What don't you want to do? Are you investing mostly through an IRA. in which case you could have UBIT etc. considerations?
Also, I think anyone who actively tells you to get rid of everything else and invest with them is a HUGE red flag. I would RUN in the other direction no matter who they were. I can't see any situation where that is warranted to tell you that. All investment has risk and concentrating your investments with one person is a big risk and he should know that. It just stinks of a hard sell and why deal with someone who would sell that hard?
In terms of your actual question about notes vs. real estate, again mileage will vary by all the factors above but my own opinion notes are designed to have more protections (i.e. they are debt) but have disadvantages as well such as that you get no appreciation, less tax benefits etc. The benefit is your first in the capital stack (assuming first lien) and if you do get the property and you did your underwriting properly your basis could be 65 cents to 75 cents on the dollar (or less) which provides some protection. Personally, I do more notes than ownership of properties at this stage in the cycle but again that is partially preference.
Also, if you are accredited you can do more passive investments of larger debt or equity deals.
Rental Property Investor · Investor from New York, NY · Member since 2017 · 95 posts · 35 votes
9y
@Charles Worth hello neighbor! All good points much appreciated. Regarding notes, they do gain value, but I can't explain how (my brain was full after that convo) not like a stock, but it was described to me like compounding. His firm takes a 2% mgmt fee. However, I came across some info on the net that said to bypass this guy and go to his source for note funds, which is a company called PPR. BP member Dave Van Horn (Podcast #28) is a contact for PPR. We are accredited and I might give them a call. I'm not totally against notes....I still think they might have a place in our portfolio. Not divesting everything into notes, but a place. I'm going to msg you now :) Cheers!
1. Of course you are not to old! You are just entering the second stage of your life! Plenty more to go. There are so many success stories here of people doing amazing things in 3 to 10 years and starting out with only 35k a year jobs.
2. Take everyone's advice with a grain of salt, mainly because I'm not sure if everyone is aware of what you are trying to accomplish and how, or what your goals are.
3. Are you seeking to be hands on? Do you have a fire burning in you to create extra income? Would you enjoy the thought and action of giving an old dated house new life? If you answered yes to any or all of those questions, then real estate MAY be for you.
Or would you rather put money in some type of account to earn better interest?
It seems like you have a decent nest egg and should have an abundance of avenues to explore. Talk to several Financial advisors, ask for recommendations from local banks, relatives, friends. So many people spend and abundance of time analyzing what TV or car to buy, and then put no thought into vetting who they put their financial future into the hands of. Keep in mind, financial advisors are salesman, they want you to let them control your money, as such, they will steer you away from real estate or anything they do not offer.
The only advice I can offer you is to take a step back, and become educated about both, or all your options. After all you are still young.
Investor · Novato, CA · Member since 2015 · 433 posts · 321 votes
9y
@Daphne Barber LOTS of great input here. You probably don't need any more.
I'm 61 and in my 2nd year of note investing. I've built a portfolio (with help) that produces over $10k monthly income. So, it can be done. I bought performing and non performing loans. I've added some seller financing flips, foreclosures and hard money. I've tried to "ladder" fixed return timeframes. 6 months, 1 year, 5 year, 15 year.
I'm not big on funds as they aren't liquid. I like an actual asset.
Now, my 15% return is a bit skewed. It depends how you calculate yield. I get interest, profit on the discount to principal, BUT principal reduction every month. I'd wonder if the 12% promise you get includes return of capital? Plus my 15% yield is gross, there are fees, advances, etc. But I'm not paying 50% in a JV deal.
Flipping is very crowded. Just look at how many shows are on HGTV! Plus that's a job, not passive investing.
It comes back to your "why". I like to tinker, work on, improve stuff. So part passive, part active keeps me off the golf course and feeling productive. I really enjoy when I can help someone stay in their home but also am willing to take a non performing home and sell it to a new investor or homeowner.
What do you want to be doing in 2, 5, 10 years? Plan your life now, right?
best of luck! and remember Buffet's Rule #1 - Don't Lose Money!
@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 :)
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
9y
No one is ever too far along. I meet people all the time in their 60's just starting flipping. It has a lot more to do with drive, awareness, focus etc. Age is not relevant in this business. It is up to you with how hard you want to push.