Am I the only one that have realized real estate is an awful investment?

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Steve K.

Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes

1w

Location, location, location.

3 Reply

Jordan RayBusiness Member

Real Estate Agent · Memphis, TN · Member since 2023 · 623 posts · 321 votes

1w

I actually think this is an important perspective for new investors to hear because real estate absolutely is not as easy as the spreadsheets make it look, and I agree that calling rental property “passive income” can be misleading. Where I disagree is the conclusion that real estate investing itself doesn’t work anymore. I think the more properties you own, the more you realize how much the little things matter—buying correctly, financing correctly, controlling rehab costs, having reserves, choosing the right neighborhoods, managing your property manager, and constantly optimizing your operation. I own rentals myself, and I've learned tricks with every property that have helped me save money and operate the next one better. There’s never a one-size-fits-all formula, and the 1% rule, 2% rule, or a spreadsheet showing $200 a month in cash flow shouldn't be treated as proof that a property is a good investment. They're screening tools at best. Real-world expenses are real, vacancies happen, repairs happen, and sometimes a deal simply doesn't perform the way you projected. Where my philosophy is probably different is that I don't think buying one property—or even ten—necessarily tells you whether real estate works; it tells you what worked and didn't work with those particular properties, markets, financing structures, and management systems. Personally, I think investors should learn as much as possible, optimize as they go, and continue buying quality assets as quickly as their finances and risk tolerance responsibly allow. The more you learn, the better you get at recognizing what works for your portfolio. That's also why I like Memphis: I can still find properties where the rents make sense relative to the acquisition cost, and I can combine cash flow with long-term appreciation rather than depending entirely on one or the other. For value-add deals, we also have local hard money lenders offering 100% purchase and 100% rehab financing, which can dramatically change the amount of capital required to scale. I completely respect someone deciding they'd rather own a service business, buy stocks, or pursue another investment after experiencing the realities of being a landlord, because real estate isn't for everybody. But I wouldn't tell the next person not to invest in real estate—I’d tell them not to believe that buying rentals is as simple as buying 40 doors at $200 per door and collecting $8,000 every month. Real estate investing is not as easy as spreadsheets. You have to learn, adapt, optimize, build the right team, and figure out what works for your portfolio, and as long as you stick it out and keep buying good property, you'll continue getting better at it.

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Luka Jozic

OP

New to Real Estate · Member since 2022 · 146 posts · 110 votes

1w

Look my point is still that for the average person getting into reale state, it's not a great investment. The only people making money right now are the ones with access to incredible discounts. I challenge you all to find a single on market deal that anyone could buy that will cash flow TODAY.

And no, unicorns like @Shiloh Lundahl provided do not count. Just because some idiot is willing to pay $7K rent doesn't mean it's repeatable.

Shiloh LundahlPro Member
Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
1w
@Luka Jozic If you are going to discount what a lot of the investors with experience are stating then let me be more concise. You're failing in real estate because your doing it wrong.

If you want to stop failing, then connect with people who are not failing and find out what they are doing differently and do that.

The average person doesn't do well in almost any area of real estate. That doesn't mean real estate is not a good investment. It means you should not be average. Lots of people on this thread are above average real estate investors. Lots of people on this thread would have counseled you not to have invested like you did or they would have helped you adjust your expectations. The problem isn't the investment class the problem is the way you invested.

For example your statement "I challenge you all to find a single on market deal that anyone could buy that will cash flow TODAY." That question is irrelevant to a good investor. Good investors either have their own deal flow or they see something average investors don't see. So the better question would have been, "could someone here show me how I could find a good deal because my past deals haven't been very good."

Have you ever heard someone say, "Whether you say you can or you can't, you're right." Rather than trying to prove your point, try to learn what successful investors are doing.
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Luka Jozic
OP
New to Real Estate · Member since 2022 · 146 posts · 110 votes
1w
But that's what Im trying to say. If real estate ONLY works for people with years of experience that are extremely connected or have the time and resources to get deep enough discounts, then i would argue it is not a great investment for most.

Now I am all for learning from others, but I am not so sure some of my deals would have been different had I paid someone to coach me. But please correct me if Im wrong and let me know what you would have done differently for some of these deals.

Deal #1: 10303 Homeworth Ave, Garfield Heights, OH 44125
Bought in 2022 for $72K, put about $10K and its worth around $120-125K today. Rented around $1300. Have had some issues with tenants but several local professionals have told me the area is not the issue, tenant placement has been. But either way, assuming 100% occupancy, this deal almost hits the 2% rule and true cashflow is still meager at best and while there has been some appreciation, after agent fees, taxes and all, Im not jumping up and down.

Deal #2: 16224 Huntmere Avenue, Cleveland OH 44110
Bought in 2023 for $47.5K, put $53K into it and refinanced at $125K to pull almost all my money out. I feel like I bought this one at a great price especially since it was on market, but same thing, modest cash flow.
Deal #3: 807 E Chelsea St, Tampa FL 33606
Bought in 2025 with 5% down for $556K. I do think I overpaid a little, but this one had some hidden potential. I added an additional bathroom to the main house making it a 3/2 as well as some cosmetic updates. It currently has an ADU above the garage and Im in the process of converting the garage to another unit. Zero tenant issues here but today Im loosing a couple hundred every month. Once the second ADU is in I'll be about a grand positive. But its an old house and a lot will need to be put aside for repairs and maintenance. After Im done Im about $100-110K all in on this one but ARV should be closer to $700K+. But even then, from an ROI perspective, its terrible. The only thing making this one interesting is in 30 years when its fully paid off, rent from 3 units will be nice and possible appreciation as Tampa is "booming".
Please let me know where I ****ed up.
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Jules Aton
MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
1w
I'm guessing I don't need to pontificate on why the properties someone sold you in Ohio or anywhere else for that matter in the past 10 years that were purchased for under $100k aren't superstars but the FL house actually sounds like it has potential. If you consider the tax benefits you may not even be losing on that one. Will you have to put more money into it for the additional AUD? Also worth noting in my experience, unless you absolutely don't have the money in which case it may mean walking from the deal upgrading the things you can anticipate will need it within a few years is best done at the onset. We are trying to help and while I appreciate you holdig on to your original theme bottom line is just sell them all if you really feel RE sucks and isn't worth pursuing.
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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
1w
So there's not really enough specifics here to even make reasonable judgements on these investments but here are some random thoughts:
Investment 1: You have $82k in it according to your thread. You are renting for $15.6k per year assuming 100% occupancy (is $1300 above/below market rates?). If you aren't making money on this property you either have a lot of vacancy or you are having poor tenant placement that is damaging the property beyond deposit recapture. Even if you were netting half of that, that would still be almost a 10% return on an all cash deal. Now if your complaint is that you're only clearing $200 a month because you have the house completely leveraged, that's more a facet of you using other people's money than an issue with the investment itself.
Investment 2: Modest cash flow with no money invested sounds like a win to me. If a guy came up to me in the street and told me he'd just send me $200 a month for the hell of it I'd take it. Not sure what other investments you would expect to control an asset like that with no money of your own in it.
Investment 3: Just on the surface this sounds like a loser. 556+110 = 666 (the number of the beast! haha) for a property worth 700, that is old and will need constant upgrades and repairs. I looked at a crime map and it's located in the some of the highest crime areas in Tampa. Built in 1923 according to property records, 7800 in annual taxes? Not sure what the attraction was to this property but if I was taking a guess as to what's sunk your opinion of RE this one would be it.
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
1w
My take is different except property #3.
I might as well combine #1 & #2. The rent point is too low. Expenses will consume too much of the rent. This leads to a best case scenario that leveraged it cash flows a pittance and at those price points appreciation has not kept up with inflation. The implication is that in inflation adjusted dollars the property value (and rents) are declining. Residential RE is not passive. A pittance cash flow and declining value property is not worth the effort and risk of residential RE. Property #2 can have a good ROI, but in dollar terms it is a pittance.
#3 I may not have purchased but if I had I likely would be hesitant to give up on it. There is info missing on the cost of the ADU conversion, but if you really would have $1k/month cash flow leverage after allocating for vacancy and sustained expenses in a market with historically modest appreciation (which is in excess of inflation) . Forget about the paid off return. Re super power is leverage. If you want to maximize return, you want leverage. I believe this may be worth keeping. You say the ROI is terrible but Tampa is booming. If you have leverage, I find it difficult to understand how both statements can be true. Note at 80% LTV, 5% appreciation produces a 25% return from appreciation.
I would avoid markets with historical appreciation below inflation. They often look shiny, but they tarnish very quickly.
Good luck
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
1w
Where you messed up is in your expectations.
Given the price points of #1 & #2, these were Class C properties, maybe D.
While Class C/D rentals can have great cashflow on PAPER, you:
- Have to use the correct metrics for your ROI (i.e. NOT 5% for vacancy!)
- Have to use Extreme Screening to find the best of the low-demographic tenants!
How are you accounting for the increased values of these properties in your ROI calculations?
Property #3 may be Class B, but another poster stated it's in a high-crime area.
Class B rentals typically take 1-3 years to stabilize & cashflow.
What spreadsheet are you using to project out your ROI over time as rents/values go up over time?
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Shiloh LundahlPro Member
Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
1w
Ok, let's analyze deal #1, (Cute house by the way).
Purchase Price 72k
Closing costs on the purchase 6k
Hard money costs 4k
Rehab 10k
Closing costs on the refinance 6k
All in on the property 98k
Appraised Value 125k
Equity created 27k
Refinance at 75% -> new loan is 94k
Left into the deal 4k
Rent $1300
PI $600
Taxes $200
Insurance estimate $100
Property management $100
Cash flow = $300 minus cap ex, repairs, and vacancy.
How do your actual numbers differ from these?
If these are the actual numbers then you would bring in about $3,600 on a $4,000 investment. Which should be a good return obviously on paper. So what is the story for this property?
I focus on lease options, So the numbers would be different the way I run them for this property. Let's say that all the purchase numbers are the same even though I don't always fix up everything with a property for a lease option.
After the refi for 94k rather than leaving in 4k, I would charge a lease option fee of $3900 for the opportunity to buy the property within the next 3 years at $135,000. I would charge rent of $1500 a month. The tenant would then get a $100 discount for doing any repairs (this would cut out repair costs and likely vacancy). My new cash flow is $500 of which I more likely keep all of it (you wouldn't really need to pay property management on a lease option because there's not much to manage. You would like to have somebody on the ground to help watch over your properties but it likely wouldn't be a consistent thing. And if there is an issue then you can have this person help out with it. A part time assistant would be all that you would need and their salary would come from the whole portfolio). Then I would connect the new tenant buyer with a loan officer at the very beginning as soon as they move in. The loan officer checks their credit and gives them a plan to get a loan within the next 3 years. Then you and the loan officer check in with them to see how they are working their plan. And if everything goes according to plan and they exercise the option with your encouragement and support, then you get $135,000 without paying closing costs or realtor fees. You would get back about $55,000 into your pocket and when you take out the 22k in rehab and closing costs you bet about $33,000 of a gain at the time of sale plus the $500 per month for the last 3 years at least which becomes another $18,000 for a total gain of $51,000 in 3 years with only having about $1000 left into the deal. That is pretty good but I would look for some properties with a little better spread at the beginning.
Here is one I bought about 2 weeks ago: 14178 S Amado Blvd, Arizona City, AZ 85123. It shows I bought it for $200,000 but I didn't I bought it for $132,000 with about a $68,000 rehab credit to close on it at $200,000 to help with the appraisal and with the loan for the refinance.
I will be putting into the property $35,000 the property is going to appraise likely at $225,000. I will get a loan at 75% of $225,000 or for about $169,000. With closing costs at purchase and at refi of around $14,000 plush hard money and holding costs of around 6,000, my all in will be around $18,000. They will come in with an option fee of $4000 so I will leave about $14,000 into the deal. I will get around $1600 in rent but the lease will say $1700 on the front of it and then in subsection 15 (the Nuisance clause) they will get $100 discount for taking care of any of the repairs for the property. My PITI should be around $1300 a month.
This will be a 3-year lease option and will go up $50 year 2 and $66 year 3. I will connect them with a banker at the beginning of the lease to help get them ready to exercise the option within the 3 years. The purchase price to them will be $240,000. If they exercise the option at the end of the 3 years then they will pay off my mortgage of $163,000 and I will get $77,000 and when you subtract my $14,000 left into the deal then my profit is $63,000 plus my cash flow of $10,800 ($300 x 36 months) for a total profit of around $74,000 within 3 years.
So if you had brought your first property to me at the beginning, I would have asked you what your goal with the property was and how much vacancy and turn over costs you would estimate and then to evaluate it to see if it would be worth it then. I would then have shared the lease option model as an alternative to a regular rental to turn your capital quicker. Because the "collect rentals game" can be time intensive, and head ache producing sometimes; and the return of capital or big windfalls of money can take a lot time. But some people really like the rental model. And that is fine.
I'll look at deal 2 and 3 a little later when I get chance.
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Luka Jozic
OP
New to Real Estate · Member since 2022 · 146 posts · 110 votes
6d
Well first off this one wasn't a BRRRR I just bought it with 20% down and put some money into it, no refinance. I guess I see some pros and cons to lease options but the way I see it now is that for real estate to work, you need extremely deep discounts regardless of strategy and often do value add. To achieve that, it takes a lot of time to a point where its no longer a passive or even semi passive investment, its a full time job. If Im gonna do a full time job anyways, there is no strategy in REI that will outperform buying a small business. I think the better way is to buy small businesses for cash flow, then use some of that money and park it in RE maybe. But instead of targeting many doors, I think its much better to have a few paid off properties that actually cash flow. Sure, you're not optimizing for appreciation with more doors but you reduce headaches significantly and actually make money every month.
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
2d
If you take leverage out of the RE investing then seldom is worth the effort and risk of residential RE.
If we use the 50% rule and you cash flow is 6%. Bump it more aggressive and it goes up slightly.
Note the appreciation has no multiplies so it will vary from very low to 6% long tern. Let’s use 4% average long term on average market.
No equity pay down. Tax benefits muted because of the no leverage and having cash flow.
Passive sp500 has historically delivered 10% return (and it has been way higher than this over the last 5 years) you are using an unsustainable vacancy/expense ratio. Fab 5 or mag 7 significantly higher. As an LP I have achieved near 30%/year return (but I currently have a dud that is almost certainly going to lower that number).
I expect my RE to produce significantly higher returns than passive options. Some of this can be achieved via value add but most value adds are far from passive (excluding sophisticated value adds). But that is typically a one time boost in return. Leverage is the boost that keeps on magnifying returns.
Good luck
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David F.

Member since 2018 · 113 posts · 135 votes

1w

I bought my first rental in 2020, purchasing 6 SFH over the last 6yrs, with W-2/self-employed savings….and similar to OP, my expectations and reality have not matched up. My expectations were the problem, I drank the REI cashflow Kool-Aid. Plus, entering in 2020 meant I was on the tail-end of the big increase in house values + rents.

I had about a 12-18 month period where I debated bailing on REI completely. Bottom line, it's not my personality to quit… I'm gonna see this thing through because I believe it's a good long-term investment. I have a lot to learn, but I'm committed to becoming a successful RE investor. Obviously OP disagrees, to each his own. I'm not sure the grass is greener on the other side…. Does OP really think the stock market's gonna perform the same the next 10 years compared to the last 10? Not a chance IMO.

I am changing my 10 year goals to more of a 20-30 year perspective. I predict more inflation, which makes REI more attractive to me long term.

Luka Jozic
OP
New to Real Estate · Member since 2022 · 146 posts · 110 votes
1w
I would seriously consider buying a small business. I would highly recommend to just look into it. I believe there is a BiggerPockets podcast episode with Walker Diabel, start there and see what you think.
1 Reply

Leacy Ott

Member since 2016 · 1 post · 0 votes

1w

Well said!

Tim Hall

Flipper/Rehabber · Tallahassee, FL · Member since 2014 · 461 posts · 237 votes

1w

Anything is an awful investment if A: if you pay too much B: if you buy at the wrong time C: if you analyze the deal incorrectly Let’s be honest, if you buy a property and all you hope to get out of it is $200 then you’re analyzing incorrectly. 1 cap ex, tax, insurance hike and your profit is gone. I see this all the time people just buying houses, not making any money and calling it investing. The word is not investing it’s just a headache. Would you buy a business that didn’t make any money? I hope not. You need to tighten the analysis up, treat every property like it was its own business, make sure you make a profit every month. If that’s not in your market don’t buy properties in your area. If a business doesn’t make 20% with a thorough assessment then I’m not buying.

Luka Jozic
OP
New to Real Estate · Member since 2022 · 146 posts · 110 votes
1w
The way I've been analyzing is assuming $200 after expenses, capex, vacancies etc. But what I've realized is that I've still not been conservative enough. If I was conservative enough, not a single deal would pencil out unless you buy at like 70% off the market value..
0 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
1w
Only newbies buy at market prices!
I won't buy anything at more than 80% of market value unless there's other considerations.
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
2d
For curiosity on the 3 properties what ended up being your vacancy/expenses other than P&i; basically had did you numbers align with the 50% rule.
I did no underwriting for this and just going from the numbers you provided I expect property #1 & #2 to have vacancy/expenses noticeably in excess of the 50% rule (my guess is between 55% and 65%). Property #3 I expect to be near 50% rule (between 45% and 55%). I do sustained expenses which implies I calculate annual cap ex by using lifetime and current replacement costs to determine annualized cap ex. Example is if water heater has 12 year lifespan and costs $1600 to replace the monthly cap ex is 1600/144=$11.12/month.
I suspect you underwriting on prop #1 & #2 showed vacancy/expenses below my WAG and fore some reason below the 50% “rule”. I will say you underwriting will improve with experience. You will recognize the impact of expenses on lower rents. My point is you are currently similar to the rookie in baseball. Sure some do great the first year. But most are still improving to become their optimal baseball player. But unlike baseball where players (without steroids) diminish in their mid 30s, RE investors can continue to improve as long as mentally they are still present.
My point is not only was your underwriting too aggressive, but so are your expectations. You have already learned quite a bit.
Good luck
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Tim Hall
Flipper/Rehabber · Tallahassee, FL · Member since 2014 · 461 posts · 237 votes
1w
@Luka Jozic and there we go. If that is the only way the deals will work then they are the only deals I would buy. If not in you area you may need to look further afield or look in different places than where you're looking now. You could look at another market class, multi families or offices. Tweak your analysis to where you get $300-500 a month a door or you don't buy it.
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Chris Ross

Member since 2023 · 15 posts · 14 votes

1w

Appreciate you sharing your experience. I do agree that the stock market and investing in a service business is likely a better investment than RE. But I still believe real estate can be good. It seems to be highly dependent on good property management, low capex, and good tenants which as an OOS investor like you and I is difficult unless you have a trusted team. I trust the team I have but anything can happen. I just had a major $6k unplanned capex expense on one property that kills the entire profitability for the year. Given your experience what would you have done differently if you had to do it again? The deals you shared look very strong to me on paper. Perhaps new construction if bought at the right price? In theory that minimizes capex compared to an older home or BRRR and maybe attracts better tenants? I also think being too levereged in a deal is risky, maybe having more money in the deal with reserves is a better strategy? I'm not really sure myself but I appreciate you sharing this.

Lipa F.

Investor · Member since 2024 · 75 posts · 27 votes

1w

I think you’re looking at a 20–30 year investment through a 4-year lens. Real estate doesn’t need to cash flow $500/month today to work.

Over a long enough holding period, you’re likely to get rent growth, principal paydown, and periods of significant appreciation. You don’t need appreciation every year — you need to own the right property long enough to participate when it happens.

The people who bought 20–30 years ago didn’t have a crystal ball either. They just held through the cycles.

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Wale LawalBusiness Member

Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes

1w

@Luka Jozic

To be honest, your experience brings out an aspect that many people fail to realize; what might look promising on paper does not feel the same way when all factors like vacancy, maintenance, taxes, insurance, and management have been considered. There is no problem at all in investing your money where you will have more control, especially when you’ve invested in 10 doors using several approaches and the returns are not worth your efforts.

Good luck!

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Adam BartomeoBusiness Member

Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes

1w

Sounds like you would be better off working a 40 hrs a week job because through your experience and your post, you are not a successful person.

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-1 Reply

Luka Jozic
OP
New to Real Estate · Member since 2022 · 146 posts · 110 votes
1w
How very professional of you to take a dig at someone you know nothing about. You literally have no idea..
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2d
whats the -1 on the like button can we now make a down post ? and agreed having read many of Adam's post I am also wondering why he took that shot at you from what I have seen not his style.. Although he has ripped folks in Ft. Meyers for buying new builds that never got built and those that sold the properties and the dreams to the investors in that market that got totally hosed way worse than Luka's experience.
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Mike Klarman

Specialist · NJ · Member since 2022 · 1k+ posts · 649 votes

1w

Process matters. Deal choice matters. Sourcing matters.

There's a thought that RE in general is a great investment. And generally speaking, it is. You buy a property today, and in 10 years it is worth more. There's houses that have been in families for generations and are worth But we all know inside the general there is the specific and the specific is real. If this isn't strategically planned out according to capital constraints and attainable goals then it can turn on you. It's easy to get in negatively margined projects when they are thinly margined to start with. All you need is the numbers to skew against you just a little. For you the headache attached to the laborious process and net result is just not worth it, I don't think anyone would deny that. It also sounds like you started with capital constraints given the house hacking strategy. Starting off with capital constraints makes it hard. You have to be very efficient with the allocation of capital.

But you are right, this is a results may vary industry.

Adam MaciasPro Member

Real Estate Consultant · Fort Collins, CO · Member since 2022 · 284 posts · 178 votes

1w

There's a reason I only stick to wholesaling, and so many people fight me tooth and nail on this, but I stick with wholesaling because I didn't have money from parents or money at all to get started in real estate. I didn't have the ability to conveniently just call up agents and go, "Hey, I have money. Let me just hold it in real estate."

I was a Starbucks barista in 2012 and worked my way through acquisitions, working with other fix-and-flippers to eventually do my own wholesale deals. Wholesaling, for me personally, is the best move I ever made in REI. I'd rather own businesses that involve real skills people will always need than just depend on tenants for cash flow. Especially in this current economy. The job market is horrendous. We have so many issues that make real estate a not so fun game anymore for the time being. There's too many gurus, too much theory, extreme lack of realistic education. There's not enough inventory to go around for millions of people to win.

I love real estate because it's a game. It's just a game, and my favorite game is being transactional. I'd rather control the market than own the market, and the best way to control the market for me personally is wholesaling real estate. Even John D. Rockefeller said, "control everything, own nothing." I get deals 70% off the ARV, and investors only dream of doing that. Sure, I can hold them as rentals. I can do the fix-and-flip myself, but to me, I don't care for that.

I'd rather just make my cash with real estate by wholesaling and assigning contracts, and being a deal finder and getting good at getting leads. That way I always have control over the market. As long as I have that skill, I'll never worry about making money. As soon as I think about having tenants, as soon as I think about worrying if the market is going to crash or if it's going to go up, it stresses me out too much. Not only that but the worst part is all the debt. You have to use debt to leverage the ability to have 100+ doors. Robert Kiyosaki brags about being $1bil in debt yet he's not a billionaire by net worth. Imagine that. The truly smart thing to do is be a billionaire without debt. LOL

For my personality, I like being in and out of deals. I honestly do not know how people are able to have hundreds of rentals and live an stress-free life. It's just impossible. There are other ways to make money, especially with technology today. This post was refreshing. Thanks for sharing your thoughts!

Crystal SmithPro Member

Moderator

Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes

1w

@Luka Jozic

Full disclosure- I am one of those people that did their first deal over 20 years ago. My partner- 30. years ago. Corporate background that ran a divisions of Fortune 100 company. Our approach to Real Estate- Run it like a business with 5 year plans that are updated yearly, quarterly. Set our own targets for ROI/CF (Don't use what others have defined such as the 1% or 2%rule) & diversify (Single family, multifamily, ....) Never be all in on REI- Invest in Real Estate, the stock market, businesses...... We were actually private lenders at one point.

You've received a lot of great feedback from your post. Take it all in and reevaluate. I'll just add this- The "Founding Fathers" set up the laws in the US for people who own stuff, real estate, businesses,... Whatever you decide to do continue to pursue being an owner of assets that throws off cash.

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Nicole W.
Rental Property Investor · L.A. Ca · Member since 2020 · 120 posts · 43 votes
1w
@Crystal Smith I am curious how your private lending did. You say you did it at one point so doesn't sound like you stuck with it. I am looking at investing in hard money loans through a broker/mortgage company. What is your experience with that.
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Crystal SmithPro Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
1w
We did private lending for about 10 years using Self Directed IRAS. We never invested through a broker/mortgage company so I can't give you any feedback
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Nicole W.

Rental Property Investor · L.A. Ca · Member since 2020 · 120 posts · 43 votes

1w

Yes. One REALLY has to do their due diligence and leave a good enough margin for error and for anything else going on. There are plenty of books on the %s to leave for different reserves. I will say that I have been in the buy and hold of rentals (multi-unit and SFR) 31 yrs. Though we had to sell a few during rough times (I didn't calculate the potential of increased taxes and insur against rent levels in a few areas) and the big real estate crash. I did continue to hold on to some and I must say, it was the BEST decision ever made financially. I never counted on appreciation. I went 100% for cash flow. Now I live off the rents I get in and have plenty for reserves for new rents, fences, etc. I had a job while collecting them and thus was able to pay for things as they came up back at the start. Now, they cover themselves totally. You can write off the expenses and depreciation to lower your taxable income and defer capital gains taxes forever if you can hold them to your departure from earth at which point your spouse and heirs all get step up bases and no taxes. What other field can you do this in? Also, the tenants pay down the mortgages and you write off the interest. We have been very lucky that our properties also all appreciated over time and was able to do 1031 exchanges with that equity. Yes, there are ups and downs in any field. You do have to be smart on what you get to hold. I have had out of state and local properties. Pick the states that are pro landlord, not in super bad weather and don't have really high property taxes and insurance. I never did the flipping and had friends who did that and didn't do the rentals/didn't like them. We are doing better financially now than they are at this point having did what we did and we were considered extremely conservative. Now this is 31 yrs later and some are not that patient but I promote to anyone who wants to listen to get into rentals. Best financial move ever PLUS I could do other business or work besides this with rentals.

Mendy M.

Rental Property Investor · Member since 2024 · 27 posts · 31 votes

1w

“Real estate is local”

It varies by State, City, Zip code, neighborhood, and even block.

In many places what your saying may be true, in others it is not.

You have to crunch realistic numbers, and make educated decisions.

[email protected]208-600-2814

Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

6d

OP

Let’s start with a position you did everything

correct.

$200 per door won’t ever get to $10,000 per month. So let’s forget that approach.

Timing is everything. Bought our land for $500 per acre in 1991 then in 2020 worth $7,000 per acre. Pretty smart??? No. Just inflation. Subdivided into housing lots and sold for $50,000 per acre. That was initiative.

Our economy is in a bad spot. I’m sure if you buy a house today for $500,000 it will be worth $50,000,000 in 30 years. Due to inflation and the USD resetting.

So you’re right. A lot of the buy and hold and even flip has been due to timing. For 90% of investors. The tide has gone out in the market and we are seeing a lot of people in their underwear.

You need to look for value add

Propositions today.

Even your Insurance and Property tax models will be wrong due to inflation. If you plan to buy hold.

Back up. Reassess. REI is not bad. You need to identify your strategy. Lean the Secret Sauce. Before you Scale. You tried to scale without the Secret Sauce.

If you start a business it will also fail unless you learn the Secret Sauce. Forget those books and podcasters. 100 doors and 25 Years old.

2 Reply

Ryan SpathBusiness Member

Real Estate Agent · Boise, ID · Member since 2017 · 553 posts · 370 votes

6d

I look at real estate more like planting trees. The first several years can be a lot of watering, pruning, fixing problems, dealing with tenants, replacing roofs and HVAC systems, and wondering why you’re doing it. The real fruit can take a decade or longer to show up. Rent growth, appreciation, debt paydown, tax benefits and eventually deleveraging all compound over time. Looking only at whether a property puts $200 in your pocket every month misses a big part of the reason many of us own real estate.

Richard F.

Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes

6d

You know that conversation you had when you broke up with a girlfriend? "It's not you, it's me." Straight up lie...it was the other person, who was oblivious to their faults and mistakes.

All this talk about deals, and cash flow, and markets, and creative finance...what if you actually sell all of these awful investments today (well, OK, I'd wait until the springtime for best market at this point)? What would your real, final, cash on cash return be when all are sold, and all the taxes and tax deductions are sorted? Appreciation or not, you have "cashed out" of some/all of the properties, so what do you end up with? Is it truly that "awful"? I seriously doubt it, unless you started with some real dogs.

Another little thing that not one person in this thread has mentioned. Operational efficiency. What is the quality of your operating systems...prepping vacant units, screening, educating prospective tenants, solid, useful terms and conditions in the rental agreements, simple and straightforward service call handling, vendor selection, occupancy management, move-in/move-out procedures and documentation, marketing, preventative maintenance and inspections, and your accounting processes? You reap what you sow is a pretty old saying that certainly holds water in the long term rental arena.

If your turnovers are costing you thousands; if you have more than one or two service calls per year, per unit or frequent go-backs to address prior repair; if you have problems with late rents or outstanding balances; if the interior and exterior condition is trending downward; or if you are having major "unexpected" repairs pop up like HVAC or sewer line replacements, or you "discover" that the roof has too many layers and must be stripped to the deck...at substantial additional cost, then maybe, just maybe, the problem is not the investment you made, but rather the lack of proper operational expertise.

Evan Polaski

Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes

6d

@Luka Jozic I am sorry you didn't have a good experience with real estate. A lot of people don't. It is also, historically not a business that 4 yrs makes any real change. But 10+ yrs in, and you are sitting pretty good. But telling people that doesn't sell books, or get people listening to podcasts.

Beyond that, the S&P has been on a tear over that period, so nothing, even small businesses, look good compared to S&P returns over last 5 yrs.

Lastly, per your "buy a small service business", I hope your research is more involved than what you did for real estate. If your looking at the Cody Sanchez and similar crowd as reason to make this move, you will very much be in the same position you are in now.

I clearly don't know what businesses you are targeting, but if you are shopping on BuySellBiz, and looking at businesses that you don't already know the industry really well, you are likely to be burned. For many of these businesses, all it takes is one well capitalized new competitor to put you out of business. And unfortunately, unlike real estate, where the asset is still marketable with or without a tenant, a small business with negative cash flow is next to worthless to anyone.

Luka Jozic
OP
New to Real Estate · Member since 2022 · 146 posts · 110 votes
6d
Appreciate the input. As far as buying businesses, Im not falling for the sales pitch by gurus ever again. I know that buying a business is not simple by any means and comes with more risk. Codie and other gurus sell unrealistic dreams. But given where technology is going and everything going on right now, as a software engineer it's just a matter of time before Im jobless. I don't have time for the results of real estate to kick in, so the business route is more appealing to me.
0 Reply
David F.
Member since 2018 · 113 posts · 135 votes
6d
I appreciate OP’s candidness, and think there are some valid points both ways. But I’m curious OP, why don’t you “have time” for real estate returns to kick in (or any other returns for that matter?) What’s the rush? Isn’t that short term mindset exactly what’s gotten you into real estate, and now so quickly out of real estate, and onto the next thing?

I feel it is important to recognize where we are in the economic cycle. The easy money has mostly been made the last 10 years… real estate, the stock market, elsewhere. The next few years look less rosy for returns. The investing OGs, those who know way more than me, say that the next couple years is likely to be tough and that it’s more about building good systems, demonstrating patience, having income exceed expenses, preserving cash, and caution against making aggressive moves.

You mentioned reading Kiyasaki… one of the things he talks about is recognizing economic cycles. I think it's important to zoom out and consider where we are on the cycle of things. Don't want to catch a falling knife (a REI term), or buy a ticket to the Titanic (in the case of buying a business).
0 Reply
Luka Jozic
OP
New to Real Estate · Member since 2022 · 146 posts · 110 votes
6d
When I say I don't have time what I mean is that Im a software engineer by profession, and if you know what going on there AI can basically do 90% of our job now. We just sit there and prompt it all day and approve ****. GPT is literally navigating our computers and doing everything. My two most recent companies have had layoffs roughly twice a year for the past few years and likely to continue. Its just a matter of time before Im next, and based on how many people I know struggling to find new tech jobs along with shrinking need, the outlook is not good. Being of an entrepreneurial spirit I think it's time to start preparing for other options. Buying more real estate even with more aggressive strategies will take a lot longer than getting into small business acquisitions, thats why im leaning towards that, and then possibly using money from there to MAYBE buy more RE down the line. Hope that makes sense.
1 Reply

Sophia Maatouk

New to Real Estate · Glenview, IL · Member since 2026 · 1 post · 0 votes

6d

Ouch. Not what I needed to read as my 1st post on this website lol

I hope you're wrong. Honestly, I have 2 toddlers and they were "2 under 2." And that "sucked" for quite a bit. What i hope is happening here is that you're just in the storm. In the hard part where most ppl give up and throw the iPad at them. But if you can stick it through and get through the learning curve, it might be really rewarding 🤞 hang in there.

Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

6d

OP. My engineer buddy said he had just talked with a friend of his. His friend’s son did all the right things. Straight A’s, high

Achiever, great college, great company, great job. He called his dad and told him he was getting into the snow removal business. Why? His job could be shipped overseas anytime.

Be careful on your business venture.

What is your unfair advantage? AI is nasty? Let’s use those to your advantage.

1. Software engineer so you should be technical and systems oriented.

2.Use AI to your advantage.

3. What ethnicity are you, were you in the military, do you have a handicap? No need to answer. If you don’t find someone with all of the above.

Research becoming an 8A government contractor.

Look into 3D manufacturing. Apply AI.

Develop two types of product lines. One to cover overhead and one to make a profit.

A. Contact military procurement personnel. Seek out repair parts that knock out large assets where they need a short leadtime. Use AI.

B. Identify a mass repetitive product not produced to a large degree in the U.S. that is medical in nature. Example. Syringes or other disposable medical supplies. Use AI.

C. Ride the Silver Bullet wave. Baby boomers. Use AI. Let your brain go wild. Ask people who take care of their parents what their needs are.

But remember as I mentioned above. Learn the Secret Sauce before you Scale.

[email protected]941-914-7779

Ashish AcharyaBusiness Member

CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes

6d

Luka, I don’t think you’re wrong to be frustrated. Real estate gets marketed as far more passive and forgiving than it actually is.

A property that “cash flows” $200 a month on paper can turn negative very quickly once you add real vacancy, repairs, turnover, management, licensing, insurance, taxes, and the time cost of dealing with problems. A lot of investors underestimate just how thin those margins can be, especially when buying at today’s prices and financing costs.

Where I’d push back slightly is on the idea that real estate itself is universally a bad investment. I think the bigger issue is that bad basis, thin cash flow, and weak operations get exposed much faster now than they did when debt was cheaper and appreciation covered mistakes.

From the tax side, rentals can still create meaningful value through depreciation, cost segregation, and passive-loss planning, but I would never use those tax benefits to justify a weak deal. The property still needs to make sense operationally.

And if you decide a service business is a better fit for your personality and goals, that may genuinely be the better use of your time and capital. An active business can produce stronger cash flow than a rental portfolio, especially if you’re good at building systems and eventually hiring management.

The interesting part is that the two can also work well together. If you operate an active business and also own rentals, the tax planning between the two can become very powerful when structured correctly.

Real estate isn’t passive, and it definitely isn’t automatically good. It’s just one tool.

Feel free to DM me, I’d be happy to send over a few resources that might help you compare the tax side of active business income versus rental income.

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Daniel Vera

Specialist · Cincinnati, OH · Member since 2026 · 15 posts · 4 votes

6d

Totally Valid! Experiences like this from out of state investors im learning is common.

I think the most important part of this is having that person on the field you can call at a moments notice and really trust, thorough job follow up with documentation. Documentation beats conversation and experience helps identify the room for error and if jobs were completed throughly. Lots of money and time goes to waste when tasks aren't followed up on no matter what.

Not a property manager but someone who preempts problems somone you can call that handles tasks directly leaving little to no room for error looking out for your investment best interest.

If you had more experienced support on the field that wasn't trying to sell you a service but serve you. I think it would give you more confidence from out of state and the ability to feel like you are on the ground.

Don KonipolBusiness Member

Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

4d

Negotiate harder, be more selective, pay a LOT less for investments. Going to MLS or its commercial equivalent, Loopnet, etc., and buying for 10% under list is not going to work short term, just like accepting seller/broker "financials" as being truly representative isn't going to work.

Good deals are negotiated, not found, not in this market anyway. At interest rates of 4-5%, investors accept low ROI. I operated (45 years ago) when mortgage rates were 17% and you could find 15% caps all day long. You still can! But it takes NEGOTIATION AND CREATIVITY.

The foundation for sustainable success in real estate investing is knowledge and experience in real estate principles, real rate finance and real estate law. Without these all the knowledge of “tactics and strategies” won’t result in long term success. It’s like memorizing instead of understanding. Memorizing might allow you to Ace the course, but won’t be useful in a real “situation” if there’s no “understanding”.

You’re right in that all the guru/ advice/ mentoring stuff won’t lead to success; unless success is defined as being able to purchase a bad investment at an inflated price. This is not an “easy” market, but I’m still average returns of 15- 20% ANNUALLY on NEW investments. I look at 100 deals for every one I end up investing in. I invest in maybe 15 new deals per year, so I probably look at 1500. Most I reject out of hand. How do I see so many new deals? Once you become known as a REAL participant, willing to spent money if your criteria is met, and having capital, or at least access to capital, the 2 million intermediaries out there have you on their “short list”.

Private Mortgage Financing Partners, LLC