All Forum Posts by: Aaron Gordy

The only clear way to test this argument is to do it. Talking does zero.  I do know this. I just hit a 30%+ return on investment annually over a 7 year of period of time with a sfh smack dab in the middle of Austin. It was a passive investment as I had a property manager dealing with it and same tenant throughout. Invested 15k, received a steady cash flow in year 2 going forward and it appraised for 160k more than what I paid for it. Gonna create value to hit even more of a grand slam home run by building adu on the lot. This is the result of alot of studying of the market though and can't be extrapolated across the entire metro. I don't think that this sorta numbers are possible in the midwest, but I could be mistaken. 

@Carissa Atendido I would suggest using a property manager for at least the first year. At the very least use a realtor to lease it out. That way you can use the realtor lease which is designed by real estate attorneys to protect the landlord which will minimize your risk. If you go this route get a good handyman locally to take care of the maintenance and ask the realtor for a good one. Realtors generally know good handymen to take care of their properties or their clients properties. Typically, if you take care of your tenant (customer) and not raise the rent crazily then you will get a long term tenant. Getting long term tenants is the key. And if you are lucky then at your time of disposition of the property and you have had the same tenant then they may buy it from you which has happened to me. 

Also, home warranties is a waste of money. 

@Mike D. There is so much conjecture in all of this. If you really want to test your premise then do it. Test it and then talk about the results. Buy in San Diego, Austin or any other higher appreciation markets and then buy in the low appreciation market with the same apples to apples product. Let's go from theory to the real estate real deal. 

The key is to recognize the cycles that we are in.

Live below your means and invest in things that you know alot about and that has done very well over time. That is a summarization of Hetty Green (witch of wall street) the billionaire by today's standards investment philosophy who had real estate in Chicago, St. Louis and NYC and a ton of treasuries and who also bailed out NYC. She also provided mortgages at fair rates back then. 

Don't overleverage. Leverage is golden for real estate but the debt has caused many a downfall. See Trammell Crow and Bill Zeckendorf for reference.

 Buy things that have withstood the test of time and done well and go all in when there are glaring opportunities. That is the nugget from the ultimate passive investor: Warren Buffet who is/was known for playing bridge for most of the day. 

Build when there are opportunities.. Donald Bren, Donald Trump, Stephen Ross, Jorge Perez, etc. 

There are many greats all around of us and in history. Study them and you surely will do well no matter the market that you are operating in. 

@Michael Maddalon I am building an adu on a lot with a house on it already near the domain. If interested hmu. I can give you all the details. 

@Mike D. In Indianapolis where you are from, it seems, the median house price is 251k. Median house  price in Jarrell, Texas is 280k which is a suburb of Austin. I would rather invest in Jarrell than Indianapolis because its in high demand and in Williamson County and I know it very well. Williamson County is one of the fastest growing counties in the US. Fastest growing means more demand. More demand than supply means greater appreciation of rents and prices. If one keeps their tenants happy then one can do quite well.

That 9.9% rate of return number that you came up with is pretty good. When one factors in the 1031 exchange then it looks even better than the historical rate of return of the stock market. Tax free cash out refi is even better. 

I have never been to Indianapolis but from pics that I have seen online, it looks nice and certainly not garbage. Herb Simon has done very well from there and is a great example of real estate billionaires are everywhere. 

@Mike D. I would rather take a $50 cash flow per month with a 7% appreciation than a 250$ cash flow at 2% appreciation any day of the week. In year 2 or 3, in that scenario I can take out equity with zero taxes. If its negative cash flow, then one should consider the expected rent increases as well. 

Pen to paper

300k property.

300k x .07 is 21k with $600 cash flow=21,600

vs. 

300k x .02% is 6k with 250x12 is 3k. 9000.

So are you suggesting that you would rather have 3k of taxable income and 6k equity vs 600$ taxable income for the 1st year only and 21k equity which is future tax free money? I am not considering other tax advantages either such as depreciation or 1031 exchange etc.  

I do realize that some folks preference is cash flow and that works for them. But as one starts creeping up the income tax brackets then one should really consider the consequences of their long term investment choices. 

What is the point of such a post? There are millionaire and even billionaire real estate folks in both slow appreciating markets and fast appreciating markets. The post is very over simplified and without references or real data for the argument. Where are the numbers that you posted coming from? What about tax implications of each strategy? I am not even going to talk about the rationale of the so called Memphis rougher tenant base. Idk man.... 

@Sweta Govani Looking at the reports that you provided. Can you really get 4-5% interest rate? Seems illogical to me as market rates are much higher. 

@Neil Narayan Good post. Nvidia and Dell have a tight relationship going back decades. Also, Nvidia has  a near monopoly on AI. Its market cap has exploded and from what I understand from a friend in Dell's AI department that Nvidia's products are on backorder. Can you say pricing power and fat margins??!!  The fact that they are making a big splash in the Austin market is a testament to the tech workers locally. Good news!