All Forum Posts by: Account Closed

If you dont think you can lose billions in Real Estate, I refer you to our esteemed ex President!

Inflation is a real risk, no doubt. And no-one is suggesting you keep all your money parked in a bank account forever. But keeping student debt and car loans is not an inflation hedge. Be debt free and then invest. You will never have to worry about inflation if you invest regularly in a properly diversified portfolio of assets.

No, its like working for an employer for stock options only. If you worked a full time job and took a part time gig with Google, or Apple, or Amazon or Netflix or Nvidia or a thousand other companies and all you got paid was in stock options, you would have made far more than any salary would have given you over almost any 5 year period after 2000. Some risk, yes, more than banking on some appreciation in LA or SF or NY etc which have an even more consistent track record of increasing values in 5-10  year periods. And dont forget, there is mortgage pay down happening all the time also. And finally, I think 90% of people buying into midwest and south markets turnkey today are buying negative cash flow with no appreciation. They just dont know it yet!

But what if that 5% return comes with a 50% risk of losing all the money? Still borrowing $10B? The market is not stupid. Comparing risk free return to risky investments is.

Pay off the debts. What people consistently never factor in is the risk. Paying off debt is a 100% risk free return on whatever interest rate you are paying. As long as that number is above 0.5% its a good deal because that's the effective risk free return rate today (money market fund). Everything else is risk. Buying real estate is risk. Buying stocks is risk. And risk is okay, once you are debt free and have emergency savings. BP posters are notorious for not understanding or not caring about this very basic thing.

Im not even talking about obvious ripoff and scams. I am pointing out that even dealing with honest brokers, if you put your life savings of $20K or $50K or $100K into some remote turnkey midwest property you are more than likely to lose money and have a lot of grief and heartache along the way. Turnkey remote investing is for  high net worth people who simply want a bit of diversification and can quickly scale to 10+ units in order to even out the return and cash flow. And even they will be disappointed at the net income at the end of the year. The other successful model is local investors, buying cheap, fixing cheap, and self managing to control costs. 

Again, 5-10 years ago things were different. The market was cheap enough to allow the mistakes and inefficiencies of PMs and the all the other crap and still come out ahead. Personally, I made a great return on my investment. But I attribute a lot of that to the luck of timing and appreciation. I have seen deals that people are buying today that make my hair stand up. There seems to be a ridiculous mania to buy investment property at any cost. To me its not even dumb money but moronic money in the market and that's scary.

@Jackson Long A person with 20k to invest should buy an index fund. Even cash flow investing needs a portfolio and significant capital to succeed.

The real problem is the price/rent ratios these days do not support a PM. When you could buy closer to the 2% ratios, a 1K per month rent was achievable on a 50K house. When that drops to 1% your mortgage payment doubles. The model is not sustainable with remote management at typical 1% ratios. And now people are buying the same rents at 0.7% and less. There is simply no margin if you pay 10% of rent to PM monthly plus the inflated maintenance and turnover costs. 

With money.

@David Stelzer You make 1m per year in income and you want to wholesale or flip or buy cheap rentals? Something does not add up here at all. If you want to diversity your stock portfolio then just buy some high quality real estate. Dont chase dribbles of cash flow.or steal equity from helpless grandmothers or deal with ripoff contractors. You must be great at what you do in your day job. Why mess around with this stuff?