All Forum Posts by: Daniel Gutierrez

@Joe Linares I have owned multi family in Vegas but not any longer. 

@Bryce Carroll 20% is the lowest you'll likely be able to put down to pull that off but it's totally doable. Let me know if you want to look at the LA or Orange County area. I do this all day in SoCal. 

@Marisa R. That's a great question! You have to define if you're looking at/ talking about diversifying out real estate as an asset class or general diversification. There is a great deal of diversification within real estate that most don't acknowledge but is very real and then there is diversification of asset classes (stocks, bonds, real estate, private equity, etc). Diversification within real estate in very important but often over looked. Below are are some things to think about although there are many more. In general, do your research and stick to what you know and understand (or find someone who does). Also, make sure that it aligns with your life and financial plans. 

Type Diversification: Are you holding only one type of real estate?

-Having investments in more than one type of real estate (Exp. residential, multi-family, commercial, retail, hospitality etc) gives you more diversification in real estate and protects you against any market changes that heavily affect one of those classes. For example, you don't want to be a real estate investor who's only invested in retail their entire life and is not getting killed. 

Demographic Diversification: Are all your real estate holdings targeting the same demographic?

-For real diversification make sure that your real estate holdings target more than one class of people or demographic. Targeting only lower demographics (Class D/ F properties) can backfire if the people of the area grow out to a higher economic situation and now longer accept lower end buildings. There is generally always someone in need of lower end housing but you have to determine if you want to rent to those people.   

Geographic diversification: Are your real estate holdings diversified across different geographic area?

-Investing everything in one city or area can be risky if the economics and growth of that area change. For example, investing everything in a boom town can backfire when the town stops booming and there is no one left to rent your units.

Diversification outside or Real Estate: Look at investing in different asset classes as they may add to your economic security and income potential and could have great tax advantages.

-Stocks: Stocks/ Equities are a bit more complicated than real estate but when done correctly could give you huge gain that are not often seen in real estate. Stocks are a big risk vs reward game but there are many resources that can help you come up with a good investing plans.

-Bonds: Bonds are kinda boring but can provide some good long term income for those who are risk adverse. Municipal bonds also have some great tax advantages that make it worth while for some.

-Private Equity/ Venture Capital: Investing in PE is not for all as they are not simple to find and understand but for the sophisticated (and wealthy) investor you can get into some great PE funds that can produce some huge returns!

-Private Lending: Becoming your own bank can be very lucrative if you know what you're doing and have the time and resources to make sure the debt is being serviced. 

@Bryce Carroll SF and OC/ LA are great areas for steady cash flow and they don't often depreciate as much as other areas in down turn but to break even or cash flow you'll need to determine how much you want to put down. Cash flowing with a 5or 10% down payment will be unlikely but if you're able to put down 20% or more you'll have more options. Have you thought about how much you'd like to put down? 

@Jonathan W Ford Getting a real estate licence is a good way to gain some knowledge on real estate but it in no way prepares you to be a real estate investor. A real estate licences makes sure you know the law and terms of real estate but it teaches you little to nothing about how real estate actually works or how to invest in real estate. You're much better off buying a few great real estate investing books to actually learn how investing is done. 

You have to also ask your self how much time you have and what you want to do with your free time. Read some of the below books and see where you fall into the real estate investing mix. Also make sure to take into consideration the current market. Reading zero down investing book from 2005 or a fix and flip book from 2009 is no longer applicable.

Rich Dad Poor Dad

Loopholes of Real Estate

The Book on Rental Property Investing 

The Real Book OF Real Estate 

Etc... 

@Martin Min although cash flow is important, it's not the only factor you need to consider. When thinking about the amount of capital you're investing you need to consider the return you're getting on your cash (cash-on-cash return) and the overall return on your investment Cap Rate (NOI/ Purchase Price) and IRR (Internal Rate of Return). Those indicators will give you a much better idea about the strength of the investment. Lower down payments are good because you get to keep more cash but your going to have a higher monthly payment which is going to negatively effect your cash flow. Nevertheless, you'll likely have a better a better cash-on-cash return and more money in your pocket to invest. A larger down payment will help your cash flow (kinda) but only because you elected to give up your cash flow on the front end.

Don't just pursue cash flow. Peruse returns! It's not that black and white.   

I have to disagree with Sam. Realtors can be a great help but it highly depends on the realtor. Not all realtors are created equally... Also, appraisers are fine but they have to live within such regulated box that they sometimes fail see the real comps and especially fail to where additional value can be derived. And don't waste your money with Realestatecompstoday.com; its a good approximation (similar to that of Zillow) but it's misses a lot important factors.        

Thanks, @Rowen Burney. I had luckily just finished writing this potion of a blog article. 

Hi @Derek York. There are many ways to getting the comps in your area. Below is a paragraph out of one of my last blogs that talk about this point. Hope this helps.

Knowing the rental competition or “comps” is much more than doing a google search for what other homes in the area are renting for. Although sites like Google, Zillow, Trulia, etc are very helpful in getting a rough idea of what the rental market is like, they do not give you the full story as to the landscape of the rental market or the important details what each rental offers. For example, you’re looking to purchase Duplex #1 and are using Duplex #2 that is three blocks away and also has two 2bed 1 bath units that are also 900sf each. Duplex #2 rents each unit for $1700/mo. It may be safe to assume that duplex #1 should rent out for the same however you never checked to see if duplex #2 offers such amenities as onsite laundry, garage parking, utilities included all of which add a great deal of value. Other factors such as bedroom size and layout or even the condition of the neighborhood all play a huge factor in the rental value and attractiveness of the home as those are the factors that tenants look and pay for. In general, you need to go visit the comps your using to compare your future real estate investment or you maybe undervaluing/ overvaluing the rents and attractiveness of the home. If you need help in doing this analysis, a good property manager or knowledgeable focused real estate agent can help you analyze the investment landscape and determine what the real compatibles are.  

@Julien Valentin You'll have to determine what you want to do in real estate in order to determine where to go next. Learning as much as possible at all times is a great start but there are so many avenues you can do down so it's important to know what you want.