I thought I would summarize some thoughts on this topic. It's not about right and wrong, it's about getting educated, then getting started, then figuring out what you like doing and do more of it.
@David Faulkner invests in single family in California. @Michael Swan and I invest in multifamily in cheaper areas. Neither is right or wrong, simply what we prefer to invest in. Each has drawbacks and advantages. California single family has had great appreciation, but little cash flow relative to the equity, Memphis and Ohio multifamily has much better cash flow, but little appreciation.
David invests without leverage, Swanny invests with investors and conservative bank leverage and I invest without investors but using as much leverage as I can find. David is giving up a lot of appreciation by not using leverage, but he's very protected in a down market. Using leverage can be a great way to multiply your returns, but it can also be a fast way to lose everything if the market turns when you need to refinance or if your cashflow dries up. Bringing in investors is another great way to multiply your efforts, but as a downside, you have to deal with investors and provide regular information to them.
On the management side, David runs his own show (I believe), Swanny uses outside management and I manage in-house with staff. I don't want my tenants having my number, but I want to control what's happening at the property, so I have a couple of managers on payroll. David knows nobody cares about the properties like he does, so he does it himself; which is not that difficult with single family properties located near him. Swanny must spend some time staying on top of the manager, or his properties could crash before his next visit.
The beauty of the real estate business is that you can mix and match techniques to come up with a business that works for you. You don't have to follow in our tracks, make your own path.
I don't want to do what David is doing, because he's too conservative and leaving too much potential gain on the table. That doesn't make him wrong, it's just not my style. I don't want to follow Swanny and take on investors and using third party management, I need to be on top of the property and I don't want to have to explain myself to investors. It works great for Swanny, but it's not my style.
If you've read this far in this thread, you should be ready to figure out for yourself what you are willing to do, what you like to do and what fits into your lifestyle and improves it? If you try something and don't like the results, change it and try something else.
One thing David, Swanny and I agree on is that we love what we do, mostly because we have each developed a style that matches our personalities and allows us to sleep well at night.
Guys, apologies if I have misrepresented you in any way, this is based on our discussion here on BP.
Happy investing.
Erik
