All Forum Posts by: Shafi Noss

Both investors and real estate professionals can make a lot of money in this business, and much of it can be passive. If you got the level of passive income or wealth you were looking for, what would you do? 

Anyone here done analysis on Post Modern Portfolio theory and have any data on things like Sortino ratio's for the different asset classes like multifamily vs development or self storage? I'm hoping someone with a background in financial analysis might know about this but I'd be interested to hear from anyone familiar with it or even standard modern portfolio theory. 

Consistent attendance at local meetups is a good way to meet people. You might also try a member search for locals or set up a filter so that when someone posts mentioning your area you'll be notified. 

Aha, gotcha. Thanks Chris, it's nice to be able to read it. 

Rule 506 under Reg D was split into 506(b) and 506(c). Anyone know why they didn't call them 506(a) and 506(b)? 

I'm curious to see this study. Would you mind sharing what you dug up @Bryan Hancock? 

Hi @Bill Johnson, extrapolating on @Ned Carey and @Russell Brazil's points about risk spectrums and knowledge, it's helpful to know exactly what risk is. A good way to tie it down to reality is to think of risk as the standard deviation in return. In other words return is how much you'll make in the long run and risk is how much you can count on getting those returns in a particular year. (There are other distributions like leptokurtic and long-tail but let's stick with a bell curve).

For example the S&P 500 over the last 10 years, according to Morningstar, has had Return: 11.64% and SD: 13.42%. Source: https://www.morningstar.com/indexes/spi/spx/risk

How does real estate compare? The first step is to choose an asset class, and then a specific deal within that asset class.

There are many assets, single family rentals, single family flips, small multifamily rentals and flips, large multifamily syndications, self storage, office, retail, new construction. Each will have their own returns and risk. New construction, which is an asset class I work in can have wildly high returns, but a large standard deviation. Whereas many institutions will buy stabilized multifamily properties with low returns, but very reliable ones. The rest are in the middle. So new construction might have Returns: 40% and SD: 15% while stabilized multifamily has Returns 6% and SD 0.3%. (Don't quote me on this, it's just an example)

There's also deal level risk, and I believe this is what Ned was talking about in his first post. An experienced investor like Ned can see patterns in the market, team members, and geography to see the success of a project from a distance. An investor who doesn't know the geography is flipping a coin on whether she's buying in a good area, Ned might already know which areas are desirable for tenants, and will just pick those. So he's reduced the randomness, and therefore the risk. Inexperienced investors can reduce randomness by partnering with experienced one's though they'll probably get lower returns. 

In your case, since you're past retirement age and risk-averse, you may want to choose a return rate then find a real estate asset class that has lower variance than the stock market and then find a deal and operator to partner with who can give you the risk level you're looking for. 

@Todd Dexheimer, I'd also be interested in seeing those studies Todd. Would you mind sharing them?

@Dmitry Clarke, You're exactly right that you will get better rental cashflow out of state since rent does not scale with purchase price. But that high purchase price is good for flips since money is made on sale and not on rental income. 

Being a realtor gives you an edge in your local market. Knowing the market in detail gives you an edge over other buyers who don't have as much time to spend on it. If it's flips you're after I think staying local will be your strongest move. 

As you've noted, 15-25k isn't enough to execute a flip on your own. One option you have, and I think you were hinting at this, is to invest with a local experienced flipper. There are lots of ways to structure private investments and they may be open to allowing you to shadow them or help with the project. 

@Greg Dickerson also gave high quality advice. Specialization will take you far, and you can generate a lot of income from building your business as a realtor first, keeping an eye out for resources that you can leverage for flips along the way so that when you are ready you'll have the contacts, knowledge, and capital to make your deals successful.

Hi Bilal, this article has a good overview of real estate professionals and how you can qualify. 

https://www.thetaxadviser.com/issues/2017/mar/navigating-real-estate-professional-rules.html