RE Investing - Not a good option right now

[Mike K.]

After looking at the opportunities available in RE investing and analyzing the risks and rewards I decided that there are better options available to build wealth.  It pains me to say this since I have been an appraiser for a long time.  In my 10 year time horizon until I retire I believe I can build more wealth as a small business owner and have decided to purchase a business.  I would like to personally thank everyone for sharing your experience and advice. Best of luck to you all.

[V.G Jason]

Quote from @Mike K.:

Quote from @Lynn McGeein:

@Mike K. I agree that investment property is difficult to make work right now at these prices, but I think it’s more risky to open a small business. I think 70% fail within 10 years, about 30% in first two years. So unless you have solid finances to get you through, it sounds more risky than investment property. My daughter and son-in-law opened their own business 3 years ago and so far have done well, but he built a good reputation in his field before starting their own, she kept her good corporate job for benefits, and they are now looking to invest in property with the profits, hoping for more passive income in the future as they’ve realized how much extra work a small business is with compliance, licenses, workers comp, etc.

 Lynn, I'm looking at buying an existing business with a track record and documented income and expenses.  Ranked website with good traffic and 160 existing customers with recurring monthly billing. Not much risk compared to buying a 100 year old duplex.

 What kind of multiplier are you going to pay for this business? Much like most assets, you're going to be buying upon the curve's higher marks if you're buying any time soon. And are you buying it 100% cash or leveraged?

I'm not going to argue small business REI, but this particular small business may be quite costly. If you're buying one sub 50 customers, cash stuck, etc., and some tweaks explodes it into 3-5x then sure. But you're going to pay a nice multiple for this.

[Charles Granja]

Quote from @Bruce Woodruff:

Quote from @Charles Granja:

No. The reason people are sitting on the sidelines is because they are scared and uninformed. Interest rates are not high overall, just high compared to what you are accustomed to.

Hello Bruce,
It's not about interest rates, its about yields and principal risk.

In investments you have market risk and idiosyncratic risk.
When we think on quantifying these risks and assigning a discount rate, we can look at 2 components. Risk-free rate and risk premium

This is an informal way of showing you that what you are saying is incorrect:
If the risk-free rate is 5%, then an investor should not invest in anything with risk at 5%. That would mean real estate, stocks, literally anything.
-Why would I invest in anything that has risk when I can get the same yield risk-free?

If the SMP 500 gives an average return of 7% return each year, and has minimal risk, then we do not want to invest in anything that has more risk for the same yield.
-If a value-add project/flip/start-up also give a 7% return, why would I invest in those projects when they are giving the same yield as an index fund? 

Interest rates could be 50% right now, but if we are getting a 20% IRR it doesnt matter.

Real estate prices have increased considerably in recent years due to low interest rates. Now that we are in a high interest rate environment with high prices, real estate yields have been compressed, and are generally not worth it given their risk profiles.

Thank you for taking the time to reply with your opinion. We think very differently about this apparently.....

It's really not about either interest rates, yields or principal risk when you get right down to it. It's about can the investor make enough money, in whatever amount of time they feel comfortable with, to make them happy (with the perceived ROI and other factors that make people happy).

You are assigning a risk rate of 5% (or whatever) to RE. That's an assumption. Lots of people :-) can find properties, fix them up a little and double their money in a couple years. Then you have a different ball game, eh?

You do say that RE is 'generally' not worth it, so you got that right. Kinda, sorta..... But with your inside-the-box thinking, I would definitely not recommend that you purchase Real Estate anytime soon.

I agree with your statement about investing in profitable real estate. I also think you are misunderstanding what I am saying because your argument about making money, value-add, directly aligns with what I am saying.

The problem today: Majority of SFR properties are selling at prices where they do not give yields that compensate for their respective risk profiles. We can see what the market thinks by observing transaction volume in real estate private equity. We can also see it in residential/commercial real estate sales. These types of deals are still possible, they are just very difficult to find given our low housing inventory.

When I refer to the risk free rate I refer to government bonds. As an investor you should consider how your investment compares to other potential investments, like government bonds and the SMP500, because if not, you could be doing way too much work and taking on too much risk, for no reason.

Real estate is very difficult and capital intensive. It is much more difficult than buying government bonds and investing in the SMP500. If we are getting the same yields investing in real estate, why are we working so hard, why are we dealing with less predictable cashflows, and why are we dealing with eviction/property management risk?

[Bruce Woodruff]

Quote from @Charles Granja:

Real estate is very difficult and capital intensive. It is much more difficult than buying government bonds and investing in the SMP500. If we are getting the same yields investing in real estate, why are we working so hard, why are we dealing with less predictable cashflows, and why are we dealing with eviction/property management risk?

It's not that I don't understand you....the thing is this: No savvy RE investor is going to take on a project that has a low yield. So yes, your points are correct in general, I just don't see why we're having this conversation at all.

Of course, put your money where it will do the best. But your statement above, although true, shows a lack of understanding. I and many others, do not care if RE is not as passive or has more built in risks. Just don't care. I know it and love it, and it has been very very good to me.

[Steve Vaughan]

@Mike K.. While RE has been very good to me, I hear you.  I stopped hunting in '22 and it's amazing how much effort, time, indigestion and life energy I got back. 

I'm selling one of my last rentals today FSBO, self-closing, directly to the renters because my LL insurance didn't renew. I have poured hours and hours into the finance contract, deed, est sheet, amort sched, excise crap for the transfer taxes, etc.

The fun will continue next April and many after as I attempt report this and other installment sales accurately to uncle sam. I just wish there was a sell button and a downloadable tax form like stocks and  mutual funds have,  

RE was real but not always fun and even selling is a PITA when you're done. I went back to the buy / sell limit order option and auto DCA into a risk-free 5% and I like your buy a biz move.👍

[Sam Yin]

Quote from @Bruce Woodruff:

Quote from @Charles Granja:

No. The reason people are sitting on the sidelines is because they are scared and uninformed. Interest rates are not high overall, just high compared to what you are accustomed to.

Hello Bruce,
It's not about interest rates, its about yields and principal risk.

In investments you have market risk and idiosyncratic risk.
When we think on quantifying these risks and assigning a discount rate, we can look at 2 components. Risk-free rate and risk premium

This is an informal way of showing you that what you are saying is incorrect:
If the risk-free rate is 5%, then an investor should not invest in anything with risk at 5%. That would mean real estate, stocks, literally anything.
-Why would I invest in anything that has risk when I can get the same yield risk-free?

If the SMP 500 gives an average return of 7% return each year, and has minimal risk, then we do not want to invest in anything that has more risk for the same yield.
-If a value-add project/flip/start-up also give a 7% return, why would I invest in those projects when they are giving the same yield as an index fund? 

Interest rates could be 50% right now, but if we are getting a 20% IRR it doesnt matter.

Real estate prices have increased considerably in recent years due to low interest rates. Now that we are in a high interest rate environment with high prices, real estate yields have been compressed, and are generally not worth it given their risk profiles.

Thank you for taking the time to reply with your opinion. We think very differently about this apparently.....

It's really not about either interest rates, yields or principal risk when you get right down to it. It's about can the investor make enough money, in whatever amount of time they feel comfortable with, to make them happy (with the perceived ROI and other factors that make people happy).

You are assigning a risk rate of 5% (or whatever) to RE. That's an assumption. Lots of people :-) can find properties, fix them up a little and double their money in a couple years. Then you have a different ball game, eh?

You do say that RE is 'generally' not worth it, so you got that right. Kinda, sorta..... But with your inside-the-box thinking, I would definitely not recommend that you purchase Real Estate anytime soon.

Hi Bruce, very neutrally posted, and wise. I respect you for that Bruce.  I totally agree with the perspective. Interest rates are not high. Prices are still low. And deals are out there and flying off some shelves. One only has to actually look. I see deals everywhere, I just whish I had the capital, the time, and the motivation to grab them all. I'm just in a cruise mode at the moment.

Just as what makes a man is not his age, but his experiences, the same applies to real estate. For some context, I'm Gen X. And as such, I have come to understand that some people are just not made for REI, all the time. Where there's a will, there's a way. But it takes WILL, and not just skill, to find the full benefits of REI. Assigning a risk for comparison between two totally different asset classes is not wise investing. This is especially true for REI. And it appears that there is a lack of WILL to find and make deals happen.

Take a moment and think about this... Staying out of the market just because you feel the easier path is in the stock market can hurt you in the long run, if you want to be in REI or use REI to achieve FI. One big difference is leverage. And that's a BIG difference. To get that leverage, as you grow, or aspire to grow, in REI, will require a resume. You just wasted a few lines on you resume because you feel it's safer in the stock market for now. You will destroy so many opportunities for future growth. That resume will determine your future.

Prime example, buy a few lower than desired cash flow properties now and into the next few years vs. investing in a good yielding stock/fund at 7-10%. Now, fast forward a few years and both people are in REI. Who do you think will excell in REI quicker? The guy in the trenches, or the newly minted stock holder with higher cash money? Let me be more clear, who will the lender trust with their money? The guy with a resume, or the guy with $ and stocks? One guy will be able to jump a few times higher than the other.

I would not be able to cruise with just a few years of REI, had I not put in MAXIMUM EFFORT. But it also had to be deliberate moves and a better understanding of real estate. It was all done before I discovered the forum or BP. It comes from experience.

Experience is earned, not studied or debated. But then again, I defer back to my foundational theory... what's your risk tolerance? How much WILL power do you have? Opportunities will always present itself, but only YOU can dictate the EFFORT you will put in for your desired outcome.

[Bruce Woodruff]

Quote from @Sam Yin:

Quote from @Bruce Woodruff:

Quote from @Charles Granja:

No. The reason people are sitting on the sidelines is because they are scared and uninformed. Interest rates are not high overall, just high compared to what you are accustomed to.

Hello Bruce,
It's not about interest rates, its about yields and principal risk.

In investments you have market risk and idiosyncratic risk.
When we think on quantifying these risks and assigning a discount rate, we can look at 2 components. Risk-free rate and risk premium

This is an informal way of showing you that what you are saying is incorrect:
If the risk-free rate is 5%, then an investor should not invest in anything with risk at 5%. That would mean real estate, stocks, literally anything.
-Why would I invest in anything that has risk when I can get the same yield risk-free?

If the SMP 500 gives an average return of 7% return each year, and has minimal risk, then we do not want to invest in anything that has more risk for the same yield.
-If a value-add project/flip/start-up also give a 7% return, why would I invest in those projects when they are giving the same yield as an index fund? 

Interest rates could be 50% right now, but if we are getting a 20% IRR it doesnt matter.

Real estate prices have increased considerably in recent years due to low interest rates. Now that we are in a high interest rate environment with high prices, real estate yields have been compressed, and are generally not worth it given their risk profiles.

Thank you for taking the time to reply with your opinion. We think very differently about this apparently.....

It's really not about either interest rates, yields or principal risk when you get right down to it. It's about can the investor make enough money, in whatever amount of time they feel comfortable with, to make them happy (with the perceived ROI and other factors that make people happy).

You are assigning a risk rate of 5% (or whatever) to RE. That's an assumption. Lots of people :-) can find properties, fix them up a little and double their money in a couple years. Then you have a different ball game, eh?

You do say that RE is 'generally' not worth it, so you got that right. Kinda, sorta..... But with your inside-the-box thinking, I would definitely not recommend that you purchase Real Estate anytime soon.

Hi Bruce, very neutrally posted, and wise. I respect you for that Bruce.  I totally agree with the perspective. Interest rates are not high. Prices are still low. And deals are out there and flying off some shelves. One only has to actually look. I see deals everywhere, I just whish I had the capital, the time, and the motivation to grab them all. I'm just in a cruise mode at the moment.

Just as what makes a man is not his age, but his experiences, the same applies to real estate. For some context, I'm Gen X. And as such, I have come to understand that some people are just not made for REI, all the time. Where there's a will, there's a way. But it takes WILL, and not just skill, to find the full benefits of REI. Assigning a risk for comparison between two totally different asset classes is not wise investing. This is especially true for REI. And it appears that there is a lack of WILL to find and make deals happen.

Take a moment and think about this... Staying out of the market just because you feel the easier path is in the stock market can hurt you in the long run, if you want to be in REI or use REI to achieve FI. One big difference is leverage. And that's a BIG difference. To get that leverage, as you grow, or aspire to grow, in REI, will require a resume. You just wasted a few lines on you resume because you feel it's safer in the stock market for now. You will destroy so many opportunities for future growth. That resume will determine your future.

Prime example, buy a few lower than desired cash flow properties now and into the next few years vs. investing in a good yielding stock/fund at 7-10%. Now, fast forward a few years and both people are in REI. Who do you think will excell in REI quicker? The guy in the trenches, or the newly minted stock holder with higher cash money? Let me be more clear, who will the lender trust with their money? The guy with a resume, or the guy with $ and stocks? One guy will be able to jump a few times higher than the other.

I would not be able to cruise with just a few years of REI, had I not put in MAXIMUM EFFORT. But it also had to be deliberate moves and a better understanding of real estate. It was all done before I discovered the forum or BP. It comes from experience.

Experience is earned, not studied or debated. But then again, I defer back to my foundational theory... what's your risk tolerance? How much WILL power do you have? Opportunities will always present itself, but only YOU can dictate the EFFORT you will put in for your desired outcome.

 Brilliant response. You get it.....

[Sam Yin]

Quote from @Bruce Woodruff:

Quote from @Sam Yin:

Quote from @Bruce Woodruff:

Quote from @Charles Granja:

No. The reason people are sitting on the sidelines is because they are scared and uninformed. Interest rates are not high overall, just high compared to what you are accustomed to.

Hello Bruce,
It's not about interest rates, its about yields and principal risk.

In investments you have market risk and idiosyncratic risk.
When we think on quantifying these risks and assigning a discount rate, we can look at 2 components. Risk-free rate and risk premium

This is an informal way of showing you that what you are saying is incorrect:
If the risk-free rate is 5%, then an investor should not invest in anything with risk at 5%. That would mean real estate, stocks, literally anything.
-Why would I invest in anything that has risk when I can get the same yield risk-free?

If the SMP 500 gives an average return of 7% return each year, and has minimal risk, then we do not want to invest in anything that has more risk for the same yield.
-If a value-add project/flip/start-up also give a 7% return, why would I invest in those projects when they are giving the same yield as an index fund? 

Interest rates could be 50% right now, but if we are getting a 20% IRR it doesnt matter.

Real estate prices have increased considerably in recent years due to low interest rates. Now that we are in a high interest rate environment with high prices, real estate yields have been compressed, and are generally not worth it given their risk profiles.

Thank you for taking the time to reply with your opinion. We think very differently about this apparently.....

It's really not about either interest rates, yields or principal risk when you get right down to it. It's about can the investor make enough money, in whatever amount of time they feel comfortable with, to make them happy (with the perceived ROI and other factors that make people happy).

You are assigning a risk rate of 5% (or whatever) to RE. That's an assumption. Lots of people :-) can find properties, fix them up a little and double their money in a couple years. Then you have a different ball game, eh?

You do say that RE is 'generally' not worth it, so you got that right. Kinda, sorta..... But with your inside-the-box thinking, I would definitely not recommend that you purchase Real Estate anytime soon.

Hi Bruce, very neutrally posted, and wise. I respect you for that Bruce.  I totally agree with the perspective. Interest rates are not high. Prices are still low. And deals are out there and flying off some shelves. One only has to actually look. I see deals everywhere, I just whish I had the capital, the time, and the motivation to grab them all. I'm just in a cruise mode at the moment.

Just as what makes a man is not his age, but his experiences, the same applies to real estate. For some context, I'm Gen X. And as such, I have come to understand that some people are just not made for REI, all the time. Where there's a will, there's a way. But it takes WILL, and not just skill, to find the full benefits of REI. Assigning a risk for comparison between two totally different asset classes is not wise investing. This is especially true for REI. And it appears that there is a lack of WILL to find and make deals happen.

Take a moment and think about this... Staying out of the market just because you feel the easier path is in the stock market can hurt you in the long run, if you want to be in REI or use REI to achieve FI. One big difference is leverage. And that's a BIG difference. To get that leverage, as you grow, or aspire to grow, in REI, will require a resume. You just wasted a few lines on you resume because you feel it's safer in the stock market for now. You will destroy so many opportunities for future growth. That resume will determine your future.

Prime example, buy a few lower than desired cash flow properties now and into the next few years vs. investing in a good yielding stock/fund at 7-10%. Now, fast forward a few years and both people are in REI. Who do you think will excell in REI quicker? The guy in the trenches, or the newly minted stock holder with higher cash money? Let me be more clear, who will the lender trust with their money? The guy with a resume, or the guy with $ and stocks? One guy will be able to jump a few times higher than the other.

I would not be able to cruise with just a few years of REI, had I not put in MAXIMUM EFFORT. But it also had to be deliberate moves and a better understanding of real estate. It was all done before I discovered the forum or BP. It comes from experience.

Experience is earned, not studied or debated. But then again, I defer back to my foundational theory... what's your risk tolerance? How much WILL power do you have? Opportunities will always present itself, but only YOU can dictate the EFFORT you will put in for your desired outcome.

 Brilliant response. You get it.....

Yup. I get it. It not for everyone, but it was/is for me. Looks like it was/is for you too.

Im living it and enjoying it. My routine, 1-2 hour breakfast/coffee with my buddy. Then 2 hours at the gym. Followed by taking the wife out to lunch. Now about to pick up kids from school, feed them, and off to Jujitsu. Might hit the gym/sauna again in the evening with a friend. That's what the REI grind provided when people said it was a bad time to buy. And trust me when I say this, MANY people told me it was a bad to invest in RE and "bad timing" MANY times over. I was too stubborn and I just did not listen. Thank goodness! Because they are still at their 9-5 by sheer necessity.

Seriously though, there is no true right or wrong. It just has to fit for each individuals lifestyle and expectations. Buying businesses and buying into the stock market can be just as lucrative and I respect those that do it. I just happen to chose REI for the monthly cash flow rather than stock dividends and valuations.

[Bruce Woodruff]

@Sam Yin Lol, your day sounds a lot like mine..

RE is what you and I feel comfortable with. Is it always the fastest and safest way to build wealth? Of course not. But it has it's own particular attraction and feel to it. It has things that nothing else has.

I have never even stopped to consider if it was the 'right time' or a 'good market' when buying or selling. Not once. There is enough flexibility and enough tricks available to REIs to make a good investment in any market. Note that I said 'good investment' and not 'make a ton of money right away' :-) 

[Charles Granja]

This will be my last comment. If you are a new investor please make sure you read all of my comments.

I believe that the statements being made are incredibly qualitative/philosophical and show a massive lack of understanding of both finance and real estate. This is showcased by how experienced investors here are unaware of what the risk-free rate is.

To be clear: I am not saying to invest your money in the SMP500 or that real estate is a terrible investment. I am saying that anyone who has a basic understanding of financial modeling and real estate finance knows that yields for real estate are dramatically lower due to quantitative tightening. (an objective fact) By comparing yields across different investment vehicles, for many investors real estate is no longer worth: the capital, the work, the risk.

You can be bullish in real estate today by saying: I believe the Fed will not increase the supply of new builds to the market over the next decade. I believe that shelter inflation will remain at or above the current rate of 6% over the coming years. I believe this inflation trend aligns with the 1980's inflation trend. In this, highly leveraged real estate will benefit.

-When discussing real estate as a whole, no other argument makes mathematical sense. Any argument being made as a market-specific argument is not relevant in the context of the conversation.

The only ways the typical investor (defined as a middle-aged adult with 4-5 properties, generating around 60-75k annually) will generate similar yields in the current state is (1) taking advantage of senior debt (assumable debt/seller financing), in this you are improving bottom line NOI via the spread between active and par interest rates. (2) Value-add or flips (Higher risk and not typical) (3) Investing in developing areas that will see high amounts of rent growth over the coming decade due to population changes. (Im not going to include niche strategies that likely don't apply to investors on the average, because that is the topic of discussion).

When you look at prices and interest rates together (so everyone is aware, comparing historical interest rates literally makes no sense), and take into account the effects of inflation, real estate is 20-30% more expensive than it was in 2008. To add more context, the cost of a mortgage has doubled over the last 4-5 years across most markets.

Prices are objectively high.

Deals are not flying off the shelves, but it is true that real estate is local. If you look at the market as a whole, transaction volume is objectively down.

If anyone says that comparing risk between investments and assessing principal risk is not wise, they do not have an understanding of finance. This is literally the basis of investing. They should refer to Mogdigliani and capm if they have no idea what any of this means. 

If anyone discusses leverage as a tool (especially without expressing the risk of leverage) and is unaware how interest rates increases over the last 2 years have utterly destroyed net yield, they aren't familiar with how interest rates impact total return. Again, a very obvious thing for anyone who understands finance/real estate.

If anyone states that someone should buy cheap real estate, they do not understand how fixed costs impact total return due to limitations in top-line revenue. While the learning experience might prove valuable, it will likely cause years of suffering and a net loss.

I do agree with the idea that people should do rather than sit on the sidelines, but you have to be crazy to think that the real estate market is in a great place.

[Henry Clark]

@Charles Granja  Ok if you respond again.

Your correct 2+2= 4 is less than 3+3=6.  The basic math of real estate, no matter what angle are harder today.  Whether interest rates, purchase price, construction costs, financing access, returns, etc.

BUT;  today is the best day to ever invest in Real Estate.

1.  The government has made Real Estate investing an unfair advantage versus other investments.

2. Yes, this is qualitative, but the majority of BP posters are first time or just starting out in REI. This is the best time ever, unless it was yesterday for them to start to invest.  A first-time investor has far more options in their tool chest versus experienced investors.  The typical "Investor?????Poster???" on BP is a first time investor, most who will never invest.  The other Experienced investors, again qualitative have more than 4-5 properties or have had more than that.  An example of my recommendation to a new investor is to go buy a house with easy re-sale, that needs superficial changes such as painting, landscaping, new carpet, roofing, etc.  Not structural changes.  For an experienced investor, I always like "Nasty" properties or situations, I can make more money on them and control the risk.  The middle-aged adult with 4-5 properties, I would recommend they start to prune their investments.  Re-assess their Risk/Reward on their properties and REI strategies and re-deploy.

3.  We all have to make our mistakes.  I'm sure all of our mothers told us to not touch the fire.  We all still touched it.  One of my sayings is "Start small and Make Your Big Mistakes Early".  They say never try to time the market in financial investments.  But in Real Estate, I say time your markets.  We are in a Tough environment. It's the best time to invest "small" and get your big mistakes out of the way now.  Before the market turns to good.

4.  "Jump off the Cliff".  Most people will never jump off the Cliff and invest.  They will follow the herd and do 401k's.   The sooner you jump off the cliff and start to learn, the sooner you will start building your wealth.

5. I like to look at people's backgrounds before responding. You're a military vet. I would recommend all HS graduates join the military. There is not another profession in the world, that I would not guarantee they will be millionaires by the time they are say 42 (retirement age) using REI as the military. No is the best time for a Military person to invest. Even if they Sale for less than they bought, they make a profit. BAH payments.

6.  If you keep doing what you do, it is harder to make the same volume or return levels.  Every person needs to look at adjusting their approach.  We had 8 Self Storage locations.  Sold one about 2 years ago and took cash off the table.  Have 3 more in Due Diligence right now, in a C market.  Need to build more there, but cost to build is too high to get the same returns.  Selling those 3, which are positive cash flow (no debt) and re-deploying those funds to either Self Storage/Flex buildings in an "A" market (same building cost, but double the rent rates); picking up some more farm land at $9,000 and subdividing for $50,000 per acre; or investing in more land for Teak plantations in Belize.  Adjust your model.  Realize these aren't MFH, but you can take similar approaches in MFH.

[Bruce Woodruff]

@Charles Granja Your posts are smart and appreciated. But your by-the-book approach and over-thinking are just not conducive to basic RE investing. IMHO.

Not that I will take them into consideration, but I appreciate your thoughts anyway...... :-)

[Mike K.]

Hey Remington, thanks for voting for my post.  Now can you please stop sending me the emails with the negative cash flow RE deals?  Enough already.

[Sam Yin]

Quote from @Henry Clark:

@Charles Granja  Ok if you respond again.

Your correct 2+2= 4 is less than 3+3=6.  The basic math of real estate, no matter what angle are harder today.  Whether interest rates, purchase price, construction costs, financing access, returns, etc.

BUT;  today is the best day to ever invest in Real Estate.

1.  The government has made Real Estate investing an unfair advantage versus other investments.

2. Yes, this is qualitative, but the majority of BP posters are first time or just starting out in REI. This is the best time ever, unless it was yesterday for them to start to invest.  A first-time investor has far more options in their tool chest versus experienced investors.  The typical "Investor?????Poster???" on BP is a first time investor, most who will never invest.  The other Experienced investors, again qualitative have more than 4-5 properties or have had more than that.  An example of my recommendation to a new investor is to go buy a house with easy re-sale, that needs superficial changes such as painting, landscaping, new carpet, roofing, etc.  Not structural changes.  For an experienced investor, I always like "Nasty" properties or situations, I can make more money on them and control the risk.  The middle-aged adult with 4-5 properties, I would recommend they start to prune their investments.  Re-assess their Risk/Reward on their properties and REI strategies and re-deploy.

3.  We all have to make our mistakes.  I'm sure all of our mothers told us to not touch the fire.  We all still touched it.  One of my sayings is "Start small and Make Your Big Mistakes Early".  They say never try to time the market in financial investments.  But in Real Estate, I say time your markets.  We are in a Tough environment. It's the best time to invest "small" and get your big mistakes out of the way now.  Before the market turns to good.

4.  "Jump off the Cliff".  Most people will never jump off the Cliff and invest.  They will follow the herd and do 401k's.   The sooner you jump off the cliff and start to learn, the sooner you will start building your wealth.

5. I like to look at people's backgrounds before responding. You're a military vet. I would recommend all HS graduates join the military. There is not another profession in the world, that I would not guarantee they will be millionaires by the time they are say 42 (retirement age) using REI as the military. No is the best time for a Military person to invest. Even if they Sale for less than they bought, they make a profit. BAH payments.

6.  If you keep doing what you do, it is harder to make the same volume or return levels.  Every person needs to look at adjusting their approach.  We had 8 Self Storage locations.  Sold one about 2 years ago and took cash off the table.  Have 3 more in Due Diligence right now, in a C market.  Need to build more there, but cost to build is too high to get the same returns.  Selling those 3, which are positive cash flow (no debt) and re-deploying those funds to either Self Storage/Flex buildings in an "A" market (same building cost, but double the rent rates); picking up some more farm land at $9,000 and subdividing for $50,000 per acre; or investing in more land for Teak plantations in Belize.  Adjust your model.  Realize these aren't MFH, but you can take similar approaches in MFH.

I second this post!... Mostly... This is probably one of the most informative response in a while. 

Not knocking on you Henry, but as a Vet myself, and I do agree people should join the military as it provides so many benefits in the future, I also feel that sometimes even the core training of the military will not stick with everyone. People have inherent personalities and traits that are difficult to change. The military will make many people much more resilient and courageous, but not every soldier. At the same time, it will provide every soldier the same future financial benefits, but not every soldier will take advantage of it. Even when it is fully explained, an individual must have the courage to take the plunge and jump off that cliff.

I would like the note #5. For any first time vet on the fence, reread the last 2 lines of #5. I  personally did not do that, but I wish I did!!! I was in the military in the mid 90s, a slightly different time with zero Internet information and the world was very active.

@Charles Granja

@Charles Granja please do return and continue to post. It's the dialogue that will add the greatest value to this forum.

[Sam Yin]

Quote from @Account Closed:

Quote from @Sam Yin:

Quote from @Henry Clark:

@Charles Granja  Ok if you respond again.

Your correct 2+2= 4 is less than 3+3=6.  The basic math of real estate, no matter what angle are harder today.  Whether interest rates, purchase price, construction costs, financing access, returns, etc.

BUT;  today is the best day to ever invest in Real Estate.

1.  The government has made Real Estate investing an unfair advantage versus other investments.

2. Yes, this is qualitative, but the majority of BP posters are first time or just starting out in REI. This is the best time ever, unless it was yesterday for them to start to invest.  A first-time investor has far more options in their tool chest versus experienced investors.  The typical "Investor?????Poster???" on BP is a first time investor, most who will never invest.  The other Experienced investors, again qualitative have more than 4-5 properties or have had more than that.  An example of my recommendation to a new investor is to go buy a house with easy re-sale, that needs superficial changes such as painting, landscaping, new carpet, roofing, etc.  Not structural changes.  For an experienced investor, I always like "Nasty" properties or situations, I can make more money on them and control the risk.  The middle-aged adult with 4-5 properties, I would recommend they start to prune their investments.  Re-assess their Risk/Reward on their properties and REI strategies and re-deploy.

3.  We all have to make our mistakes.  I'm sure all of our mothers told us to not touch the fire.  We all still touched it.  One of my sayings is "Start small and Make Your Big Mistakes Early".  They say never try to time the market in financial investments.  But in Real Estate, I say time your markets.  We are in a Tough environment. It's the best time to invest "small" and get your big mistakes out of the way now.  Before the market turns to good.

4.  "Jump off the Cliff".  Most people will never jump off the Cliff and invest.  They will follow the herd and do 401k's.   The sooner you jump off the cliff and start to learn, the sooner you will start building your wealth.

5. I like to look at people's backgrounds before responding. You're a military vet. I would recommend all HS graduates join the military. There is not another profession in the world, that I would not guarantee they will be millionaires by the time they are say 42 (retirement age) using REI as the military. No is the best time for a Military person to invest. Even if they Sale for less than they bought, they make a profit. BAH payments.

6.  If you keep doing what you do, it is harder to make the same volume or return levels.  Every person needs to look at adjusting their approach.  We had 8 Self Storage locations.  Sold one about 2 years ago and took cash off the table.  Have 3 more in Due Diligence right now, in a C market.  Need to build more there, but cost to build is too high to get the same returns.  Selling those 3, which are positive cash flow (no debt) and re-deploying those funds to either Self Storage/Flex buildings in an "A" market (same building cost, but double the rent rates); picking up some more farm land at $9,000 and subdividing for $50,000 per acre; or investing in more land for Teak plantations in Belize.  Adjust your model.  Realize these aren't MFH, but you can take similar approaches in MFH.

I second this post!... Mostly... This is probably one of the most informative response in a while. 

Not knocking on you Henry, but as a Vet myself, and I do agree people should join the military as it provides so many benefits in the future, I also feel that sometimes even the core training of the military will not stick with everyone. People have inherent personalities and traits that are difficult to change. The military will make many people much more resilient and courageous, but not every soldier. At the same time, it will provide every soldier the same future financial benefits, but not every soldier will take advantage of it. Even when it is fully explained, an individual must have the courage to take the plunge and jump off that cliff.

I would like the note #5. For any first time vet on the fence, reread the last 2 lines of #5. I  personally did not do that, but I wish I did!!! I was in the military in the mid 90s, a slightly different time with zero Internet information and the world was very active.

@Charles Granja

@Charles Granja please do return and continue to post. It's the dialogue that will add the greatest value to this forum.

Your comments: "I do agree people should join the military as it provides so many benefits in the future" 

But, sadly you get shot at in countries that didn't attack us, this government has no respect for you and veterans have an abnormally high suicide rate. That is too much of a price to pay to save a few dollars on an investment property.

The other aspects of military service creates unquantifiable lifelong benefits. Besides the obvious that it is a path for some people to escape out of the lower than average socio-economic situation, the training, team building, and exposure to people from many walks of life is probably the greatest benefit that is hard to find elsewhere. Many people will never know whats outside their social  and economic circle. Most will not believe how vast the people and the world really is. It takes intentional placement of oneself to immerse in those conditions. The out come is a people that can better cope with a variety of situations and people. That's is a tremendous quality to have in any investing environment, ESPECIALLY real estate. 

Just my personal opinion. From a person who has been around the USA multiple times and many other countries. Those are your renters you will have to deal with or will have a Manager deal with... But don't ever let the chef be the chief of your business.

[Michael Moy]

Quote from @Mike K.:

After looking at the opportunities available in RE investing and analyzing the risks and rewards I decided that there are better options available to build wealth.  It pains me to say this since I have been an appraiser for a long time.  In my 10 year time horizon until I retire I believe I can build more wealth as a small business owner and have decided to purchase a business.  I would like to personally thank everyone for sharing your experience and advice. Best of luck to you all.

 Good luck in your future endeavors!  There's no denying that owning a business provides an opportunity to create greater wealth than owning real estate alone, but I personally belive there is a much higher level of risk and more work involved in that option.  But, hey people told me the same when I said I was buying my first rental, so what do I know as someone who has not done what you strive to do!  You probably should change the title though, because plenty of people do just fine with real estate.

[Mike K.]

Quote from @Bruce Woodruff:

@Charles Granja Your posts are smart and appreciated. But your by-the-book approach and over-thinking are just not conducive to basic RE investing. IMHO.

Not that I will take them into consideration, but I appreciate your thoughts anyway...... :-)

 I other words, Bruce doesn't believe math has any part in investment analysis. 

[Marcus Auerbach]

Quote from @Mike K.:

Quote from @Bruce Woodruff:

@Charles Granja Your posts are smart and appreciated. But your by-the-book approach and over-thinking are just not conducive to basic RE investing. IMHO.

Not that I will take them into consideration, but I appreciate your thoughts anyway...... :-)

 I other words, Bruce doesn't believe math has any part in investment analysis. 

There is a lot more than plain math to REI. It's where you start, but the last 15 years of investing have taught me to take a much more holistic few than you can fit into an XLS. In fact, I don't even run numbers anymore, partially because I know what will work cash flow-wise (or break even at least), partially because in hindsight your XLS is always wrong, but mostly because I am collecting quality assets for the long haul and math does not capture a collection.

[Bruce Woodruff]

Quote from @Mike K.:

I other words, Bruce doesn't believe math has any part in investment analysis. 

Where did I say that? Of course you have to do the math. I'm just saying that there are multiple factors involved and the numbers are just one of them.

You are obviously not cut out for the RE game, go start a business or something.

[Marcus Johnson]

It's funny.  If you go to Boglehead's they tend to bash real estate investing, whereas on this website the subject tends to favor more real estate. 

[Carlos Ptriawan]

Quote from @Mike K.:

Quote from @Kevin Sobilo:

@Mike K. I hope that works out for you.

IMO opinion, its ALWAYS a good time to invest in real estate.

However, depending on the economic climate deals might look differently. The kind of deal that was easy to find pre-covid might not exist right now, BUT a different kind of deal might be ripe for the picking.

There are SOOOO many ways to invest in real estate that its hard to ever say with authority that "now isn't a good time to invest".

Good Luck!

 Looking at a local service business that currently generates $60k a year with limited owner involvement, no inventory, and very limited equipment required. Basically no overhead and can be scaled up to increase income. Should generate at least $500k wealth in my 10 year time span with very limited risk. I've analyzed numerous 1-4 unit residential deals for both cash flow and appreciation and haven't seen anything close to those numbers.  

Also, I think once the Marxists take over the first people they are going after is the landowners. That's how it always happens.

 Mike what kind of business is this ? in general.... been thinking the same.

[Bruce Woodruff]

Quote from @Carlos Ptriawan:

Mike what kind of business is this ? in general.... been thinking the same.

Carlos - I've owned probably 20 different businesses since I was in my 20s. They are far more risky than RE. 

Literally every property you buy (assuming you're not an idiot) will gain value simply due to appreciation, if not cash flow and the other adds...

Most businesses fail in the first few years......

[Carlos Ptriawan]

Quote from @Bruce Woodruff:

Quote from @Carlos Ptriawan:

Mike what kind of business is this ? in general.... been thinking the same.

Carlos - I've owned probably 20 different businesses since I was in my 20s. They are far more risky than RE. 

Literally every property you buy (assuming you're not an idiot) will gain value simply due to appreciation, if not cash flow and the other adds...

Most businesses fail in the first few years......

yeah but it's interesting to hear the story what and when/why it failed ? is it business related to real estate ? or something else .... 

[Becca F.]

Great comments by everyone. I thought about starting my own business but it would have been much too labor intensive to do to this with a W2 job. And as far as renting a commercial space out in the Bay Area that would be expensive. I'd still consider starting a business but it would need to have lower overhead costs and low risk (if there is such a thing). 

I still believe in real estate and and its many financial benefits ways to do RE but it's more difficult in 2024. My properties (Bay Area and Indianapolis suburb) acquired pre-2013 are doing well with appreciation. I'm not planning to buy anymore until I problem solve my other properties which are losing money. I analyzed my deals wrong and focused on cash flow on paper, which there is none. 

I've been putting my money into S&P500. My stress level has greatly reduced from constantly looking for another property.  I know people that love being mortgage free and RE wouldn't be the right choice for them. I still talk about RE with people show an interest but I add my cautionary story. We all have different financial situations, lifestyles, risk tolerances, time horizons, etc so I don't think there's one right answer for everyone. 

[Marcus Auerbach]

Quote from @Becca F.:

We all have different financial situations, lifestyles, risk tolerances, time horizons, etc so I don't think there's one right answer for everyone. 

Exactly. REI requires a passion for the game in order to have the long-term stamina it takes to actually move the needle. You can't beat the simplicity of an S&P500 index fund. Not being able to influence the stock market also relieves you from the personal  sense of responsibility that comes with REI.

About running a business vs REI: on an abstract level, a business is something that generates money as an output, an investment is something that requires money as an input. On the highest level REI is cash flow negative because you have 25% downpayment flowing in and maybe $200 monthly flowing out.

When you look at it this way it is almost funny how everyone is so worried about the exact amount of the monthly cash flow. I'd say who cares in the light of a $50,000 down payment, do $100 really matter? 

[Bruce Woodruff]

Quote from @Marcus Auerbach:

Not being able to influence the stock market also relieves you from the personal  sense of responsibility that comes with REI.

Not being able to influence the stock market also means that you have no direct control over the asset's movement up or down......

I like being able to actively influence the value of my asset..... :-)