Investment Properties

[marlopez]

Are you financing or paying cash? If you’re financing, you will have to put down a larger down payment if it isn’t owner occupied.


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[GatorBait2001]

Just remember that making money is never easy. Real estate is a longterm play which will pay off many years down the road. Keep your day job for stability and acquire property on the side slowly over the years. 20 years will fly by and you will thank yourself for the equity you have accumulated and the cash flow streams you have created.

You are on the right path and asking the right questions. Financial independence doesn't just happen on it's own so expect some bumps in the road, occasional crappy tenants, unexpected repairs at inopportune times and life to test your fortitude along the way.

[Bt122]

I commend you.

Understand the math.
Key ones.

Monthly rent vs mortgage and such
Understand leverage
Make sure have cash buffer
Make sure to not run a slum- so capitalize it appropriately.
Understand whether you are playing for capital appreciation of cash return. It’s 2 different things. Capital appreciation - make sure you are not too far from key msa

Buy the location the house is worth minimal.


Control cost This is really important. Do not over capitalize the house for the area. $200 k sounds like it’s not an affluent neighborhood so understand who you are renting to, how to collect, as well as whether it’s section 8 or they will pay.

Ps don’t get a property manager that’s giving up 1 monthof your returns and half the time they are useless. Learn to control all things of your property.

Since you are 24, Learn to physically do the renovations yourself so you understand cost as well as network of contractors ... get dirty, and make sure u understand building codes.


If you follow these few things you should be okay.


Good luck. You impress me that you are thinking of this. Earlier on your live.

[gmh1013]

I use to own condo's in North Scottsdale that were rented and some as "golf vacations" etc. I was lucky because my wife worked for Wells Fargo and i got the list of upcoming repo's etc. Once i was the only bidder!!!
1. do as much work yourself
2. it going to cost more than you think to fix it up...
3. If you can make a profit sell and move on
4. Never fall in love with a piece of property....

[Carrera911]

4. Never fall in love with a piece of property....[/QUOTE]

[brandrea]

Great to hear you’re thinking of putting your money to work

These ideas always come down to simple math. What rate of return do you anticipate making on a $200k investment?

Rental properties are bit too complicated and frankly too much effort for me. I prefer to simply invest the money.

Best of luck

[Carrera911]

Just throwing in another tip: I got a buddy that has a company that seeks cash investors for real estate. You get 10% back annually and the company registers mortgages on current properties to secure your investment in case of default.

I have some money invested into that. It doesn't bare the same % you would get directly into investing on properties but you don't deal with the headaches of owning one either.

[Bt122]

Originally Posted by brandrea

Great to hear you’re thinking of putting your money to work

These ideas always come down to simple math. What rate of return do you anticipate making on a $200k investment?

Rental properties are bit too complicated and frankly too much effort for me. I prefer to simply invest the money.

Best of luck

Risk adjusted returns on average of investing in equity and property are the same over time, the market is a inflation measurement metric. If u sse the stock market 8%-12% on average for example...a levered housing investment would yield similar as most people deploy 4-5x leverage. So house prices historically go up 2% which is CPI. That means levered return to investment is 8-10% pre tax benefits.


Don’t get me wrong I like equities too but, . The problem with equity investing is the inability to employ leverage and control initial invested capital optimally. Buying single stocks are different as you are taking significant idiosyncratic and systemic risk.

If you can lower the volatility of any investment, you can employ infinite leverage as prices increase. In the above scenario of house investment... let’s assume you can refinance to 99% loan to value. You would be levered 99%. A 2% house price increase would be. 99x2%. :)

Control for risk by the monthly payments matching with cash buffer.

In equities difficult to lever up even with margin. Especially controlling for risk.

If it was easy everyone be doing it. But kid is 24. Don’t worry about failing. If u set ur goal now, if u fail I would believe you’d get farther than starting point 0.



Sorry for geeking out. Just trying to help the kid.

[brandrea]

Originally Posted by Bt122

Risk adjusted returns on average of investing in equity and property are the same over time, the market is a inflation measurement metric. If u sse the stock market 8%-12% on average for example...a levered housing investment would yield similar as most people deploy 4-5x leverage. So house prices historically go up 2% which is CPI. That means levered return to investment is 8-10% pre tax benefits.


Don’t get me wrong I like equities too but, . The problem with equity investing is the inability to employ leverage and control initial invested capital optimally. Buying single stocks are different as you are taking significant idiosyncratic and systemic risk.

If you can lower the volatility of any investment, you can employ infinite leverage as prices increase. In the above scenario of house investment... let’s assume you can refinance to 99% loan to value. You would be levered 99%. A 2% house price increase would be. 99x2%. :)

In equities difficult to lever up even with margin. Especially controlling for risk.



Sorry for geeking out. Just trying to help the kid.

Lol, see ... complicated

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