Real estate investment

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How much of your portfolio you guys have allocated for real estate investment?
I know some type of investments are a big hassle, but it is my favorite type because I have experience with it growing up.
How much is a "safe" proportion if any?excluding your own home of course.

Any ideas or suggestions strongly appreciated.
I have one investment property home on the sights that seems solid. Should I make an llc or different company to put it under to protect my assets?

Let's talk real estate guys!


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How much of your portfolio you guys have allocated for real state investment?
I know some type of investments are a big hassle, but it is my favorite type because I have experience with it growing up.
How much is a "safe" proportion if any?excluding your own home of course.

Any ideas or suggestions strongly appreciated.
I have one investment property home on the sights that seems solid. Should I make an llc or different company to put it under to protect my assets?

Let's talk real state guys!


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I own a couple of REIT funds. And my house...
 
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How much of your portfolio you guys have allocated for real estate investment?
I know some type of investments are a big hassle, but it is my favorite type because I have experience with it growing up.
How much is a "safe" proportion if any?excluding your own home of course.

Any ideas or suggestions strongly appreciated.
I have one investment property home on the sights that seems solid. Should I make an llc or different company to put it under to protect my assets?

Let's talk real estate guys!


Sent from my iPhone using SDN mobile app


Get a RE attorney. Don't do this on the cheap. And you should be aware that the smart money is dumping RE, rental and commercial. The cycle has topped.
 
Hi, know this thread is old and musty already but i'm hoping someone might be able to help me.
Found an option for investment with much higher rates that usual buy-to-let. They call it mezzanine financing and it gives 10-15% per year. Taking into account the current situation in the USA and Europe investors could expect to get 12-20% per annum from value-added projects.
Has anyone heard of it or actually tried doing that? Would be interesting to know about some first hand experience

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If it's "really low risk", it ain't paying 10-15%. One way to get into real estate without buying properties outright is to invest on some of the RE crowdfunding platforms.

(I do not know the rules here so will not mention any specifically, but I do invest in a diversified portfolio of primarily debt instruments via two of the popular ones. I am not an investor in the business itself.)
 
If it's "really low risk", it ain't paying 10-15%. One way to get into real estate without buying properties outright is to invest on some of the RE crowdfunding platforms.

(I do not know the rules here so will not mention any specifically, but I do invest in a diversified portfolio of primarily debt instruments via two of the popular ones. I am not an investor in the business itself.)

Well it's the lowest risk possible for such yield. 15% is rather for equity partners, who become involved in the project almost as much as developers. The main risks of profit loss are always on the developer though.

Could you tell a bit more about the debt instruments? without names, just the general idea how it works
 
Robert Kiyosaki has a whole host of books published on this subject. I love real estate because it allows for tax advantages, leverage, appreciation, cash flow etc. Also, if things ever go down the pooper, you can always live in it or tear it down and grow crops. If you ever need to talk to someone about a real estate loan please call or email me, I will give you the complete lowdown.

Cheers!
 
Wait why do people say real estate is risky? If you buy a home and rent it out whats risky about that? You make money every month its not like the home is gonna go anywhere. Even if it goes down in value itll eventually go back up with the cycle of the market and in the meantime you make money every month by renting it. What am i missing?
 
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If you start when you’re young, real estate is one of the smartest investments to make for the long run. You can leverage time, OPM, and your money. It’s one of the few remaining ways that the average household, can still secure their future and potentially become wealthy.

As for me, I own a few rental properties,and I keep buying. However, I rent the place I live in.

Unless you own your properties outright, no reason for LLCs. Just get a solid umbrella policy (cheap) and put your leveraged (financed) properties under that.
 
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Wait why do people say real estate is risky? If you buy a home and rent it out whats risky about that? You make money every month its not like the home is gonna go anywhere. Even if it goes down in value itll eventually go back up with the cycle of the market and in the meantime you make money every month by renting it. What am i missing?

Because you might not be able to rent it out and lose money while it's sitting empty.

The home might end up needing some huge repairs.

Your tenants could trash it. Or just stop paying and take months to be evicted.

Price of the home could rise slower than inflation (which is the historic norm - the last couple decades are an exception to the rule).

Etc.

It has risks and headaches that just don't exist to buying a mutual fund/ETF. In exchange for that (and the risks involved in leveraging yourself out) it has a higher potential for gains.

I don't care for the headaches.
 
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Because you might not be able to rent it out and lose money while it's sitting empty.

The home might end up needing some huge repairs.

Your tenants could trash it. Or just stop paying and take months to be evicted.

Price of the home could rise slower than inflation (which is the historic norm - the last couple decades are an exception to the rule).

Etc.

It has risks and headaches that just don't exist to buying a mutual fund/ETF. In exchange for that (and the risks involved in leveraging yourself out) it has a higher potential for gains.

I don't care for the headaches.

I have flipped properties in the past and I plan to continue to do so. I'm not a huge fan of renting mainly because I don't want to pay someone else to handle the day to day operations and calls from tenants but owning property is still good. I'm not totally opposed to it but I haven't found a deal that is good enough.

Everything has a risk including mutual funds and ETFs. No one can tell what the future holds with 100% accuracy.

If you are a young guy with little to no debt this is the time to be "naughty" and accept a little more risk for higher returns.

YMMV.
 
I have flipped properties in the past and I plan to continue to do so. I'm not a huge fan of renting mainly because I don't want to pay someone else to handle the day to day operations and calls from tenants but owning property is still good. I'm not totally opposed to it but I haven't found a deal that is good enough.

Everything has a risk including mutual funds and ETFs. No one can tell what the future holds with 100% accuracy.

If you are a young guy with little to no debt this is the time to be "naughty" and accept a little more risk for higher returns.

YMMV.

Everyone has their own risk tolerance and investing philosophy. My wife and I probably save >30% of our income in various forms, and the majority of that is going into 100% equities at the moment. Some would consider that too risky - but the majority of my lifetime capital right now is unearned human capital, so I'm comfortable with that. The worst that will realistically happen is that I lose half of my paper investments due to some kind of market crash - and over the 30+ years of possible working career I have left ahead of me, it's not a big deal because it will recover. I'm a strong proponent in the arguments in Siegel's Stocks for the Long Run - for periods 20 years or longer, the chance of the stock market (with dividends reinvested) keeping up with inflation or growing is approximately 100% (using data from the 1870s to present).

But even though I'm probably taking advantage of more risks than many would, there are other risks that I'm not comfortable with - I'm not buying leveraged ETFs for example. I'm not investing in emerging markets. And I'm not investing in real estate - I think it's poorly diversified, poorly liquid, and has the possibility of headaches and unforeseen expenses I just don't want to have to deal with. I can manage my funds in 5 minutes sitting on my toilet in the morning - I don't have to go look at the property, worry about contractors fixing it, or doing anything else. My ETF can't burn down.
 
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Everyone has their own risk tolerance and investing philosophy. My wife and I probably save >30% of our income in various forms, and the majority of that is going into 100% equities at the moment. Some would consider that too risky - but the majority of my lifetime capital right now is unearned human capital, so I'm comfortable with that. The worst that will realistically happen is that I lose half of my paper investments due to some kind of market crash - and over the 30+ years of possible working career I have left ahead of me, it's not a big deal because it will recover. I'm a strong proponent in the arguments in Siegel's Stocks for the Long Run - for periods 20 years or longer, the chance of the stock market (with dividends reinvested) keeping up with inflation or growing is approximately 100% (using data from the 1870s to present).

But even though I'm probably taking advantage of more risks than many would, there are other risks that I'm not comfortable with - I'm not buying leveraged ETFs for example. I'm not investing in emerging markets. And I'm not investing in real estate - I think it's poorly diversified, poorly liquid, and has the possibility of headaches and unforeseen expenses I just don't want to have to deal with. I can manage my funds in 5 minutes sitting on my toilet in the morning - I don't have to go look at the property, worry about contractors fixing it, or doing anything else. My ETF can't burn down.
My OB-GYN father in law had planned on real estate investments being a big part of his retirement plan.

Guess who has 3 properties that he can't rent or sell at the moment?
 
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My OB-GYN father in law had planned on real estate investments being a big part of his retirement plan.

Guess who has 3 properties that he can't rent or sell at the moment?
Exactly. Poorly diversified and poorly liquid.

If he owned 300 properties all in different markets across the US, even if a few of them weren't working out, he'd be fine. But that's not feasible - everyone I know with real estate ends up having most or all of their eggs in one basket. It usually works out - but what about when it doesn't?
 
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Exactly. Poorly diversified and poorly liquid.

If he owned 300 properties all in different markets across the US, even if a few of them weren't working out, he'd be fine. But that's not feasible - everyone I know with real estate ends up having most or all of their eggs in one basket. It usually works out - but what about when it doesn't?
Yep.

And you'll naturally hear stuff like "well what about if the market crashes?'.

My mother lost 50% of her savings in 2008. She was back to baseline by I think 2012. Not ideal, but a pretty good recovery all things considered. Barring a Great Depression type scenario, investing is pretty darn safe over the long run.

Real estate for most of us just isn't.
 
Everyone has their own risk tolerance and investing philosophy. My wife and I probably save >30% of our income in various forms, and the majority of that is going into 100% equities at the moment. Some would consider that too risky - but the majority of my lifetime capital right now is unearned human capital, so I'm comfortable with that. The worst that will realistically happen is that I lose half of my paper investments due to some kind of market crash - and over the 30+ years of possible working career I have left ahead of me, it's not a big deal because it will recover. I'm a strong proponent in the arguments in Siegel's Stocks for the Long Run - for periods 20 years or longer, the chance of the stock market (with dividends reinvested) keeping up with inflation or growing is approximately 100% (using data from the 1870s to present).

But even though I'm probably taking advantage of more risks than many would, there are other risks that I'm not comfortable with - I'm not buying leveraged ETFs for example. I'm not investing in emerging markets. And I'm not investing in real estate - I think it's poorly diversified, poorly liquid, and has the possibility of headaches and unforeseen expenses I just don't want to have to deal with. I can manage my funds in 5 minutes sitting on my toilet in the morning - I don't have to go look at the property, worry about contractors fixing it, or doing anything else. My ETF can't burn down.

I agree with your approach. All of our money is going into equities as well. We are fairly young (I'm 32, my wife is 31) so it makes sense to accept the risk now. I used to buy leveraged ETFs but they are too much of a headache and the risk is unacceptably high for my comfort zone (and I'm not particularly risk averse) and I don't think they are better than conscientious investing but of course YMMV.

We only invest in funds in our retirement accounts. The rest of our money I put in a brokerage account and invest in individual stocks.
 
Exactly. Poorly diversified and poorly liquid.

If he owned 300 properties all in different markets across the US, even if a few of them weren't working out, he'd be fine. But that's not feasible - everyone I know with real estate ends up having most or all of their eggs in one basket. It usually works out - but what about when it doesn't?

I'm simply playing devil's advocate here but you can say this about anything.

A lot of people have made a fortune in real estate. It's not a bad strategy but it takes much more effort than simply going out and buying just about any property that you see. I agree that most of us don't have the time to do it right. Doing this correctly is a full time job.

I had the most success when I worked 1 week on/1 week off. I used to go to the auctions held by the city. It entailed spending the week prior researching the properties that would be up for grabs and then showing up at the auction to bid. It wasn't exactly easy. There were tons of full time investors that had way more information than I did. I was lucky I had the right connections.
 
Wait why do people say real estate is risky? If you buy a home and rent it out whats risky about that? You make money every month its not like the home is gonna go anywhere. Even if it goes down in value itll eventually go back up with the cycle of the market and in the meantime you make money every month by renting it. What am i missing?
The reasons have already been given. I have been incredibly lucky with my rental properties but they all started off as places I wanted to live in then could afford to keep when the time to move came. Maybe I would have earned more if I had sold and invested what I ended up paying for each new place or maybe I will stay lucky and the rent checks will keep rolling in outpacing expenses. But I manage my own properties which means I got to profit more but have had the occasional headaches dealing with issues. I certainly haven't gone out to add to my property portfolio despite financially being able to.
 
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Wait why do people say real estate is risky? If you buy a home and rent it out whats risky about that? You make money every month its not like the home is gonna go anywhere. Even if it goes down in value itll eventually go back up with the cycle of the market and in the meantime you make money every month by renting it. What am i missing?

because it is risky. The risks are different than risks in the stock or bond market. Buying a home and renting it out takes work. You gotta put in the up front effort and then ongoing maintenance and landlordy type things. It's also usually a fairly illiquid investment in that it isn't always easy to sell on short notice. Aside from just the usual risk of picking a bad tenant or having lots of stuff break down, you might also see the local economy go into a recession and tank your market.

I'm not overly pro or anti real estate as an investment. It is what it is. It is certainly a diversified risk from the usual other options. But it also usually requires a lot of on going time and effort to keep it going unless you want to pay somebody else to do that stuff for you in which case your potential returns are greatly reduced.
 
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I don’t know much about real estate so maybe this is a dumb question. But why do so many people have a hard-on for direct real estate investing? Why not just buy REITs and call it a day?

Is it the leverage you get from doing it (you could just buy stocks on margin instead, that is easier and more liquid than real estate)? Getting to power trip as a slumlord?

Why deal with the hassle of an essentially part-time job tying yourself to a specific location with low diversification of risk, high illiquidity, potentially troublesome tenants, having to maintain/fix the property, etc etc
 
I don’t know much about real estate so maybe this is a dumb question. But why do so many people have a hard-on for direct real estate investing? Why not just buy REITs and call it a day?

Is it the leverage you get from doing it (you could just buy stocks on margin instead, that is easier and more liquid than real estate)? Getting to power trip as a slumlord?

Why deal with the hassle of an essentially part-time job tying yourself to a specific location with low diversification of risk, high illiquidity, potentially troublesome tenants, having to maintain/fix the property, etc etc

While I currently don't have the time to do it, it's the allure of owning a property that generates enough income to offset the costs so that at the end of the mortgage you own it outright essentially for free (although that doesn't include the time and hassle you had to deal with it over the years). If it's a property that is generating excess income compared to costs, you can then plow that into another property. Rinse and repeat and you can see the dream of having an ever expanding roster of properties that you end up owning outright at retirement and can either live off the stream of income or sell them for lump sums of cash.


Like I said, I don't have the time right now but I know people that do it successfully. I think of REITs more as stocks in the real estate sector as opposed to real estate investing (for both good and bad).
 
While I currently don't have the time to do it, it's the allure of owning a property that generates enough income to offset the costs so that at the end of the mortgage you own it outright essentially for free (although that doesn't include the time and hassle you had to deal with it over the years). If it's a property that is generating excess income compared to costs, you can then plow that into another property. Rinse and repeat and you can see the dream of having an ever expanding roster of properties that you end up owning outright at retirement and can either live off the stream of income or sell them for lump sums of cash.


Like I said, I don't have the time right now but I know people that do it successfully. I think of REITs more as stocks in the real estate sector as opposed to real estate investing (for both good and bad).

Agree with these points. I own a multi family with a partner and am looking to add another 1-3 this year. It cash flows monthly while paying down a 10 year note and required zero down. That’s pretty appealing by itself. Then when you add in the accelerated depreciation I’m paying zero taxes on it this year while also paying down $25k of the principal. I can’t do all of that with a REIT. I have REITs as well but I view those as stocks.

It was definitely some hassle on the front end but setting up the systems correctly decreases your time involvement on the back end.


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I was taught to buy a home that I can pay off with 25% of my earnings over 15 years. Put 25% into savings & paying off student loans. Then after making payments on the home for 15 years and paying it off leverage into rental properties that your 25% can make payments on. Take all rental income and put it towards paying off the rental property. This way you have no risk involved with your rental properties and you have the liquid assets available to hire an attorney and do needed property upgrades. At all times be placing 50% of your income into house/rental properties and stocks.
 
I was taught to buy a home that I can pay off with 25% of my earnings over 15 years. Put 25% into savings & paying off student loans. Then after making payments on the home for 15 years and paying it off leverage into rental properties that your 25% can make payments on. Take all rental income and put it towards paying off the rental property. This way you have no risk involved with your rental properties and you have the liquid assets available to hire an attorney and do needed property upgrades. At all times be placing 50% of your income into house/rental properties and stocks.

Agree with getting a 15 yr mortgage on your personal residence. But there’s no more reason to wait 15 years to invest in real estate than there is to wait 15 years to invest in equities. Both should likely have a place in your portfolio.


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Your likely to only get a loan with monthly payments equal to 35% of your pre tax earnings. This includes things like cars too. Plus you need 20% down, attorney fees, and ect. Be careful when you purchase stuff too. Building materials, building costs, interest rates, local economy, and ect. can all impact your investment.
 
y. Don't do this on the cheap. And you should be aware that the smart money is
I don’t know much about real estate so maybe this is a dumb question. But why do so many people have a hard-on for direct real estate investing? Why not just buy REITs and call it a day?

Is it the leverage you get from doing it (you could just buy stocks on margin instead, that is easier and more liquid than real estate)? Getting to power trip as a slumlord?

Why deal with the hassle of an essentially part-time job tying yourself to a specific location with low diversification of risk, high illiquidity, potentially troublesome tenants, having to maintain/fix the property, etc etc

Great question. REIT's actually outperform real estate. Where Real Estate makes it up is with leverage/tax advantages. The leverage can make a huge difference in returns (although REITs are also leveraged, though tax dis-advantaged). In theory, you could do the same with stocks, but there's always a bigger downside tail with leverage (see 2008 collapse).
 
Real estate can have the advantage in that it's not a perfect market. You can potentially find a deal and buy a house at a steep discount. Not going to happen with stocks.
 
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