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Madison MoneySports - Personal Finance Thread - Tyler.M - 03-03-2020
I'd ideally like to get to a point where I'm maxing out my 401(k) and roth and also donating a flat rate of 5% of my annual income. I attempt to get into investing every few years and sock a bit of money into an index fund but I think I'd rather get into real estate investment right now. I've been thinking about doing it for a few years but buying property and renting it seems like a better long term investment. It's been good for me and my first property anyways.
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RE: Madison MoneySports - Personal Finance Thread - D_Eclipse9916 - 03-03-2020
(03-03-2020, 01:03 PM)Tyler.M Wrote: I'd ideally like to get to a point where I'm maxing out my 401(k) and roth and also donating a flat rate of 5% of my annual income. I attempt to get into investing every few years and sock a bit of money into an index fund but I think I'd rather get into real estate investment right now. I've been thinking about doing it for a few years but buying property and renting it seems like a better long term investment. It's been good for me and my first property anyways.
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Property investment is a lot of work. Not quite as passive as I had hoped as I have had lots of turnover this year. Profitable? Yes, charging 90 day termination fees and then having someone move in the day after has been really good this year; but its taken a bit more time.
Real estate is REALLLY long term and fraught with expense and the first couple years are lean. Excluding termination fees I am netting ~8% this year on my original investment after expenses, 12% including termination fees. This is including having to replace a pool (although I did negotiate 90% of it into a reduction in sale price), a dishwasher, and a washer/dryer between my properties. Plus your mortgage stays relatively flat while rental prices increase.
I have found though that it would take a hell of a lot of properties (and far more than I can get mortgages for) to really make it a day job. It is a great diversification for your retirement though instead of having your entire nest egg in the market.
RE: Madison MoneySports - Personal Finance Thread - Tyler.M - 03-03-2020
(03-03-2020, 05:34 PM)D_Eclipse9916 Wrote:(03-03-2020, 01:03 PM)Tyler.M Wrote: I'd ideally like to get to a point where I'm maxing out my 401(k) and roth and also donating a flat rate of 5% of my annual income. I attempt to get into investing every few years and sock a bit of money into an index fund but I think I'd rather get into real estate investment right now. I've been thinking about doing it for a few years but buying property and renting it seems like a better long term investment. It's been good for me and my first property anyways.
Sent from my SM-G950U using Tapatalk
Property investment is a lot of work. Not quite as passive as I had hoped as I have had lots of turnover this year. Profitable? Yes, charging 90 day termination fees and then having someone move in the day after has been really good this year; but its taken a bit more time.
Real estate is REALLLY long term and fraught with expense and the first couple years are lean. Excluding termination fees I am netting ~8% this year on my original investment after expenses, 12% including termination fees. This is including having to replace a pool (although I did negotiate 90% of it into a reduction in sale price), a dishwasher, and a washer/dryer between my properties. Plus your mortgage stays relatively flat while rental prices increase.
I have found though that it would take a hell of a lot of properties (and far more than I can get mortgages for) to really make it a day job. It is a great diversification for your retirement though instead of having your entire nest egg in the market.
I've had my house for 8 years now and it's been a huge pain in my ass but at the same time, I'm glad I bought when I did. I just enjoy having a tangible object who's valuation is based more on the local market than a piece of a company who's valuation is a lot less based on facts and based more on "mood". No investment is perfect, right?
Hair brained idea though (and I'm no expert at this) but would buying a townhome or something and allowing a property management firm to worry about rental contracts be a good way to get into this? Get a mortgage, get it rented, PM takes 10% off of rent and then I pay for any thing that needs fixing down the road. Townhouses in the 'Burg can run into the mid 100's and with low mortgage rates right now, you'd at least beat inflation with the equity you would gain through the loan payment plus reinvestment of rental income and growth in market valuation. Stay in it for 10 years, sell it if the market is good or continue to rent it out. Mortgages are at like....4% or something right now?
Who knows. My gramps made a killing doing this sort of thing but he also started out when houses were cheaper than hell and he had a pension from the USPS and the Airforce. I'm not so lucky.
RE: Madison MoneySports - Personal Finance Thread - Sijray21 - 03-03-2020
i thought about the property management, but no one looks after property like you do/will. since you have a vested interest in its state (ie: not becoming a mold-infested dank house because some dip shit thought it wasn't necessary to report a water leak or a PM that ignored a small issue), but i suppose that could work if you had the margins.
RE: Madison MoneySports - Personal Finance Thread - WRXtranceformed - 03-04-2020
I'll say it once again, residential real estate investing is not worth the time, investment funds, energy or effort unless you are a slum lord / own a trailer park or you have the capital to front for commercial condo buildings. Commercial real estate >>>> all without question but that also takes a lot of capital and knowledge.
RE: Madison MoneySports - Personal Finance Thread - Sijray21 - 03-04-2020
(03-04-2020, 09:35 AM)WRXtranceformed Wrote: I'll say it once again, residential real estate investing is not worth the time, investment funds, energy or effort unless you are a slum lord / own a trailer park or you have the capital to front for commercial condo buildings. Commercial real estate >>>> all without question but that also takes a lot of capital and knowledge.I learned through my cousin (doing residential and dabbling into commercial) basically said the same thing. Less restrictions for contract situations, better for landlords, and essentially anything goes as long as it's stated in the contract. Businesses also tend to move less and are more willing to invest more into the property for their benefit. I feel like the initial capital needed is a bit higher.
RE: Madison MoneySports - Personal Finance Thread - .RJ - 03-04-2020
(03-04-2020, 09:35 AM)WRXtranceformed Wrote: I'll say it once again, residential real estate investing is not worth the time, investment funds, energy or effort unless you are a slum lord / own a trailer park or you have the capital to front for commercial condo buildings. Commercial real estate >>>> all without question but that also takes a lot of capital and knowledge.
I'm diving into it this year, with the expectation that I'll hire a property manager and that its easier to build equity rather than more savings. It may take some work to find a good one that will look after the place, though. I also dont expect to quit my day job.
There seems to be a lot of info and support here - https://www.biggerpockets.com/ - I've been reading there a lot. One of my goals is that it will generate passive income once I'm done with the rat race.
RE: Madison MoneySports - Personal Finance Thread - WRXtranceformed - 03-04-2020
(03-04-2020, 09:48 AM).RJ Wrote:(03-04-2020, 09:35 AM)WRXtranceformed Wrote: I'll say it once again, residential real estate investing is not worth the time, investment funds, energy or effort unless you are a slum lord / own a trailer park or you have the capital to front for commercial condo buildings. Commercial real estate >>>> all without question but that also takes a lot of capital and knowledge.
I'm diving into it this year, with the expectation that I'll hire a property manager and that its easier to build equity rather than more savings. It may take some work to find a good one that will look after the place, though. I also dont expect to quit my day job.
There seems to be a lot of info and support here - https://www.biggerpockets.com/ - I've been reading there a lot. One of my goals is that it will generate passive income once I'm done with the rat race.
Have fun man. Just make sure you read both sides of the coin before you dump too much money and energy into it. I used to build houses for people who rented them out and have a lot of friends that have tried to do it to build pAsSiVe InCoMe because they got roped in by the glamour of being a landlord. Every single one of them has horror stories and most of them have cut bait and gotten out of that market. Truly the best thing about that business is that you can use it to shelter your income from the tax man.
My favorite was the guy who bought a $450,000 townhouse that we built in Chantilly. He was a high ranking Navy officer and gone most of the time so he hired a company to keep it filled with renters and manage the property. As it turned out, the second renters he got were meth addicts and squatted. They finally got chased out of there somehow, I guess by the police. I was called in to do an initial assessment for our company's warranty service department (who obviously covered none of it). The entire place smelled like feces, they had pooped in every corner of every room. Every single door in the house was kicked in and broken. When the plumbers came in, they found meth pipes and drugs in the upstairs plumbing that they had tried to flush when the cops came. Unfortunately those broke the pipes and it basically rained shit water down through the entire house. Nearly every bit of drywall, insulation and all of the flooring had to be replaced. Maybe that guy got lucky and his homeowner's insurance covered some of that. Either way it was a massive sunk cost and loss of rental income for a long time while they had to assess, remediate (from the meth fumes but also from the black mold had already started to grow by the time i got there) and rebuild.
That's not exactly what I call a relaxing retirement income stream
Madison MoneySports - Personal Finance Thread - JPolen01 - 03-04-2020
I have a friend who has one rental property right now. He has a property manager, but they basically do nothing other than find him tenants. Whenever an issue arises they call him and it's his responsibility to fix it. They do have different levels of service and he chose to make his own repairs, but he still complains about their fee for essentially only finding a tenant.
You're not going to make any money for a long time with a house or two. Look at what you can rent for vs you're mortgage. Making a couple hundred profit every month is not worth having to be a landlord IMO. Your fridge goes tits up? Washer over flows? There goes the profit you made the last few months and possibly your weekend fixing the damage, if you can do it yourself.
Also where are you getting money for down payments on multiple houses? You buy one house and then shit you have to wait years to rebuild your savings for the down payment on the next? No thanks.
Everyone wants to play in real estate because of HGTV. Nobody understands the undertaking it actually takes to make money in that world.
RE: Madison MoneySports - Personal Finance Thread - WRXtranceformed - 03-04-2020
Not only that, but historical returns from just leaving your money in the market are like a 10% average. I would have to be staring down yearly profits at least double that or better to take on those headaches. Last year my entire portfolio was up almost 30%. For literally doing nothing other than moving some money around in a brokerage account. Your mileage may vary~
Madison MoneySports - Personal Finance Thread - D_Eclipse9916 - 03-04-2020
(03-04-2020, 09:48 AM).RJ Wrote:(03-04-2020, 09:35 AM)WRXtranceformed Wrote: I'll say it once again, residential real estate investing is not worth the time, investment funds, energy or effort unless you are a slum lord / own a trailer park or you have the capital to front for commercial condo buildings. Commercial real estate >>>> all without question but that also takes a lot of capital and knowledge.
I'm diving into it this year, with the expectation that I'll hire a property manager and that its easier to build equity rather than more savings. It may take some work to find a good one that will look after the place, though. I also dont expect to quit my day job.
There seems to be a lot of info and support here - https://www.biggerpockets.com/ - I've been reading there a lot. One of my goals is that it will generate passive income once I'm done with the rat race.
Don’t be scurred. If you are already maxing our your other investments it’s good.
Residential Rental and Real estate agent is my uncle’s only job for 20 years and his net worth and ridiculous “work” life makes me jealous. It’s not a get rich scheme but 5-10 years in 20-30% returns are there and not subject to typical taxation or based on “one to two years of drumpf pushing the market”.
AKA don’t quit your day job, pay attention, max your 401k and personal Roth first and then see where you are at. Personally I think tying 90% of your entire net worth to a finicky and volatile stock market is ridiculous. Sounds good when the market is up; not so great when you have to pull it out during a 5-8 year pull back cycle during retirement. See: timing your retirement income is almost as important as putting money away.
RE: Madison MoneySports - Personal Finance Thread - Apoc - 03-04-2020
People seem to be posting like you have to do one or the other. Most of us have money tied up in both given our primary residences. Yes, it's investing in real estate because none of us would tie up 5-6 figures in a down payment if we thought it was gonna lose money. I did not want to buy a house in Seattle, but we made $300k in four years. Extreme example, but that wasn't an investment I was gonna miss out on. The reality is both sides are right and you could/should do both to diversify.
Twenty years ago, I was the onsite property manager for a bunch of rentals my dad had in Alexandria. It sucked, a lot. People are pretty shitty to other people's things and basically cleaning up after them was annoying. The margins are pretty thin when you factor in maintenance cost; your real money comes in equity building over 10 years. If you're cool dealing with people's bullshit, do the work yourself. If that's annoying and you have the margin, a property manager can relieve you of that annoyance.
If we move to Europe, we're gonna keep our house and do a full management company. I don't want to have to do anything more than make decisions via email from the other side of the globe.
I've also passively shopped a vacation property in the mountains for years. That one is consider running myself as an Airbnb, but we wouldn't live close. I'd still have to find local contractors to do the work and I wouldn't be around to see the result. My decision there would largely depend on if I could break even while still using the cabin as a family when we wanted.
Also, real estate is NOT liquid. You need some investments you can turn into cash penalty free should you end up unpaid for 6-12 months... for whatever reason. 401k isn't the answer.
Madison MoneySports - Personal Finance Thread - D_Eclipse9916 - 03-04-2020
(03-04-2020, 12:23 PM)Apoc Wrote: People seem to be posting like you have to do one or the other. Most of us have money tied up in both given our primary residences. Yes, it's investing in real estate because none of us would tie up 5-6 figures in a down payment if we thought it was gonna lose money. I did not want to buy a house in Seattle, but we made $300k in four years. Extreme example, but that wasn't an investment I was gonna miss out on. The reality is both sides are right and you could/should do both to diversify.
Twenty years ago, I was the onsite property manager for a bunch of rentals my dad had in Alexandria. It sucked, a lot. People are pretty shitty to other people's things and basically cleaning up after them was annoying. The margins are pretty thin when you factor in maintenance cost; your real money comes in equity building over 10 years. If you're cool dealing with people's bullshit, do the work yourself. If that's annoying and you have the margin, a property manager can relieve you of that annoyance.
If we move to Europe, we're gonna keep our house and do a full management company. I don't want to have to do anything more than make decisions via email from the other side of the globe.
I've also passively shopped a vacation property in the mountains for years. That one is consider running myself as an Airbnb, but we wouldn't live close. I'd still have to find local contractors to do the work and I wouldn't be around to see the result. My decision there would largely depend on if I could break even while still using the cabin as a family when we wanted.
Also, real estate is NOT liquid. You need some investments you can turn into cash penalty free should you end up unpaid for 6-12 months... for whatever reason. 401k isn't the answer.
Agreed on all points.
However “real estate investment” of personal property does not give you anything into retirement as you have to live SOMEWHERE and also doesn’t give you a return every month in cash. Seattle is a bubble, expecting big gains is like expecting 10% returns the next 20 years
Many ways to skin a cat! I personally enjoy it and have a good resource. You may have 180 of an experience.
RE: Madison MoneySports - Personal Finance Thread - Apoc - 03-04-2020
(03-04-2020, 12:53 PM)D_Eclipse9916 Wrote: Agreed on all points.
However “real estate investment” of personal property does not give you anything into retirement as you have to live SOMEWHERE and also doesn’t give you a return every month in cash. Seattle is a bubble, expecting big gains is like expecting 10% returns the next 20 years
Many ways to skin a cat! I personally enjoy it and have a good resource. You may have 180 of an experience.
We've talked about this before and we still disagree. I do not plan to own a home in retirement and I certainly don't plan on doing it in a high cost of living area. Even if I had to reinvest a portion or spend it on rent, I'm not reinvesting all equity into my primary residence. I'm cashing out, making money on that money, and paying rent or buying much cheaper. Remember, your lifestyle is to grow roots. Mine is not.
We're also gonna have to disagree about Seattle being a bubble. All economic indicators, including job growth and capital investment, suggest Seattle is as much of a bubble as San Francisco. The crazy growth is over, but I don't believe there's gonna be a pop and large loss in property values unless it happens nationally. I'm not saying it can't go down, as it likely will (like the stock market), but these cities are more insulated than most in America.
https://www.geekwire.com/2020/seattle-tech-workers-earn-279k-year-average-double-wages-every-sector/
Tech salaries in Seattle are far outpacing the income of financial workers in New York, an industry that has long been associated with generous paychecks and luxury lifestyles. Seattle tech workers are earning 56 percent more than the average financial worker in New York City, a trend first spotted by Bloomberg.
The Seattle tech industry has experienced explosive growth over the past decade, led by giants such as Amazon and Microsoft and buoyed by startups and mid-sized companies. In addition to home-grown businesses, more than 130 out-of-town tech companies have opened Seattle engineering outposts to mine the region’s talent.
RE: Madison MoneySports - Personal Finance Thread - WRXtranceformed - 03-04-2020
Building equity in a single home is a lot different than buying up properties and renting them out. I'm all on board the diversification train and we've got a bunch of home equity right now. But the real smart kids are diversifying by investing in tax havens now so that you can pull out guaranteed income tax free when you retire, no matter what the market has done / will do. The value of your home is always market / time dependent just like the stock market and you're gonna get hit with capital gains if you don't reinvest the funds from any non-primary property you sell in retirement anyway. The Man and the Market are always going to take their cut.
The stock market is always going to rise and fall but its trend line is up over many decades and that's probably never going to discontinue. My personal opinion from lots of observation and that of many experts / advisors is that piecemeal rental properties are a waste of time, money and energy. It is fact that the richest people in real estate do it in the commercial space (which does include residential condos). On the sales side, a good commercial real estate broker makes a good residential real estate broker look like a poor peasant.
There's a ton of commercial zoned land for sale around us right now and I wish I had the funds to buy it up, sit for a bit and develop it. Whoever does is gonna own this part of town.
RE: Madison MoneySports - Personal Finance Thread - Apoc - 03-04-2020
I like the part where you described yourself as a real smart kid.
I think everyone agrees commercial is where it's at... but I doubt he has the capital so that's moot. The question is how he wants to diversify and how much he wants a side hussle to get there. Your and my retirement goals tend to be more mathematical in getting the most money with doing little. Not everyone is wired that way. Some like the hussle.
My dad and his dad were all residential real estate in the form of land. Dealing with tenants is when everything goes to shit.
...and building equity isn't any different if you're prospecting when you do it. Again, not everyone buys a house to live there for 20 years.
RE: Madison MoneySports - Personal Finance Thread - WRXtranceformed - 03-04-2020
(03-04-2020, 02:33 PM)Apoc Wrote: I like the part where you described yourself as a real smart kid.
I think everyone agrees commercial is where it's at... but I doubt he has the capital so that's moot. The question is how he wants to diversify and how much he wants a side hussle to get there. Your and my retirement goals tend to be more mathematical in getting the most money with doing little. Not everyone is wired that way. Some like the hussle.
Yeah that statement in bold is how I'm defining "smart". What would I know though? I'm not already fast approaching a lifetime financial goal before the age of 40 or anything
RE: Madison MoneySports - Personal Finance Thread - .RJ - 03-04-2020
For me I think its a 10-15 year 'investment' in both time and money, that I hope would include a bunch of houses. My thinking is that houses in the $150-200k range, probably in Richmond, that I can rent out enough to net $500/mo after management fees. One house by itself I agree is not worth the hassle but if I can find a good property manager that'll be key. This might be a pipe dream, but, one of my goals this year is to get rolling on this.
I'm sure as shit not buying a new construction, $450k house to rent, that's just stupid.
(03-04-2020, 02:37 PM)WRXtranceformed Wrote:(03-04-2020, 02:33 PM)Apoc Wrote: I like the part where you described yourself as a real smart kid.
I think everyone agrees commercial is where it's at... but I doubt he has the capital so that's moot. The question is how he wants to diversify and how much he wants a side hussle to get there. Your and my retirement goals tend to be more mathematical in getting the most money with doing little. Not everyone is wired that way. Some like the hussle.
Yeah that statement in bold is how I'm defining "smart". What would I know though? I'm not already fast approaching a lifetime financial goal before the age of 40 or anything
Did your custom house include wider doorways so your head fits through them?
RE: Madison MoneySports - Personal Finance Thread - WRXtranceformed - 03-04-2020
(03-04-2020, 03:31 PM).RJ Wrote: For me I think its a 10-15 year 'investment' in both time and money, that I hope would include a bunch of houses. My thinking is that houses in the $150-200k range, probably in Richmond, that I can rent out enough to net $500/mo after management fees. One house by itself I agree is not worth the hassle but if I can find a good property manager that'll be key. This might be a pipe dream, but, one of my goals this year is to get rolling on this.
I'm sure as shit not buying a new construction, $450k house to rent, that's just stupid.
(03-04-2020, 02:37 PM)WRXtranceformed Wrote:(03-04-2020, 02:33 PM)Apoc Wrote: I like the part where you described yourself as a real smart kid.
I think everyone agrees commercial is where it's at... but I doubt he has the capital so that's moot. The question is how he wants to diversify and how much he wants a side hussle to get there. Your and my retirement goals tend to be more mathematical in getting the most money with doing little. Not everyone is wired that way. Some like the hussle.
Yeah that statement in bold is how I'm defining "smart". What would I know though? I'm not already fast approaching a lifetime financial goal before the age of 40 or anything
Did your custom house include wider doorways so your head fits through them?
No custom house purchased yet, but it's in the plan for the future! I'm more concerned about custom toilets deep enough to handle my huge package without having to touch that cold water every time
RE: Madison MoneySports - Personal Finance Thread - Apoc - 03-04-2020
Cold toilet water? Clearly your investments are underperforming.