Author Topic: Investment property - Advice  (Read 2023 times)

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Offline Panda

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Re: Investment property - Advice
« Reply #15 on: November 13, 2017, 09:58:43 AM »
the.irvine,

I would agree with what Irvine commuter said. You have to find good foot in the ground people / team whom you can trust whether you decide to invest in the Carolinas or Atlanta. I believe that the most important skill for the investment broker/PM is having the ability to find, select and screen good tenants. When it comes to property management, I believe that my clients should be ones in control with full transparency, not the property management company. I favor the PM model of self-management out of state with backup support when needed to save on the fees. There are also two full service property management companies I am now working with for those who want to be completely hands off in property management. 

Although investing in Santa Ana vs investing in Forsyth County are apples and oranges as median home prices in Santa Ana is much higher than the median home price of Forsyth County, the tenant profile you will find in Forsyth County is going to be very different from the profile from that of Santa Ana. I would argue to say that the median household income of a Forsyth County resident is much higher than that of a Santa Ana resident. You find tenants who are white collar professionals in Forsyth County while the median home prices are much lower than that of Santa Ana. I like to focus in B and A class assets with good schools and demographics that attracted white collar professionals. These areas are currently North Gwinnett and Forsyth County. Forsyth County is by far the strongest landlord favoring county in Georgia that I know of. Forsyth County is currently the wealthiest county in GA and the 6th fastest growing in the nation with low property taxes.

Is it possible to manage out of state rentals? Say in ATL, NC , Dallas-TX etc

« Last Edit: November 13, 2017, 10:11:04 AM by Panda »
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Offline hello

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Re: Investment property - Advice
« Reply #16 on: November 13, 2017, 10:03:17 AM »
Investing in Orange County has never been about cash flow, so comparing to Forsyth County is like comparing oranges to peaches.  Similar but not the same, and oranges are much more popular.

In order to succeed at investing in Orange County, you have to invest for appreciation.  That means buying when the cycle is favorable (i.e. prices are low).  Right now, everybody feels like prices are very high.  Prices could go even higher, but the risks are increasing.

Going with hello's numbers, you need 4% appreciation per year just to break even on your negative cashflow.  You only start to profit if appreciation exceeds 4%.  So two questions you should ask are: Will appreciation be higher than 4% over the long term?  Will the returns you are getting be worth the risks you are taking?

OC used to cash flow.  It doesnt anymore.  Unfortunately "investors" are fighting for scraps now and resort to chasing appreciation.  In my opinion that is not really investing, but speculation.  Cash flow is king, appreciation is a bonus. 

I dont understand why one cannot compare Irvine RE to Forsyth RE.  Yes they have different pros and cons.  But isnt that what one should do when considering different investment choices? 

Furthermore, you will need more than 4% appreciation if you plan to make money.  Consider opportunity costs and selling costs of about 5% of home price.

Your goal is clearly to make some money.  You are really better off putting the money in other investment vehicles or if you really want to buy RE, then look outside of Irvine or outside of California. 

Offline Liar Loan

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Re: Investment property - Advice
« Reply #17 on: November 13, 2017, 10:16:05 AM »
OC used to cash flow.  It doesnt anymore.  Unfortunately "investors" are fighting for scraps now and resort to chasing appreciation.  In my opinion that is not really investing, but speculation.  Cash flow is king, appreciation is a bonus. 

I dont understand why one cannot compare Irvine RE to Forsyth RE.  Yes they have different pros and cons.  But isnt that what one should do when considering different investment choices? 

Yes, there have been points in time when OC cashflowed, most recently in 2011, but in general most of the return will come from appreciation.  Even those that bought cashflowing assets in 2011, have gotten most of their returns from appreciation.  The difference with other markets is that cashflow might be the primary return you get, while appreciation is secondary.

You can compare Irvine to any cashflowing market including Forsyth, but without context for the type of investing at play I don't think it makes any sense.  It would be like comparing a tech stock to a pharmaceutical stock.  They are both stocks that can be compared, but what does it really tell you?  One pays a very high dividend, and the other pays no dividend.  They both might go up in value, but generally a tech stock will have higher appreciation if purchased at the right time in the cycle.

I completely agree with you that investing for appreciation is speculation.  That's what I am, a speculator.

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Offline Irvinecommuter

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Re: Investment property - Advice
« Reply #18 on: November 13, 2017, 10:57:10 AM »
the.irvine,

I would agree with what Irvine commuter said. You have to find good foot in the ground people / team whom you can trust whether you decide to invest in the Carolinas or Atlanta. I believe that the most important skill for the investment broker/PM is having the ability to find, select and screen good tenants. When it comes to property management, I believe that my clients should be ones in control with full transparency, not the property management company. I favor the PM model of self-management out of state with backup support when needed to save on the fees. There are also two full service property management companies I am now working with for those who want to be completely hands off in property management. 

Although investing in Santa Ana vs investing in Forsyth County are apples and oranges as median home prices in Santa Ana is much higher than the median home price of Forsyth County, the tenant profile you will find in Forsyth County is going to be very different from the profile from that of Santa Ana. I would argue to say that the median household income of a Forsyth County resident is much higher than that of a Santa Ana resident. You find tenants who are white collar professionals in Forsyth County while the median home prices are much lower than that of Santa Ana. I like to focus in B and A class assets with good schools and demographics that attracted white collar professionals. These areas are currently North Gwinnett and Forsyth County. Forsyth County is by far the strongest landlord favoring county in Georgia that I know of. Forsyth County is currently the wealthiest county in GA and the 6th fastest growing in the nation with low property taxes.

Is it possible to manage out of state rentals? Say in ATL, NC , Dallas-TX etc



Offline Irvinecommuter

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Re: Investment property - Advice
« Reply #19 on: November 13, 2017, 11:00:21 AM »
I am no expert in real estate investing but I am in touch with several...single home investment is super tough with minimal return.  Money to be made in on flipping, not owning/renting.  You can screen all you want but get just one bad tenant...you have lost all your profit.

Money is in commercial real estate and multi-unit residence complexes...problem is that you need substantial cash flow to do that.   

If you have like $150-200K to invest...you are much better off in the stock market or mutual funds.  If you really want to invest in real estate, go with a REIT.

https://ycharts.com/indices/%5EDJER/ytd_return
« Last Edit: November 13, 2017, 11:24:30 AM by Irvinecommuter »

Offline dream16

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Re: Investment property - Advice
« Reply #20 on: November 13, 2017, 11:04:10 AM »
I am no expert in real estate investing but I am in touch with several...single home investment is super tough with minimal return.  Money to be made in on flipping, not owning/renting.  You can screen all you want but get just one bad tenant...you have lost all your profit.

Money is in commercial real estate and multi-unit residence complexes...problem is that you need substantial cash flow to do that.   

If you have like $150-200K to invest...you are much better off in the stock market or mutual funds.  If you really want to invest in real estate, go with a REI.

https://ycharts.com/indices/%5EDJER/ytd_return

What links/resources/forums would you recommend to someone who has zero knowledge about investing in REI's? Thank you

Offline Irvinecommuter

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Re: Investment property - Advice
« Reply #21 on: November 13, 2017, 11:23:33 AM »
I am no expert in real estate investing but I am in touch with several...single home investment is super tough with minimal return.  Money to be made in on flipping, not owning/renting.  You can screen all you want but get just one bad tenant...you have lost all your profit.

Money is in commercial real estate and multi-unit residence complexes...problem is that you need substantial cash flow to do that.   

If you have like $150-200K to invest...you are much better off in the stock market or mutual funds.  If you really want to invest in real estate, go with a REI.

https://ycharts.com/indices/%5EDJER/ytd_return

What links/resources/forums would you recommend to someone who has zero knowledge about investing in REI's? Thank you

Honestly...I would say to talk to people who already done it and have no financial incentives with respect to provide advice to you.  Most articles/discussion are from a 50,000 feet level and not all that helpful to an individual investor.   Talk to investors, loan people, and attorneys about the pros and cons of REI and be realistic about your situation.   You also want to talk to a CPA about the tax ramifications.

Again, this is not to say that you cannot have success in REI or any other form of investment but it takes a lot of work, research, and luck to do well.  It's not a "hey, let's buy a house and rent it out".   Even if you have a local property, there is a lot of time and effort that you need to commit to.  I can't tell you the number of times I have heard "I have to drive out to ___________ cause my tenant is complaining about __________________."   

Edit:  I just realize that I meant to type REIT instead of REI.  REIT is like mutual funds but with the money going to RE investment (usually commercial).  There are a number of types of REIT that specialize in a variety of property.  Some have better return than others but of course also means more risk.

http://www.steadfastreits.com/reit-university/reit-fundamentals

https://www.investopedia.com/articles/mortgages-real-estate/10/real-estate-investment-trust-reit.asp

Offline Ready2Downsize

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Re: Investment property - Advice
« Reply #22 on: November 13, 2017, 11:38:23 AM »
I am no expert in real estate investing but I am in touch with several...single home investment is super tough with minimal return.  Money to be made in on flipping, not owning/renting.  You can screen all you want but get just one bad tenant...you have lost all your profit.

Money is in commercial real estate and multi-unit residence complexes...problem is that you need substantial cash flow to do that.   

If you have like $150-200K to invest...you are much better off in the stock market or mutual funds.  If you really want to invest in real estate, go with a REIT.

https://ycharts.com/indices/%5EDJER/ytd_return

You are definitely right about the one bad apple but can you still make money on flipping as a "regular person" around here?

I see if you are a realtor/construction team you could reduce your costs substantially (real estate commission, maybe getting a "deal" on closing costs, knowing where to buy building supplies that get a contractor rate) but then you are getting your profit on your time put into the project.

Selling commission is on the whole enchilada not just the profit.

When I watch Flip or Flop, I say but but but.... that must include only the commish to the selling agent for their closing cost and I see they did work themselves.

Offline Irvinecommuter

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Re: Investment property - Advice
« Reply #23 on: November 13, 2017, 11:55:08 AM »
I am no expert in real estate investing but I am in touch with several...single home investment is super tough with minimal return.  Money to be made in on flipping, not owning/renting.  You can screen all you want but get just one bad tenant...you have lost all your profit.

Money is in commercial real estate and multi-unit residence complexes...problem is that you need substantial cash flow to do that.   

If you have like $150-200K to invest...you are much better off in the stock market or mutual funds.  If you really want to invest in real estate, go with a REIT.

https://ycharts.com/indices/%5EDJER/ytd_return

You are definitely right about the one bad apple but can you still make money on flipping as a "regular person" around here?

I see if you are a realtor/construction team you could reduce your costs substantially (real estate commission, maybe getting a "deal" on closing costs, knowing where to buy building supplies that get a contractor rate) but then you are getting your profit on your time put into the project.

Selling commission is on the whole enchilada not just the profit.

When I watch Flip or Flop, I say but but but.... that must include only the commish to the selling agent for their closing cost and I see they did work themselves.

Oh I agree...flipping is insanely difficult and risky and you need a ton of commitment/research/personal knowledge.  People understand (or should understand) how risky flip is but think renting a property is a piece of cake. 

Offline hello

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Re: Investment property - Advice
« Reply #24 on: November 13, 2017, 02:51:24 PM »
I am no expert in real estate investing but I am in touch with several...single home investment is super tough with minimal return.  Money to be made in on flipping, not owning/renting.  You can screen all you want but get just one bad tenant...you have lost all your profit.

Money is in commercial real estate and multi-unit residence complexes...problem is that you need substantial cash flow to do that.   

If you have like $150-200K to invest...you are much better off in the stock market or mutual funds.  If you really want to invest in real estate, go with a REI.

https://ycharts.com/indices/%5EDJER/ytd_return

What links/resources/forums would you recommend to someone who has zero knowledge about investing in REI's? Thank you

Consider syndications as well.  This is probably the most hands off approach to actually owning a piece of property without doing any work.


Offline shahshah

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Re: Investment property - Advice
« Reply #25 on: November 13, 2017, 06:46:51 PM »
Folks must know that they are not going to be cash flow positive buying over the past few years. Yes, if they are looking to park half of an 800-900k home and get a loan they can be positive in the cash coming in. They make not care about parking money vs opp cost of putting the money somewhere else.

I think the argument is that the property market in Irvine is stable and less volatile then the stock market. Yes renting can be a pain and less so with the right property manager but it is part of the process.

The other thing is though people say you just have to get in but what if people start laughing when someone on this board is looking for 4bd and asking where they can find homes for less than 1.5m in Irvine.

Offline irvinehomeowner

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Re: Investment property - Advice
« Reply #26 on: November 14, 2017, 09:08:17 AM »
Flipping seems easy considering how many home projects (and sales) we've done over the years.

It's really easy to buy inexpensive stuff that looks expensive and raises the value on a flip... I just think it's time intensive and you have to have a consistent contractor team for all the work. New paint and flooring alone adds perceived value to any dated home.

A relative of mine just went to through a kitchen reno and they could have probably spent just 1/3 if they went with more inexpensive stuff that looks just as good. They don't really need that $3000 range when an $800 one will look just as nice to a buyer. Since you are not going to live in it, it's easier to put in the cheaper stuff.

I remember when we sold our last house... paint, newer sink fixtures and good staging probably netted us at least 10% more than similar homes and we didn't come close to spending that much on it.

Who wants to be part of my Flip or Flop Irvine team?
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Offline Irvinecommuter

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Re: Investment property - Advice
« Reply #27 on: November 14, 2017, 10:19:01 AM »
Flipping seems easy considering how many home projects (and sales) we've done over the years.

It's really easy to buy inexpensive stuff that looks expensive and raises the value on a flip... I just think it's time intensive and you have to have a consistent contractor team for all the work. New paint and flooring alone adds perceived value to any dated home.

A relative of mine just went to through a kitchen reno and they could have probably spent just 1/3 if they went with more inexpensive stuff that looks just as good. They don't really need that $3000 range when an $800 one will look just as nice to a buyer. Since you are not going to live in it, it's easier to put in the cheaper stuff.

I remember when we sold our last house... paint, newer sink fixtures and good staging probably netted us at least 10% more than similar homes and we didn't come close to spending that much on it.

Who wants to be part of my Flip or Flop Irvine team?

Two biggest money traps for a property are 1) unseen issues with the property and 2) holding costs.   There are also some hidden costs.

https://www.thebalance.com/pros-and-cons-of-flipping-a-property-2124830

Offline Panda

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Re: Investment property - Advice
« Reply #28 on: November 14, 2017, 11:40:22 AM »
IHO,
Flipping homes is taxed at earned income level while buy and hold rental properties are taxed at passive income level. In the financial markets, flippers are like day traders while buy and hold investors are like investors buy and hold their S&P 500 index for 10 years +. Flipping is what I consider Income Statement wealth whereas buy and hold investing is considered Balance Income Wealth. You need focus on growing your balance sheet wealth, not your income statement wealth.

Flipping is no different from any other active small business like a web designer selling each websites for $3000.00 in that both are taxed at the earned income level. Flipping homes is difficult to sustain long term, while buying and renting single family homes is a sustainable long term semi-passive business.

This is why for every millionaire flipper, there will be at least 10-15 buy and hold millionaire investors.
James Park, MBA
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Offline irvinehomeowner

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Re: Investment property - Advice
« Reply #29 on: November 14, 2017, 11:59:20 AM »
Heh.

I won't be challenging Tarek in my lifetime (does he still do ForF?).

I just think it would be fun to try a few... maybe when I'm retired.
Once you go 3-car garage... your junk can never go back.
3CWG: 3-Car Wide Garage
FCB: Foreign Cash Buyer
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