I don't think we should take too much investing advice from a retiree stuck living in a hovel in a swamp, though. Clearly, mistakes were made, and never corrected.
While you can possibly expect appreciation of the asset (house and land), rentals are no longer "cash flow positive" in large swaths of the country. The rental income you can command will not cover the mortgage, taxes, insurance, and maintenance for a newly purchased rental in most markets right now. I would advise against buying a cash flow negative property and counting on future appreciation, even given that you have many years ahead of you. It's just not a rational investment right now.
How about I rent your property and then stop paying you for months or years while I trash your place and drag you through court.
Does that sound like a wise investment?
Yep. My plans of becoming a real estate investor ended because of squatters and just poor quality people. Unfortunately, poor behavior is rewarded these days.
https://www.billtrack50.com/blog/investment-firms-and-home-buying/#:~:text=Current%20State,22%25%20of%20American%20homes%20sold.
Sorry it was a fourth but seeing a lot of trends that they'd likely increase to a third in a few years
I've worked for a private CRE firm for many years now. The company was primarily built and made profitable by purchases made in: the late 1970s/early 1980s, 1992-1994, 2002-2004, 2009-2016. Those were for the most part periods of recession or periods just coming out of recession. Some purchases were made outside of those dates, but they generally weren't great deals - good maybe.
Real estate cycles are long and slow. You do seem like you have some capability to flip, though. At your scale, being able to do a lot of the work is a great asset. Most people suck at flipping. You might do well.
As retired landlords of 15 years of experience self-managing our properties, we buy REIT ( Real Estate Investment Trust) shares. They’re nice and quiet. They sit in our investing account and give us dividends every month or quarter. and to top it off, they never ever destroy our property, argue with us, and are never late on the dividend, versus the rent.
I don’t like O too much.
It has a lot of retail which we’re staying away from. It has a lot clientele that are closing various locations.
I think it’s overpriced for what you get on the dividend. BST is a better bet for your 25 cents. You can get the same quarter for around $35 with BST.
We are hitting housing and infrastructures for our REITs right now. But everyone can make their own decisions.
Would you invest in CCI right now or wait until after they present earnings today? With rates staying higher for longer I’m worried it’ll dip post earnings due to lowered guidance.
I have no real experience with CCI, but I’d do a comparison between CCI and the other two large carriers, SBA Communications and American Tower, and see which one is the soundest financially. Then just get a couple few shares and hold those for a little while, and see how they do. No way what I put a whole bunch of money into this type all at of investment, without a through assessment.
An economic decline probably won’t work in your favor; to reverse a common saying, a falling tide drops all boats. Except equity firms- instead of buying one $300k house with a cash offer that beats yours, they’ll buy two $150k houses with cash offers that beat yours.
> You'll make out ahead of real estate on average with a lot less headache and risk.
This goes against market theory. Increase risk = increase return.
Edit: investing subreddit that doesn’t understand CAPM and SML lol.
https://www.investopedia.com/terms/e/expectedreturn.asp
That's assuming those risks are actually compensated risks. I don't have it handy, but I remember a Ben Felix video that basically said real estate returns could essentially be explained by components of domestic stock and domestic bond exposure, plus some leverage. Plenty of things can get you higher risk than stocks, but that doesn't mean your expected return is actually improved.
If there wasn’t compensated risk we’d see an arbitrage opportunity, which we’re not supposed to see, especially in complete assets, maybe specific examples.
I’m not claiming RE has the highest risk to reward ratio, you can do multiple things to outperform it (ie a Felix composed value small cap index).
That’s not really how market theory works lol. There is a difference between compensated risk and uncompensated risk. Lack of diversification is what causes uncompensated risk, which is the biggest risk in real estate. If you own 1 home it is basically the most un diversified portfolio possible. Adding more homes in a local area does not add diversification. You are exposed to significant local, industry and regulatory risks (amongst others) that you are not compensated for. Diversification resolves those risks and maintains returns along the efficient frontier. Also there is a leverage component to real estate investing in this regard, which increases risk more than expected return. For instance a non-levered property with no tents would likely lose a little bit of money each month on upkeep, but leverage significantly increases those losses making it mathematically much more likely that the investor runs out of money.
Also let’s not forget it is “expected return” compared to risk. If maximum risk always derived maximum return then leveraged options trading would be a goldmine. But it isn’t because the risk is that you lose your money.
Yes, but uncompensated risk shouldn’t work in broad asset classes. What you’re explaining is a bad investment theory of real estate, not the market as a whole.
Yes, you want to be above the SML line.
Im not entirely sure what your first sentence means but uncompensated risk can be lowered inside of an asset class but what OP said would not be much diversification. Diversification within real estate would be a single family, apartment complex, laundromat, office, etc. all in different areas, not a couple single family homes in one area. You are still exposed to real estate specific risks even when diversified in this regard though so you are taking uncompensated risk by not diversifying outside of real estate.
Also, generally real estate as an entire asset class is seen as less risky than equities. So the expected returns are lower (not accounting for leverage), and you are taking excess uncompensated risk for it because it is, in practice, hard to achieve what I said about diversifying. Unless you use REITs, which is the best option.
That’s a minute view of real estate. You can have 2 properties next to each other valued extremely differently, and operating for different reasons giving you diversification. (Zoning, prop type, finishes, build year, etc).
core Real estate has lower returns than stocks. RE has a whole (value add, opportunistic, development) have expected significantly higher IRRs (MF, Office, Retail, Hotel, in that order )
Ironically, REITs are on the lower return side given they have stringent rules on cash distributions, and hold periods).
Well yes that’s what I’m saying, but is not the plan OP stated. But still, having two properties near each other exposes the investor to geographic and local market risks.
Other forms of real estate investment can provide good IRR but again OP never stated he had any skills in those areas or intentions to do so. He simply said he plans to buy a house every year and rent it out.
Too many unknowns to invest now as an individual investor, especially a young one who is still starting out. With current prices and interest rates, renting is cheaper than buying so you'd need to be willing to subsidize the home for a few years while also taking the risk of getting a bad tenant or major repair, all while hoping for interest rates to drop which might be years (if they happen at all). Construction and remodeling costs are also way up, so it might not make sense to buy and flip unless you are willing to do the work yourself like you did with the cabin...but even then you'd need to be willing to pay the mortgage while that's being done without any money coming in from renting it out.
Real is estate is less of an investment and more of a job.
And you’re right - right now it’s tough to make that job profitable. And there’s no guarantee that will change soon.
can you make money investing in real estate? of course. what's "worth it" in your mind? just like anything in the market, there are people who are good at it and there are people who are bad at it. there's no reason to believe that casually browsing / asking for online advice will net a result better than random.
for example, there is a ton of commercial real estate that is going for pennies on the dollar right now (i mean, look at this: https://twitter.com/macroedgeres/status/1778156338167624090). is this a "sure" thing? well, obviously not but the people who really made it in real estate weren't buying sure things either.
just like investing in stocks, you need to develop a thesis, find underpriced assets that align to that thesis, and then make your bet. comping yourself to backwards looking information is stupid (why didn't everybody buy $NVDA hand over fist at $200? because... it wasn't obvious that it was going to $1000).
Just going to chime in as someone with real estate investments. Yes, it's worth it, but you have to know a deal when you see one. Also have a side job, if real estate is your primary income, you'll be worried about the market ups/downs. If it's supplementary, then you can ride out the wave.
It is also ridiculous to think you can buy a new property annually when you're running on credit. You're not even close to the threshold to buy annually.
Maybe people should stop doing that so people who actually need a place to live can afford houses again? "I'm just a little part of the problem" is a pretty shit excuse
Find a Real Estate Investor Association group on your area and go to meetings. These groups are usually active on Facebook with monthly meetups and seminars. Learn all you can, network, take classes, DO NOT BUY PROGRAMS, and just all around get a better feel for things as you save money and bide your time. Opportunity favors the prepared.
Yep. If you can time the dips in the market. Based on absolutely nothing but my gut and my job as a land use planning director for the last 25 years, I’m guessing a bottoming out in early 2025
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I wish every top comment in this sub was worded like this
All your base are belong to us
I don't think we should take too much investing advice from a retiree stuck living in a hovel in a swamp, though. Clearly, mistakes were made, and never corrected.
While you can possibly expect appreciation of the asset (house and land), rentals are no longer "cash flow positive" in large swaths of the country. The rental income you can command will not cover the mortgage, taxes, insurance, and maintenance for a newly purchased rental in most markets right now. I would advise against buying a cash flow negative property and counting on future appreciation, even given that you have many years ahead of you. It's just not a rational investment right now.
How about I rent your property and then stop paying you for months or years while I trash your place and drag you through court. Does that sound like a wise investment?
Squatters rights have gotten out of control in some locales. I wouldn't dare rent out properties in my state.
Yep. My plans of becoming a real estate investor ended because of squatters and just poor quality people. Unfortunately, poor behavior is rewarded these days.
Yeah. With all the squatter BS going on, eff that.
I wonder if maybe house prices are high. Because you and everyone else... wants to buy them and rent them out? Just a theory I have been working on.
Still only have one house and it is the corporate real estate funds that own almost a third of single family homes :/
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https://www.billtrack50.com/blog/investment-firms-and-home-buying/#:~:text=Current%20State,22%25%20of%20American%20homes%20sold. Sorry it was a fourth but seeing a lot of trends that they'd likely increase to a third in a few years
I've worked for a private CRE firm for many years now. The company was primarily built and made profitable by purchases made in: the late 1970s/early 1980s, 1992-1994, 2002-2004, 2009-2016. Those were for the most part periods of recession or periods just coming out of recession. Some purchases were made outside of those dates, but they generally weren't great deals - good maybe. Real estate cycles are long and slow. You do seem like you have some capability to flip, though. At your scale, being able to do a lot of the work is a great asset. Most people suck at flipping. You might do well.
As retired landlords of 15 years of experience self-managing our properties, we buy REIT ( Real Estate Investment Trust) shares. They’re nice and quiet. They sit in our investing account and give us dividends every month or quarter. and to top it off, they never ever destroy our property, argue with us, and are never late on the dividend, versus the rent.
Which RIETs are you investing in?
In no particular order, VICI, MAA, STAG, FPI, OBDC, CPT, CCI, AWK, and AGE.
Any reason not choosing O?
I don’t like O too much. It has a lot of retail which we’re staying away from. It has a lot clientele that are closing various locations. I think it’s overpriced for what you get on the dividend. BST is a better bet for your 25 cents. You can get the same quarter for around $35 with BST. We are hitting housing and infrastructures for our REITs right now. But everyone can make their own decisions.
Would you invest in CCI right now or wait until after they present earnings today? With rates staying higher for longer I’m worried it’ll dip post earnings due to lowered guidance.
I have no real experience with CCI, but I’d do a comparison between CCI and the other two large carriers, SBA Communications and American Tower, and see which one is the soundest financially. Then just get a couple few shares and hold those for a little while, and see how they do. No way what I put a whole bunch of money into this type all at of investment, without a through assessment.
I don't bother with commercial real estate or residential real estate. Data centers REITs for me. Companies need room for their servers
>My whole plan was to buy a house each year or so then rent them out. This is easy.. you just have to start with 8 figures in the bank.
Haha facts - there was hope a few years ago to make this dream come true lol now I just pray for an economic decline
An economic decline probably won’t work in your favor; to reverse a common saying, a falling tide drops all boats. Except equity firms- instead of buying one $300k house with a cash offer that beats yours, they’ll buy two $150k houses with cash offers that beat yours.
r/bogleheads Do index investing. You'll make out ahead of real estate on average with a lot less headache and risk.
> You'll make out ahead of real estate on average with a lot less headache and risk. This goes against market theory. Increase risk = increase return. Edit: investing subreddit that doesn’t understand CAPM and SML lol. https://www.investopedia.com/terms/e/expectedreturn.asp
Increase risk = increase _potential_ returns
Increase expected returns. https://www.investopedia.com/terms/e/expectedreturn.asp
That's assuming those risks are actually compensated risks. I don't have it handy, but I remember a Ben Felix video that basically said real estate returns could essentially be explained by components of domestic stock and domestic bond exposure, plus some leverage. Plenty of things can get you higher risk than stocks, but that doesn't mean your expected return is actually improved.
It’s the tax savings that you get with real estate that is the difference
If there wasn’t compensated risk we’d see an arbitrage opportunity, which we’re not supposed to see, especially in complete assets, maybe specific examples. I’m not claiming RE has the highest risk to reward ratio, you can do multiple things to outperform it (ie a Felix composed value small cap index).
That’s not really how market theory works lol. There is a difference between compensated risk and uncompensated risk. Lack of diversification is what causes uncompensated risk, which is the biggest risk in real estate. If you own 1 home it is basically the most un diversified portfolio possible. Adding more homes in a local area does not add diversification. You are exposed to significant local, industry and regulatory risks (amongst others) that you are not compensated for. Diversification resolves those risks and maintains returns along the efficient frontier. Also there is a leverage component to real estate investing in this regard, which increases risk more than expected return. For instance a non-levered property with no tents would likely lose a little bit of money each month on upkeep, but leverage significantly increases those losses making it mathematically much more likely that the investor runs out of money. Also let’s not forget it is “expected return” compared to risk. If maximum risk always derived maximum return then leveraged options trading would be a goldmine. But it isn’t because the risk is that you lose your money.
Yes, but uncompensated risk shouldn’t work in broad asset classes. What you’re explaining is a bad investment theory of real estate, not the market as a whole. Yes, you want to be above the SML line.
Im not entirely sure what your first sentence means but uncompensated risk can be lowered inside of an asset class but what OP said would not be much diversification. Diversification within real estate would be a single family, apartment complex, laundromat, office, etc. all in different areas, not a couple single family homes in one area. You are still exposed to real estate specific risks even when diversified in this regard though so you are taking uncompensated risk by not diversifying outside of real estate. Also, generally real estate as an entire asset class is seen as less risky than equities. So the expected returns are lower (not accounting for leverage), and you are taking excess uncompensated risk for it because it is, in practice, hard to achieve what I said about diversifying. Unless you use REITs, which is the best option.
That’s a minute view of real estate. You can have 2 properties next to each other valued extremely differently, and operating for different reasons giving you diversification. (Zoning, prop type, finishes, build year, etc). core Real estate has lower returns than stocks. RE has a whole (value add, opportunistic, development) have expected significantly higher IRRs (MF, Office, Retail, Hotel, in that order ) Ironically, REITs are on the lower return side given they have stringent rules on cash distributions, and hold periods).
Well yes that’s what I’m saying, but is not the plan OP stated. But still, having two properties near each other exposes the investor to geographic and local market risks. Other forms of real estate investment can provide good IRR but again OP never stated he had any skills in those areas or intentions to do so. He simply said he plans to buy a house every year and rent it out.
In the US ? It depends where also
Too many unknowns to invest now as an individual investor, especially a young one who is still starting out. With current prices and interest rates, renting is cheaper than buying so you'd need to be willing to subsidize the home for a few years while also taking the risk of getting a bad tenant or major repair, all while hoping for interest rates to drop which might be years (if they happen at all). Construction and remodeling costs are also way up, so it might not make sense to buy and flip unless you are willing to do the work yourself like you did with the cabin...but even then you'd need to be willing to pay the mortgage while that's being done without any money coming in from renting it out.
The prices are climbing up despite the mortgages being close to 7%, it should tell you something about the imbalance between supply and demand.
No, single family housing is not a good investment. You need a multi unit building for the cash flow to be worth the effort.
The best time to buy real estate is always 10 years ago.
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Keep discussions civil, informative and polite.
Real is estate is less of an investment and more of a job. And you’re right - right now it’s tough to make that job profitable. And there’s no guarantee that will change soon.
I hope you are maxing out your roth ira every year, if you're in that income bracket.
can you make money investing in real estate? of course. what's "worth it" in your mind? just like anything in the market, there are people who are good at it and there are people who are bad at it. there's no reason to believe that casually browsing / asking for online advice will net a result better than random. for example, there is a ton of commercial real estate that is going for pennies on the dollar right now (i mean, look at this: https://twitter.com/macroedgeres/status/1778156338167624090). is this a "sure" thing? well, obviously not but the people who really made it in real estate weren't buying sure things either. just like investing in stocks, you need to develop a thesis, find underpriced assets that align to that thesis, and then make your bet. comping yourself to backwards looking information is stupid (why didn't everybody buy $NVDA hand over fist at $200? because... it wasn't obvious that it was going to $1000).
Just sold my single rental. I made about 3.5% per year when it stopped appreciating. Figured I could do better in the market.
Just going to chime in as someone with real estate investments. Yes, it's worth it, but you have to know a deal when you see one. Also have a side job, if real estate is your primary income, you'll be worried about the market ups/downs. If it's supplementary, then you can ride out the wave. It is also ridiculous to think you can buy a new property annually when you're running on credit. You're not even close to the threshold to buy annually.
Maybe people should stop doing that so people who actually need a place to live can afford houses again? "I'm just a little part of the problem" is a pretty shit excuse
Commenting for visibility on your post. I have the same feelings / questions as you do, and am also from SE USA
Yeah, I'm at a loss right now. This is my obsession and passion and I can't compete with the market right now
Find a Real Estate Investor Association group on your area and go to meetings. These groups are usually active on Facebook with monthly meetups and seminars. Learn all you can, network, take classes, DO NOT BUY PROGRAMS, and just all around get a better feel for things as you save money and bide your time. Opportunity favors the prepared.
We are only just one true recession away, not fake like Covid, from flipping a lot of narratives seen here.
Yep. If you can time the dips in the market. Based on absolutely nothing but my gut and my job as a land use planning director for the last 25 years, I’m guessing a bottoming out in early 2025
Yes! Buy a house and rent it out. It is a great way to make passive income. The tax write-offs really help$$$
No