Is it really worth buying a real estate?

If I read John Galt and thebacchus correctly, then what they are saying is that by developing a few specialized skills and investing a good chunk of your own time, you can make money on real-estate by finding problem-properties an fixing them.

Hmmm... I also have a technique for converting specialized skills and time into money by solving other people's problems. I call it a job.

How is this any different from any other kind of work? How is it an "investment" if to profit from it you need to get up every morning, put on your ratty old blue-jeans and start a long day of sanding/painting/fencing/roofing or whatever else? I'd rather be at the office having a coffee at my desk and reading this forum!
 
How is this any different from any other kind of work?
Click to expand...

Its just like any other type of self employment. Some people contract out the management, but it gives you lower profits. You need more units to earn a living this way. If your desire is to lay on the beach all day, stick to passive investments in retirement. Fixer upper rentals can be a good way to amass money for retirement, but they are a lot of work. You either enjoy that type of work, or you don't.
 
GDH is right. No matter how you do it. Outside management , fixer-uppers, seller don't-wanters,
it is still work. In my case, when I was young I enjoyed it more than any other income producing activity I tried.
Never made the jump to full time real estate
investing but I sure thought about it a lot. Anyway,
it's not for everyone. Alas, my time has now passed.
If I buy more real estate it will likely be raw land.
Probably no cash flow, but no hassle either. An aside.
Yesterday I was fishing nearby a hunting club I once owned and sold off. Got a bit wistful thinking about all the good times we enjoyed there.
Taxes were low and no real hassles other than an occasional trespasser. Anyway, I moved the money
into other real estate so that now I get some cash flow.
Even with hired management it can be PITA.

John Galt
 
GTM, my brother is a multi-millionaire. His net worth is approaching five million and his monthly income from positive cash flow on rents is about $10,000 a month.

All his RE is in San Diego, CA and is appreciating about 25% a year--minimum!

He bought back in the early seventies. He was then and he is now a barber in a one-chair shop. His income from that has NEVER been over $25K.

Every couple of years for the last 30 years we have had the following discussion:

Me: Sell now there is no way real estate prices can go up!

Him: They will go up, so why sell?

Every time, he has been right and I have been wrong.

He has sat in his shop and made more money from appreciation than I made working for a living with my five degrees!

Is real estae really worth buying? Are you kidding?

Check this out:

http://roqc.tripod.com/whatcolorareyourhandcuffs/
 
I think that link would be better in the No work and No brains Category.
 
HI bruce. I agree that post is in the wrong category.

The old juices are still pumping through my somewhat
constricted arteries. Last night I am taking a late stroll
down our lane with my black Lab. We normally do our
exploring elsewhere as the lane is only half a mile long and deadends either way. Anyway, the real estate
has been flying out of here all summer. As I pass
what little is left for sale, I am thinking about how cheap I might buy it and what I could do with it. My brain just kicks into autopilot on this stuff, and I read the paper
and all of the real estate booklets and flyers
religiously. Deals abound but I don't want the hassle.
When I was younger I didn't have the time to work on
these deals much. Now that I have the time, I have neither the energy nor am I inclined to mess up
my freedom to loaf and wander at will. That's irony folks.

John Galt
 
GTM, my brother is a multi-millionaire.  His net worth is approaching five million and his monthly income from positive cash flow on rents is about $10,000 a month.

All his RE is in San Diego, CA and is appreciating about 25% a year--minimum!

He bought back in the early seventies.  He was then and he is now a barber in a one-chair shop.  His income from that has NEVER been over $25K.

Every couple of years for the last 30 years we have had the following discussion:

Me: Sell now there is no way real estate prices can go up!

Him:  They will go up, so why sell?

Every time, he has been right and I have been wrong.

He has sat in his shop and made more money from appreciation than I made working for a living with my five degrees!

Is real estae really worth buying?  Are you kidding?

Check this out:

http://roqc.tripod.com/whatcolorareyourhandcuffs/
Click to expand...

Consejo:

I was in the Marine Corps. in San Diego in 1954. San Diego was blessed with climate that would be well matched with any place on earth. The population then was about 100,000 people. It now has over 2,000,000
population.
To extrapolate your brothers experience with real estate
(at least on the appreciation side), is much like using an individual that bought Microsoft at the start-up price for
an idea of how well you can do in the stock market.
As far as appreciating 25% a year, commen sense, and
finding folks with the ability to pay, has stretched that rubber band about as far as it can go.
For a young man that has time on his side, can find an area that will have explosive growth (unexpected), he also will have stories to tell his grandchildren.
For the lions share of real estate investors, it is a tough, grinding type of hands on "work", that not many have a stomach for. (Been there, done that).
Regards, Jarhead
 
Hello Jarhead! I agree with you that real estate investing can be "tough, grinding type of hands-on work
that not many have the stomach for". But, if it was easy
then everyone would be doing it. I loved it in my younger days, but let's face it, many people
(if not most) are very reluctant to be landlords and deal with tenants. Also, it takes a lot of knowledge to be
successful over time. I too have "been there- done that".
And, I do not intend to go back. I wish I could though.
I truly do.

John Galt
 
Hmmm... I also have a technique for converting specialized skills and time into money by solving other people's problems. I call it a job.

How is this any different from any other kind of work? How is it an "investment" if to profit from it you need to get up every morning, put on your ratty old blue-jeans and start a long day of sanding/painting/fencing/roofing or whatever else? I'd rather be at the office having a coffee at my desk and reading this forum!
Click to expand...

Like I have mentioned before, this isn't for everyone, but I happen to enjoy it.

I don't mind the "work." Being a workaholic seeking ER, I find it relaxing compared to other work I do which is highly demanding. There also is a tremendous amount of satisfaction in taking on a project and turning it around. If I don't feel like working on a property, I don't. Try telling your boss that you don't feel like working! This form of income production also provides tax benefits that ordinary income will not.

Quite often though, the "work" is not done with our own hands. Often we will find a property that we will have painters and floor specialists go through and do very little ourselves other than write the checks. Depends on the property and our plan for it.

We also have been fortunate and have met a few other investors that we have become partners with in some larger projects that we would not have been able to get into otherwise. Most are land developments that have done very well for us with a minimal amount of management required. We have now gotten to the point that we have banks that watch for properties for us as they want a shot at providing the financing.

Bear in mind that this does not happen over night. Like any other business, it has taken several years to get to this point.

We all have our investment preferences. This is another diversification strategy for us, but as with all strategies, it's not for everyone.

-TB.
 
Jarhead, your point is valid...except for this...in NYC a one bedroom apt in a coop is $1M!

Like I said, I didn't think it could go up any more 20 years ago! It defies the laws of gravity. :confused:

But you don't need the crazy appreciation rates we've been seeing for the last ten years to make residential real estate a great investment. The reason? Multiple streams of income all contributing to your bottom line:

Market value appreciation, obviously but there is also tax deductions including deprecation and rent appreciaition and principle paydown. Then when it makes sense, you refinance the lower balance on your mortgage to 30 years to create cash flow--buy and hold!

If you buy a house every couple of years, like the brief on the model at the previous link I posted, in 10 years you could be FI. Not to say it wouldn't be work but it would take less cash than many of us are contributing to 401s and Roth IRAs. And right now the payoff on those SUCK--RE, on the other hand is rocking?

Look the model has been around for a long time. In the 50s a book came out with the same model and now that book sells used for $100 on Amazon.

AND RE was making millionaires in the 60s w/o the appreciation rates of today just based on the multiple streams of income. R/
 
Jarhead, your point is valid...except for this...in NYC a one bedroom apt in a coop is $1M!

Like I said, I didn't think it could go up any more 20 years ago!  It defies the laws of gravity. :confused:

But you don't need the crazy appreciation rates we've been seeing for the last ten years to make residential real estate a great investment.  The reason?  Multiple streams of income all contributing to your bottom line:

Market value appreciation, obviously but there is also tax deductions including deprecation and rent appreciaition and principle paydown.  Then when it makes sense, you refinance the lower balance on your mortgage to 30 years to create cash flow--buy and hold!

If you buy a house every couple of years, like the brief on the model at the previous link I posted, in 10 years you could be FI.  Not to say it wouldn't be work but it would take less cash than many of us are contributing to 401s and Roth IRAs.  And right now the payoff on those SUCK--RE, on the other hand is rocking?

Look the model has been around for a long time.  In the 50s a book came out with the same model and now that book sells used for $100 on Amazon.

AND RE was making millionaires in the 60s w/o the appreciation rates of today just based on the multiple streams of income. R/
Click to expand...

Consejo:

O.K., you talked me into it!
The next move will be finding a partner that has a good financial base and is young enough to do the grunt work.
I'll check with "Cutthroat", and get back to you ;)

Jarhead
 
[quote author=consejo Jarhead, your point is valid...except for this...in NYC a one bedroom apt in a coop is $1M!

Granted Manhattan apartments are very high but
No one bedroom co-op goes for a million bucks.
Actually a coop is not even real estate, it is shares of ownership in a corporation that owns a building. There are tons of restrictions.

Possibly a large modern condominium on 5th Avenue or in Greenwich Village may be close to the $1m but I would say a very small percentage.

Co-op's and condos can look exactly alike but are very different in the way ownership is structed reflecting in the price.
 
GTM: Thanks for the clarification on co-ops. The only market I really know is the southwest. My point in my response to Jarhead was that I still think there is room for appreciation--even at existing prices--as hard as that is to believe.

The thing is, you don't need crazy appreciation rates to achieve REFI. Slow and easy will do it.

Jarhead: As I have written in other posts, I think I'm done w/RE other than my own house. (I think, it is hard to pass on the ROI.)

But like John Galt, if I could turn back the clock and knowing what I know now, if I were looking to get out of the rat race, I'd find some nice university town with a base of SFRs, 2 and 4 rental units and go for it.

The PITA factor can be managed by carefully screening your tenants, inspecting in and out once a month (when you go to personally pick up the rent), and evicting quick when necessary.

The way I managed was to think of myself as Conrad Hilton and the tenants as paying guests. I treated them well, kept the houses maintained, and provided them small reminders of my appreciation on holidays. I mean, after all, they were a large part of my successs!

You don't need 100 or even a dozen units, all you need is enough to be FI--after all that is what this board is about. REFI (real estate financial independence) can be achieved w/as few as 4 SFRs. 4 units can't cause you all that much grief and won't take 10 hours a month of your time. R/
 
Real Estate is what allowed me to retire at 53, Not a get rich quick but 30+ years of putting up with rental property. Now I can sell a house every other year and get by until about 95.
 
Someone said that "compound interest" was one of the true "wonders of the world". While giving that its due,
I think it is leverage. Using leverage and creativity alone, anyone can start right now and make a fortune
in real estate (I sound like Carlton Sheets) :)

It's true! You don't need anything
except what is between your ears.

JG
 
the fact is that as long as the demand exceeds the supply, (Bay Area of Calif. for instance), there may be periods of flatness, but the general trend will exceed most of the country. (Of course a major earthquake would have an unsettling effect)
Click to expand...

Let's assume that an earthquake will never happen. Is it still a good idea to buy properties in the Bay Area, Southern Cal or Las Vegas? The demand is still growing!
 
Hi Spanky. I wouldn't do it, even if I had the money.

JG
 
Let's assume that an earthquake will never happen. Is it still a good idea to buy properties in the Bay Area, Southern Cal or Las Vegas? The demand is still growing!
Click to expand...

Spanky: Actually, Las Vegas is still not near as expensive as any place in the coastal areas of Calif.
The coastal area of Calif., generally stretching from San Francisco to San Diego (about 500 miles of heavy population, and finding a nice home for less than $l,000,000.00 is no easy chore.)

In the Bay area, San Francisco, San Jose (Silicone Valley), It is possible to buy inland with a very long commute and find something in the $400,000 range.
(But that would take you out to the Antioch area, and would be an hour and a half commute to San Jose, or San Francisco). For your money, you'd get a home that would be in the area of 1500 Sq. feet.

A closer commute to San Francisco, (Walnut Creek, Concord etc. that home would run in the $700,000.00 range.
I am a native Californian, but always lived either in the mountains(currently), or Inland prior to retiring. Our values would be high compared to most of the country, but the coastal area of Calif. is in a class by itself.
Where the prices go from here, (I thought they had topped out a year ago, and had another huge increase
in 04), who knows.
Living like that is not for me, but for a young person that finds theirselves with a large income in that area, and plenty of time would probably be alright. (But you'd have to really hold your nose)
 
In the Bay area, San Francisco, San Jose (Silicone Valley), It is possible to buy inland with a very long commute and find something in the $400,000 range.
(But that would take you out to the Antioch area, and would be an hour and a half commute to San Jose, or San Francisco). For your money, you'd get a home that would be in the area of 1500 Sq. feet.
Click to expand...

Hi ex-Jarhead,

Thanks for the info. I did look at some properties in the Constra Consta County area while I was visiting my parents in Oakland during Xmas holidays. As you say, you can get a decent size (1600 sq. ft) house for about $400K to $500K in Antioch, Napa, Vacaville area. The commute is long to work if you have to travel to San Francisco or Silicon Valley, but it is not a concern since we do not plan to work. I really like the weather and the promixity to my parents, brothers, sisters, Chinese restaurants and grocery stores.

Spanky
 
Hi ex-Jarhead,

Thanks for the info. I did look at some properties in the Constra Consta County area while I was visiting my parents in Oakland during Xmas holidays. As you say, you can get a decent size (1600 sq. ft) house for about $400K to $500K in Antioch, Napa, Vacaville area. The commute is long to work if you have to travel to San Francisco or Silicon Valley, but it is not a concern since we do not plan to work. I really like the weather and the promixity to my parents, brothers, sisters, Chinese restaurants and grocery stores.

Spanky
Click to expand...

Spanky: Not to beat this point to death, but if commuting is not a problem, you might check out the Vallejo area. It is closer to San Francisco, Oakland (where your parents live).
Here's the advantage, weather-wise. The areas that you mentioned get very hot in the summer. (Not the high humidity hot like a lot of areas in the country, but hot).
Vallejo is close enough to the Bay to give you very mild summers. As far as I know, the property values would be very close to what we were talking about. (Weather is about as close to perfect as one could hope for.).
In any case, I have lived in California all my life, and if you can afford the initial buy-in, I'm sure you'll thrive out here.
Regards, Jarhead
 
Vallejo is close enough to the Bay to give you very mild summers. As far as I know, the property values would be very close to what we were talking about. (Weather is about as close to perfect as one could hope for.).
......
Regards, Jarhead
Click to expand...

Jarhead,

Thanks. I will look into that.

Spanky
 
Hello Chuck-Lyn. Headed your way in about a week.

I missed your Dec. 30 post ("what's between your legs").
I thought about using that same line but then
decided a reference to cojones might offend someone's
delicate sensibilities, and you know what a sensitive
Alan Alda type I am :)

Give my best wishes to Up-Chuck for 2005...................

JG
 
JG, last I heard Up-Chuck fled to Canada after the
election. :)

Cheers,

Charlie
 
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