Real Estate versus Cash/Dividends

[ferco]

Ga has one of the highest foreclosure rates in the country and quite a few of my friends have bought up several (10-15) of these properties stating this is a "can't-lose" proposition. The rental properties are positive cash flowing and were bought for 50-75% of value. The question is, given individuals nearing "retirement age" with a nice nest egg ( 1 million plus) and wanting relative peace of mind, do you go the real estate route (cash flow and long range profits on resale) or a less stressful / more freedom route such as equity/dividend investing, private lending etc. I recognize that some will respond its an individual decision (and it is), but I'd be interested in how others work through the algorithm in their own mind.

 

[HillCountry]

Ga has one of the highest foreclosure rates in the country and quite a few of my friends have bought up several (10-15) of these properties stating this is a "can't-lose" proposition. The rental properties are positive cash flowing and were bought for 50-75% of value. The question is, given individuals nearing "retirement age" with a nice nest egg ( 1 million plus) and wanting relative peace of mind, do you go the real estate route (cash flow and long range profits on resale) or a less stressful / more freedom route such as equity/dividend investing, private lending etc. I recognize that some will respond its an individual decision (and it is), but I'd be interested in how others work through the algorithm in their own mind.

I don't want all my asset into equity. I see real estate as a good diversification.

I am more focused on local growth prospect, which is closely tied to real estate trend. For a growing market, if the current rent provides nice cash return, it should be a profitable long term investment.

BTW, investment always has risk. There is nothing can's lose.

 

[hosehead]

Hello, well my first comment is that few investments offer a true “can’t lose” guarantee. But having done a lot of analysis on a local real estate market I felt I was getting into a relatively safe investment when I decided to buy some foreclosed properties in AZ. The area I entered was hard hit with foreclosures which led to good bargains in buying distressed property with cash. Since the construction market was also hit during this time I was able to get the rehabilitation work done at discounted prices. Lately in this area rental demand increased as more people lost their homes and/or struggled to get financing under the “new rules”. I have only been in the rental business for about 2 years. I rapidly built a portfolio of 6 single family homes and have been seeing a net return of around 12%+ and I use a property manager since I live and work overseas. I still have at least a decade until retirement but I sure enjoy the monthly checks coming in no matter what the market is doing. I know there will be some challenges but that is what my property manager is for. I would buy some more properties but the local market has really increased in price since late last year as many investors have begun to jump in (including large institutional investors). If the prices cool down again I might continue to purchase.


My main reason for entering the rental market was to offset the mutual fund options I have in my company 401k. I feel like the stock market has become a big casino and like a real casino the house always wins. I wanted something I felt I could control more and was a physical asset. Secondly even if I see huge repair bills and vacancies my returns are better than bonds or stocks over the last decade. I have also already seen capital appreciation in my local market but it really doesn’t matter since I hope to hold the homes for income. I personally have enjoyed being in the rental market but I have heard some horror stories. Property Managers can help with this but will eat into your profits. But between stock volatility and incredibly low bond yields I am feeling good about my new venture……..

 

[MichaelB]

Ga has one of the highest foreclosure rates in the country and quite a few of my friends have bought up several (10-15) of these properties stating this is a "can't-lose" proposition. The rental properties are positive cash flowing and were bought for 50-75% of value. The question is, given individuals nearing "retirement age" with a nice nest egg ( 1 million plus) and wanting relative peace of mind, do you go the real estate route (cash flow and long range profits on resale) or a less stressful / more freedom route such as equity/dividend investing, private lending etc. I recognize that some will respond its an individual decision (and it is), but I'd be interested in how others work through the algorithm in their own mind.

My sense is that being a successful landlord takes a lot of work and commitment.

 

[Dawg52]

My sense is that being a successful landlord takes a lot of work and commitment.

Work? I'm a little like Maynard when it comes that 4 letter word.

DG - MAYNARD G KREBS - WORK - YouTube

 

[Animorph]

Sounds like w*rk.

A friend of ours bought foreclosure rental houses in 2009 or 2010 or so. My equities have since recovered all their pre-downturn value (minus the current dip). His houses are valued at less than when he bought them for if they followed our general housing market, which continues down and has maybe flattened out and sort of started to rise just now. They were fixer uppers, so he has his time invested in them as well. But they do generate some cash.

 

[haha]

Ga has one of the highest foreclosure rates in the country and quite a few of my friends have bought up several (10-15) of these properties stating this is a "can't-lose" proposition. The rental properties are positive cash flowing and were bought for 50-75% of value. The question is, given individuals nearing "retirement age" with a nice nest egg ( 1 million plus) and wanting relative peace of mind, do you go the real estate route (cash flow and long range profits on resale) or a less stressful / more freedom route such as equity/dividend investing, private lending etc. I recognize that some will respond its an individual decision (and it is), but I'd be interested in how others work through the algorithm in their own mind.

I just spent some time on this. Our prices are not this good, but much better than anytime in the recent past. I decided to leave it to the young guys. It takes work, it takes driving around and going to Lowes, it involves legal exposures and time with attorneys, it involves interacting with sometimes unpleasant people(other than the attorneys)- and worst of all, I cannot invest enough money to make a big difference in my income, absent speculative gains. I already know how to speculate from home in stocks, why take on this?

Ha

 

[W2R]

The question is, given individuals nearing "retirement age" with a nice nest egg ( 1 million plus) and wanting relative peace of mind, do you go the real estate route (cash flow and long range profits on resale) or a less stressful / more freedom route such as equity/dividend investing, private lending etc.

My sense is that being a successful landlord takes a lot of work and commitment.

+1

Personally, the main reason why I decided not to take on the job of being a landlord was because it would take too much time for my liking. My sense of it is that being a landlord is really a job of sorts, but one for which I am not particularly well qualified or trained and one that I wouldn't even like. I couldn't justify quitting my primary job as an oceanographer for something like that.

A secondary reason why I didn't become a landlord is that I have no skills at, or interest in, fixing broken plumbing, doing drywall/painting, and so on in the residences of other people. I have even less interest in doing these tasks on demand. Without doing these things personally, I expect the disparity between the income from my primary job/career compensation package and the income from the job of being a landlord would have been greater.

 

[jclarksnakes]

The rental properties are positive cash flowing and were bought for 50-75% of value.

They were bought for 50-75% of value, or 50-75% of what they were worth a couple years ago? A house that was worth 100K 15 years ago may have likely appreciated to around 200K 5 years ago and now again only be worth 100K. There are lots of houses here in Savannah that are now valued low enough that they could currently be very profitable as rentals. Sales of smallish 3/2 homes in suburban neighborhoods have picked up a bunch the last few months as investors have been buying them up. I would worry that a few years from now there may be too many of these houses in the rental market and it may be difficult to keep them all occupied.

 

[Nords]

My sense is that being a successful landlord takes a lot of work and commitment.

Or blind faith in a property manager...

 

[tryan]

FWIW I fired almost exclusively on rental income ... but I 've owned income property for 25 years. Not sure I would want to start in this business anywhere close to retirement.

The old-dog-new-trick comes to mind. Too many pit falls along the way ... EVERYONE plays CYA. Contractors, tenants, property managers, realtors, lawyers, all tell you what they think you want to hear ... your job is sort it out and do the right thing. Not for the faint heart.

That said I am currently rehabing a Fannie Mae REO that had 213k worth of mortgages on it ... bought it for 42k. The neighbor wants it - all dolled up - for 120k. Yes, there is $$ to be made.

 

[Cessna5354]

There is money to be made in real estate, however I am admitting I am getting to old, or the rentals I have are getting old for me to continue. I am also thinking I may not live long enough to see real gains in RE prices.

I never needed to put a roof on a portfolio of stocks & bonds.

Each to his own,