To Anyone who is still reading my post, would you recommended investing now in an index fund? or having cash on hand for real estate. It is nice having the cash for opportunities but it kills me only making 2.25% in a savings account. After reading the posts on this forum and jlcollinsnh stock series, I have really thought hard if I should just stick to index fund investing and keep socking money into it. I know timing the market is near impossible but I would love to see another 10-20% correction
28 Years old looking for FI advice
- Thread starter nwtractor
- Start date
Offgrid Organic Farmer
Full time employment: Posting here.
It has worked well for me.
When you own rental real estate you have to avoid hiring 'management'.
If you manage it yourself, there is a whole list of IRS benefits. But when you hire someone to manage it for you, you lose those benefits and what happened to me was they cost me so much that I lost all profits.
Offgrid Organic Farmer
Full time employment: Posting here.
Oh hell yes.
Offgrid Organic Farmer
Full time employment: Posting here.
When you say 'now' are you saying 2019?
I had $400k drop in my lap, unexpectedly in 2016, and I put it into rental real estate.
Im late to the discussion... but I would absolutely find/buy the rental property!
Yes, as others have said you'll save a LOT of money by managing it yourself... but the beauty is that you don't HAVE to manage it yourself.
That means later on, when the monthly passive income starts to look better (as rents increase over time) you have the flexibility to hand it off to someone else and reduce your stress and/or travel more.
For us that has been the absolute key.
Our numbers might not even look like we can/should RE yet, but thanks to most/all of our funds being in real estate that value can continue to grow while we're away living the life of our dreams now.
Also... in case it hasn't been clear already - thing is less important when looking for the "perfect6" property... whats really important is LOCATION (in fact, its almost the only thing that's important - just about everything else can be changed over the life of the property).
Offgrid Organic Farmer
Full time employment: Posting here.
When you say 'my savings'; are we discussing money that you earned from a salary job?
I have owned four properties that had mortgages, in each case I never had to use any of my salary money to pay their mortgages. I had rental income that covered the mortgage payments for me.
My experience has been that the moment you contract a property manager any 'profits' you may have seen will end.
Also keep in mind the IRS has rules about 'passive' income and 'non-passive' income activities.
When you give up managing rental real estate, you lose all benefits from having a 'non-passive' activity.
I would say in general that means you haven't had a very good experience.
If we still had to manage our own properties we would have gotten out of the real estate market (despite believing it's the best possible investment you can make) because we would never truly be free of work or of being tied to one place.
We would never consider a property profitable until it makes enough monthly income to pay management fees and pay us... and we sold the properties that fit that description as soon as was possible. In fact, deciding to put our properties in someone else hands might be one of the best decisions we ever made!
Yes, the IRS rules change, but who cares?
If Im making money passively (meaning without working) than am I the one paying those taxes, or are my tenants?
Taxes are suddenly just an expense like any other (management, utilities, repairs, etc).
At some point a couple years ago the wife and I got bummed out when we realized we were making so much money on our rentals and other projects that we had to pay taxes for the first time since leaving our jobs... but then it hit us - wasn't that actually the goal all along??
Don't get me wrong... use whatever loophole you can find to reduce/avoid taxes... but if the only way to avoid them is by not making money than i'm out.
This may be your experience, but certainly not true as a rule.
Might depend on what you call "benefits" I guess... But i've had someone else managing our properties for the last 7 years while we are out traveling and living our best life.
If you ask me, thats one hell of a benefit!
Offgrid Organic Farmer
Full time employment: Posting here.
When we bought our first Rental Real Estate, I was in a career field that offers a 20-year pension, and I was 16 years away from getting that pension. So we knew that we had 16 years in which to gain enough equity to buy a farm where we wanted to settle when I did get my pension.
My wife as an accountant wanted our investments to shelter my salary income from being taxed. Thereby increasing my takehome paychecks.
We knew that we were likely to be stationed at any location for only 3 years. So whatever deal we did needed to be accomplished within a 3-year window, repeated again at each duty station.
Through the process, we owned four different properties. Three of those properties spent a period of time with a Property Manager. I would say that each time we used a Property Manager, we got screwed in the deal.
In my mind, we were successful. After I retired, we were able to get enough cash, to buy our farm with no mortgage. Since I have no mortgage, my pension is enough to support my family.
yes, as one detractor here will insist on injecting. In the long process of all this, we over leveraged and were forced at one point to file bankruptcy. Bankruptcy laws protected my assets so I have no complaints.
My wife as an accountant wanted our investments to shelter my salary income from being taxed. Thereby increasing my takehome paychecks.
We knew that we were likely to be stationed at any location for only 3 years. So whatever deal we did needed to be accomplished within a 3-year window, repeated again at each duty station.
Through the process, we owned four different properties. Three of those properties spent a period of time with a Property Manager. I would say that each time we used a Property Manager, we got screwed in the deal.
In my mind, we were successful. After I retired, we were able to get enough cash, to buy our farm with no mortgage. Since I have no mortgage, my pension is enough to support my family.
yes, as one detractor here will insist on injecting. In the long process of all this, we over leveraged and were forced at one point to file bankruptcy. Bankruptcy laws protected my assets so I have no complaints.
No, surplus cash flow from properties after setting aside funds for long term expenses, paying for mortgages etc.
Liam
Confused about dryer sheets
Options in Real Estate
You are doing great! I suggest contacting Luke at Sol Mar REI, as he has 40 years experience, worked with IRAs since 1987 and really knows the subject matter. I have most my money in real estate related opps and I have been for many years with returns north of 12% hassle free.
You are doing great! I suggest contacting Luke at Sol Mar REI, as he has 40 years experience, worked with IRAs since 1987 and really knows the subject matter. I have most my money in real estate related opps and I have been for many years with returns north of 12% hassle free.
What exactly are you invested in?You are doing great! I suggest contacting Luke at Sol Mar REI, as he has 40 years experience, worked with IRAs since 1987 and really knows the subject matter. I have most my money in real estate related opps and I have been for many years with returns north of 12% hassle free.
Ready-4-ER-at-14
Full time employment: Posting here.
I don't have the desire or temperament to do real estate any longer, but did when younger.
I got some very nice capital gains by being in the right place at the right time. I choose to use a realtor who also managed properties for a fee. We bought and sold many times with here, it ending only after she retired and I didn't have confidence in her referred to associate.
I have been using some REITs that do triple net leasing including NNN. I've pulled some money out as capital gains to buy some fixed income reducing net worth calculation fluctuations.
To date almost everyone with a high net worth I have met attribute much of their wealth to real estate or a business.
I am glad you are going multiunit as everything I have seen suggest people often think of buying a duplex, and seldom think much bigger as individual ownership thus your costs will be related to earnings at a lesser premium.
I got some very nice capital gains by being in the right place at the right time. I choose to use a realtor who also managed properties for a fee. We bought and sold many times with here, it ending only after she retired and I didn't have confidence in her referred to associate.
I have been using some REITs that do triple net leasing including NNN. I've pulled some money out as capital gains to buy some fixed income reducing net worth calculation fluctuations.
To date almost everyone with a high net worth I have met attribute much of their wealth to real estate or a business.
I am glad you are going multiunit as everything I have seen suggest people often think of buying a duplex, and seldom think much bigger as individual ownership thus your costs will be related to earnings at a lesser premium.
HawkeyeNFO
Thinks s/he gets paid by the post
Who says you have to pick one or the other? You can allocate your money any way that you feel comfortable.
Multi-family or commercial real estate will take more effort on your part, and you still might lose all your money. But you also might make a lot more profits than mutual funds. One alternative is a REIT.
The index fund is less work, and arguably less risk. Might or might not make more than real estate.
Multi-family or commercial real estate will take more effort on your part, and you still might lose all your money. But you also might make a lot more profits than mutual funds. One alternative is a REIT.
The index fund is less work, and arguably less risk. Might or might not make more than real estate.
Liam
Confused about dryer sheets
What exactly are you invested in? Response
Gold I bought 20+ years ago, about $20k in stocks (for liquidity) and the rest in single family and smaller multifamily dwellings, which is great for monthly CASH. The real estate provider I work with has just started an investment fund paying 8-12% fixed per annum based on 1 to 5 year term, they pay monthly, you get a text from their bank regarding monthly deposits and all collateralized by median price housing. This is great for me, because I am very active with my hobbies and don't want to worry or have to work hard at maintaining my wealth.
Gold I bought 20+ years ago, about $20k in stocks (for liquidity) and the rest in single family and smaller multifamily dwellings, which is great for monthly CASH. The real estate provider I work with has just started an investment fund paying 8-12% fixed per annum based on 1 to 5 year term, they pay monthly, you get a text from their bank regarding monthly deposits and all collateralized by median price housing. This is great for me, because I am very active with my hobbies and don't want to worry or have to work hard at maintaining my wealth.
HI Bill
Thinks s/he gets paid by the post
- Joined
- Dec 26, 2017
- Messages
- 2,556
I voted for all three options. Diversification is king. Pretty sure the poll wasn't intended to work that way!
That said, if you don't want the effort, hassle, and risk of real estate investments, just go with the diversified index funds. I tried being a landlord, leveraged my 20% down, almost lost my shirt (almost lost 3X the value of my $70K downpayment when the market tanked). Real estate investing is not for everyone!
That said, if you don't want the effort, hassle, and risk of real estate investments, just go with the diversified index funds. I tried being a landlord, leveraged my 20% down, almost lost my shirt (almost lost 3X the value of my $70K downpayment when the market tanked). Real estate investing is not for everyone!
As the poll is clearly showing... this forum is mostly comprised of fairly conservative/risk-adverse investors and the vast majority are not huge fans of real estate (and also not planning to retire before their 50's).
You are clearly asking how to get to RE on a much faster track!
I agree with HNLBill's statement above that "all of the above" is the best answer, but you've already started saving in the other areas (and still have a few more years to do so), so why not use the high paying job to help you leverage money right now while you have it?
If you want to retire in your 30s (good for you, I highly recommend it!!), I would suggest downsizing and living a bit lean now so that you can ensure your ability to live large after RE when the passive income starts rolling in from your real estate investment(s).
We bought all of our investment properties over about a 6yr timespan, and it all started with a HELOC on our primary home and using appreciation from each investment property to fund a down payment on the next one.
Granted, that was a different time with lower down payments, which helped us achieve such a fast curve - but leverage is still a very powerful thing (and we also didn't have the advantage of the savings you've already collected!).
If you're being swayed by the poll... don't forget that IF you decided to take $100k of your savings (or salary) and:
- Put that money into the funds, you'll be making a return on $100k investment.
- Put that same money into a 25% down payment on a property... you're suddenly making similar returns on a half million dollar investment (and one that your tenants are going to payoff for you over time).
The passive income is the real reward though given your aggressive RE goals... as you won't want to touch any cash from those funds for a few decades, but each year as rents increase your income from the property grows (independent of age, employment, location, etc).
