Am I barking up the wrong tree with real estate investing?

Question

Okay  - I'm seeking input from some seasoned / battle hardened real estate investors about my next investment move.

Here is a synopsis of our circumstances and what my goal is:
1: I am unemployed (semi-retired or you might say fully depreciated in my industry;-), but I continue to look for work.
2: I have a strong operations background and know how to determine whether I can turn a profit on an investment
3: I have a respectable amount of capital available for the right investment
4: I am not afraid to micro manage an investment project
5: Perfect world I would like to "net" a minimum of $2500 per month within the next 10-12 months and would like to continue increasing that amount through further investing
6: Any return on my investment "must" give me a minimum of a 10% return on my investment.
7: I am pre approved to finance up to $200K

Some personal notes: My son has a mild disability and is our greatest concern. He will likely never make enough money to survive on his own, and will probably need some long-term financial help. My initial thought is to eventually buy him a condo and provide him with enough dividends from investments to supplement his current income. That being said, at this time I would like to avoid dipping into my investment money unless it's for a profitable reason.

Here is the big question for those who are "in the know" - Is real Estate the right direction for me? If so which area do you think is best for me to explore?

James Lawrence · Answer

Scott - That's not such a radical idea. Although I might be in my element with that type of work, I have to wonder how I would be able to get that type of job without any prior experience in the industry. I'll look into it. If anyone out there is looking for someone to help them out with their investment projects (due diligence, financials, project management, etc) I would appreciate some input. I am even willing to work a project or two for free just to get the experience. Thanks again to all of you.

J Scott Hamilton · Answer

@James Lawrence

I'm going to throw out a radical idea here. The idea is based on the assumption that your strong operations background is your biggest asset and the circumstances of you being unemployed and "fully depreciated" can be flipped from a liability to an asset. You have time on your hands now that can be put to work building cash flow and wealth instead of selling to an employer at a fixed price.

Look into commercial real estate. Specifically, look for multi-tenant buildings that have a lower occupancy rate and are under poor management. You are going to be looking for a turnaround play where a strong uptick in operations will improve monthly cash flow through reduced wasted expenses, reduced tenant turnover, and increased occupancy.

Then in the process of turning around the property management, look to either buying out or putting together your own commercial property management company.  This will give you an exit plan should you want to really retire while giving you a base to acquire more commercial properties.

Dana Whicker · Answer

Time can be a huge returns booster in REI.  It takes time to find deals.  They usually don't just fall in your lap.  You can do whatever you can on your rehabs, manage your own properties, do your own minor repairs.  All of these things can help you get to your goals.

Given your circumstances, if your driven and have a bit of capital, REI may be just right for you.

Ravi P. · Answer

I think if you only focus on one property now with the long term goal of providing it for your son you'll have a long enough timeline to 1) pick the perfect property for his needs, and make necessary improvements 2) rent it out in the meantime to cover the mortgage

netting $2,500 is a tall order, but netting $25 but having a mortgage paid off by a tenant is still worth it for a property you know you'll want to own outright down the road.

good luck!

Rich Vogel · Answer

HI James,

The first thing is real estate can definitely be for you.  One of the biggest assets (and mine is the same thing) is my why. For my kids and in your case your son.  That is what drives me to work hard everyday.  I would find a Real Estate group by you whether it is through meetup(that is were I found my group).  This will help you network with people that are doing real estate and they can let you know what are realistic cash flow expectations.  I don't know what your real estate market is like but I wouldn't go out there and buy a ton of property at once.  Take it slow and get your processes in place.  Good Luck and don't be afraid to reach out.

Thanks

Rich

James Lawrence · Answer

Thanks guys. You are correct; $2500 is a tall order. I can pay cash for several properties to reach that goal, but I'll probably never see the 10%+  return I am looking for. I have also been looking at SFH and Multi's, but haven't found anything that gets me the returns after all of the other expenses are factored in. I'm not looking for a get rich quick approach but I'd like to diversify some of my resources out of the stock market. Real estate seemed to be one possible avenue since I now have time to manage whatever needs to be managed....

Jassem A. · Answer

With a good amount of capital and the right management, generating reliable cash flow should not be very difficult

Evan Roberts · Answer

James, I think the real hang up with that criteria IMO is with criteria number 5. When you say "net" what do you mean? To cash-flow $2500 after all expenses (property management, repair estimates set-aside, vacancy contingency) is quite a feat!! This is something you can certainly work towards, but I would not look at this as a way of simply replacing a day job in one move. Just my two cents for what it's worth (I hope at least 2 cents).

Jassem A. · Answer

Buy and hold locally will probably be simplest route.  I prefer single family homes in B/C areas with some cash flow potential.