What kind of real estate should a 20 yo investor with 150k look 4

[Mason May]

I have grown a stock portfolio since 2017 and I am ready to spend about 150k in real estate. I live close to LA and I want to invest in a cheaper state like TX or FL. I am looking for cash flow so that I can have a stream of income to rely on as I continue my accounting degree in school. Are there any specific tips or types of real estate that would be more beneficial to a young investor? I like the idea of having a duplex in a big city like Austin TX. Thanks!

[Jon Schwartz]

Originally posted by @Mason May:

@Jon Schwartz Thanks for the advice! House hacking is definitely on my radar and I like how another tenant could basically pay into my net worth! I go to Cal State Fullerton so I'd like to invest around Orange. But I was born and raised in Palm Springs, CA which is about 2 hours away from Orange and LA. The only issue is the high prices in CA and around the country right now. Is there any point in trying to time the real estate market?

OC, baby!

There's definitely a point in trying to time the real estate market if you're an investor.

Three important differences between the real estate market and the stock market:

Firstly, the stock market is totally liquid, whereas real estate isn't. Ergo, the real estate market moves much more slowly that the stock market. It's not as much of a fool's game to time it.

Secondly, the stock market is typically a leading indicator of the general economy (though WTF is going on now???). The real estate market general lags the broader economy. So whereas you have to be clairvoyant to time the stock market, you need only be wise and observant to time the real estate market.

Thirdly, when you try to time the stock market, you really have to be right twice: when you buy and when you sell. With the real estate market, if you're a longterm investor, you really only need to buy right or sell right. Both will be even better, but getting just one right is worth a lot of dough.

Regarding timing, I say wait. The real estate market is crazy hot, and the general economy isn't responding to our 10% unemployment the way it has before. Why? Huge government stimulus, eviction moratoria, and forbearance programs. I'm a believer that the party is going to wind down eventually, probably mid-2021, and we're going to see some economic pain. Most likely not a crash because home-owners have much more equity in their homes than they did in 2008, but a "normal" recession and a dip in prices. So I say, take your time...

Something else to pay attention to is that single-family homes and multifamily properties are not the same thing. The SFR market is blazing, but is the multifamily? It's more Eddy steady, from what I understand. In fact, I would expect more softening in residential multifamily in the coming months as CA's eviction moratorium is extended and mom-and-pop landlords decide to call it quits.

Also, with $150K and a 10% down loan in Orange, you can definitely afford to get in the market now.