New here: My Goal and is it Realistic?

Question

I did my formal "intro" in the Newbie Intro area. I'm in the fact findings/knowledge acquisition phase of what will be, hopefully, another chapter to my life. Starting late rather than never. I'm a successful health care practitioner and own my own business and have some limited real estate experience. I will not need to venture into RE to make a living, but would like to acquire some additional wealth in the form of equity when I retire in about 15 years. Cash flow and extra income is not to be rejected however!

Against ALL advice others have given me, I'm thinking about getting into multi family housing. I do NOT want to manage or be a landlord. I'm specifically thinking about units large enough to be under management; something that will gain equity over the years. Obviously my challenges are several: finding out if this is an area of real estate that can be financially rewarding, finding down markets to buy in, finding a property worth buying, and accumulating enough cash for a downpayment on a sizeable property so I can be a "hands off owner."

My questions basically are:

1. Am I nuts?
2. How to find markets that are undervalued?

I've been reading here (and have a LOT more to do) and will pick some brains. I am a person who does a great deal of due diligence before I make a financial move, but I am not averse to some risk so I'm not afraid to move once my numbers and data show it can/should work. Bottom line is I usually believe in myself before I believe in what a salesperson will tell me.

Any global views/opinions/wake up slaps are appreciated. Thank you.

Andrew S. · Answer

Adam, thank you for giving me yet another perspective. What I think I find intriguing about real estate is it can be very creative. Thank you.

Adam Johnson · Answer

Andrew S. - I will offer a "unique" angle for you to consider, after I confirm that you aren't nuts. First, you aren't nuts. When I first started in real estate, I thought that I was crazy to think that it could help get me ahead of the game. Looking back 7 years now, I'm glad I continued forward even though I did think I was nuts (and so did several very close acquaintances!). As to your second question - why not let somebody else do it for you? My assumption is that your business consumes a lot of your time. There other alternatives to simply owning real estate. You could become a private lender, where you are essentially the "bank" lending money for another investor to do the actual hand-on management along with "finding the deals". I, along with many others, frequently use private money to fund acquisitions. I use this money as a "bridge" for me to acquire the property and get it into a condition that will allow it to be financed by a bank. This term is typically 1 or 2 years and I pay a premium for the use of these funds. This type of investing is passive in a similar fashion to buying a larger property and having a manager, but it may offer higher returns and allow you to diversify somewhat among multiple borrowers and/or properties. I am not a hard money lender, but I work with them regularly. This might be an alternative to consider as well. Hope I didn't just make your research more difficult/confusing!

Andrew S. · Answer

Thank you for the quick responses and encouragement. I certainly appreciate it!

Brandon Krieg · Answer

Andrew S. - I think you're making a very good choice, and it sounds like you're 'starting smart.' That is, you're looking at things carefully and thoughtfully, and seeking out others who have walked the road you want to travel. Nice job! To answer your questions: 1. No, you're not nuts. You have the ability to think for yourself and see past the surface layer of potential investments. As a retirement possibility, I believe real estate is the best way to go if you know what you're doing. 2. If I were you, I would switch it up slightly. Rather than looking for an 'undervalued market,' search for an 'undervalued asset' within a given market. If you are able to purchase a solid asset for below market value and turn positive cashflow, the value you will be there for a long time. You may have to make some improvements to the property or management structure, but I'm sure some wise folks on here can point you in the right direction. I'm in favor of starting close to home, although I know a lot of people find success investing out of state. That way, you know the area backwards and forwards, and can make more educated purchase decisions. Good luck, and welcome!

Shawn S. · Answer

Hi Andrew, I'm in a similar situation as you are in that I love my career and want RE to simply help fund my retirement and allow me to retire early. I think your plan is solid. I assume you are reading lots of books. My local library in a small town had tons which surprised me. I've read most of them. Also, this site has been a wealth of knowledge for me. I'm a big sports fan, but I find myself coming here more than checking sports news now. I learn something new every day. Welcome, Shawn

Michael Seeker · Answer

Hey Andrew - welcome to BP! It's never too late to get started and you've certainly come to the right place. Here's a good quick look at RE investing: http://www.investopedia.com/slide-show/real-estate-investing/ It looks like number 2 and number 4 would be most appealing for you. If you want to have exposure to RE cashflow and appreciation without being very hands-on, you might be best suited to find a solid REIT or even consider investing/partnering with a smaller company/individual that is looking to expand. To answer your questions: 1. Nope, you're not nuts at all! The people who tell you NOT to get into RE investing are nuts! 2. Rather than answering this (because I don't have an answer) I'd suggest revising this question to finding areas that will provide good long-term cashflow. If you find that, the appreciation will follow it. With a 15+ year time horizon, your focus should not be on speculating which markets will appreciate faster or slower - that is very difficult to predict over such a long period and markets that are expected to be hot in the next few years may fizzle out 10-15 years from now. Good luck with your endeavors! -Michael