Just how viable and feasible is it to invest in Real Estate NOW?

Question

Hello

I would like to know just how viable and feasible it is to invest in real estate at this moment, i have been advised to invest in funds such as Index Funds, mutual funds and hedge funds but my interests lie in properties/real estate.

I will appreciate more details on where to look, what cities or neighborhoods to stay away from and also is NOW the right time to purchase for investment purposes?

what is the prediction for the real estate market in your suggested choice location for the next 5 years?

I would not mind being educated on the profitability of real estate investments as long as there is a substantial ROI, this may be the determining factor to persuade my investment.

Thanks

David Veeder · Answer

I do not believe in the stock market anymore.  Hardly any companies pay dividends.

Here is a simple way of looking at it in comparison to the stock market.  If you purchase a 100K single family rental home with an 80% you have $ 20 to $25K out of pocket.  Even if you do not make a penny from cash flow over 30 years, and the home value doesn't increase,  You have still purchased a $ 100K asset for $ 25K.   That is a 300% return over 30 years.  That is 10% a year and you did not have to keep on putting money in year after year.

The above example just shows the value of principle pay down by your tenant.  There are four other ways that real estate makes you money.

• Principle paydown
• Cash Flow
• Equity Capture ( if you learn to purchase at a discount you capture equity when you buy)
• Market appreciation (after 5 years I have done a REFI and got more than my original investment out of the property, to rinse and repeat the process)
• Tax advantages ( this is what got me into real estate in the first place. )

I would never tell anyone to purchase a property without cash flow!!!  However, in most cases, this miserable example still beats out the stock market.

Kevin Siedlecki · Answer

@Stanley Hammerton, It's very feasible, and for many reasons, real estate done well will crush stock market returns in the long run, but I don't know where to begin explaining how and why without any idea of what your current knowledge base is.

Poke around BP a lot. Listen to the podcasts, read the blogs, and you'll start to understand the opportunities that real estate offers.

Cailyn Aune · Answer

The above posts mostly sum it all up. But just to add- the reason so many people got into trouble in the last crash is because there were so many who invested for appreciation ONLY, and bet on the market to keep going up. As a wise BPer once said, "That isn't investing. That's gambling."

The smart investors make money on the way up, one the way down, and everywhere in between and are still standing after crashes or market corrections.  They have learned how to evaluate what a good deal is, and they seize it. If you buy right and invest for cashflow, you're good. If you buy right, invest for cashflow, and do it in an area that appreciates- you're great.Good luck. Take a lot of time to learn before you decide how you want to move forward. It will pay off.

Eugene Lee · Answer

Hi Stanley, That is a question that ultimately comes down to your preferences simply because even the most passive real estate investment is going to be significantly more hands-on than indexing 20% of one's paycheck every two weeks. Having said that, I firmly believe the case for real estate investing sets itself apart from indexing on a few levels:1) cash flow - the right property at the right price will cash flow more than JNK will on a good year 2) equity buildup (mortgage paydown) - building equity as someone else pays down the mortgage, that's pretty awesome and should not be discounted. It won't affect 1yr cash on cash return but in terms of ROI, it may be another 5%. 3) Taxes: This is what really sets real estate investing apart from index funds; dividends are taxed. Mortgage interest is tax deductible. When one chooses to sell the funds, you may pay cap gains tax. In real estate, one can 1031 exchange four houses for a hotel; tax free. Hope this helps. Full disclosure: I work at an investment consulting firm

Andrew Lenis · Answer

First you have to decide what type of investor you want to be. You will have much more control of your financial goals in real estate than in stocks. Im going to assume you want to be a a buy and hold investor since you are looking into stocks.  Multi family is great way to achieve passive income. Start getting familiar with the terms NOI, Cap rate, Operating expenses, gross scheduled income etc. My advice is to stay away from large cities. I currently live in NYC and we have hit the peak of the commercial market. Main take away from this is keep learning and educating yourself. Best of luck to you Stanley!

Trevor Reed · Answer

@Stanley Hammerton there is a lot to take in but remember action is one of the most important parts.  Many people will analyze and dream of doing their first deal but never take action.  Find a local investor, ask questions, take notes and learn/see how it's done in person.  That will go a long way in building your confidence in this investment.  Talking to real people with real numbers and properties in your area really turn this "idea" into reality.  Good look, I hope you enjoy it.

Stanley Hammerton · Answer

Thank you all for your counsel.I have a lot to take into consideration.

Will digest everything said here and hopefully make a decision i dont get to regret.

Michael Lee · Answer

Hello and welcome to BP!  You have allready got valuable information ahead of me but I will tell you how I feel.  Nobody knows about the future, they can only guess.  Do all of your research when looking and base your decions on the present situation.  I am tempted to tell you to hold onto your money until the market goes down but there is no assurance that it will.  I think the government-to-be will be good for capitalists and they are the major reason that good deals will still be out there.  Just make sure that the area you select is diverse on the economy and has.

I spend about 8 hours a day learning about real a growing population since I do not work right now.  Talk to The Chamber of Commersce to see what is planned for the future.  Experienced real estate Agents can also tell you what is currently going on and how they feel about the future of your selected area.

You may have to work harder but there are still good deals out there.  If you have a job right now I would keep it and work real estate part time.  Buying rental properties are good long term investments and you have more control over them and they do not lose a bunch of money overnight.  Just have an exit plan for each of your properties.  You might to invest in turnkey real estate to learn by and receive a decent return.  Just go with a company that is experienced and manages their units and believed in good renovation.  I am 60 years old from Dallas Texas and I have seen a bunch happen.  Keeping it simple and the location of prospective properties are both critical.  Real estate investing is not easy.  Hopefully, you realize that.

Good luck to you!

Paul Ewing · Answer

I am with Brandon Turner on his "There are great investment properties within two hours drive of everywhere."

That said, I do believe that many areas are heading for a major correction, but then so is the stock market. The key is to research, hunt, and buy right. If you do this and also follow a buy and hold strategy then it is much easier to weather any downturn.

Just how viable and feasible is it to invest in Real Estate NOW?

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