Is real estate investing for me?

Commercial Real Estate Investing
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Is real estate investing for me?

David Wilson
Eugene, OR · Member since 2019 · 5 posts · 15 votes

Hi all. I am a health care professional that has always been fascinated by real estate investing. I have around $ 200,000 extra income a year to invest after maximizing my other retirement plans. I would like to begin taking that extra money and invest it into real estate to diversify my portfolio. However I am very busy with my profession. I understand it will take more work than just placing the money into the S and P 500 but from everyone’s experience, is it reasonable to assume I can do this without creating another job for myself? Thanks in advance!!

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Ola Dantis
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
7y

@David Wilson There are a couple of things you mentioned that stuck to me: 

Your fascination with REI (some passion) + You Are Very Busy with Your Work 

I think you should seriously consider some sort of passive investing opportunities in Real Estate such as Multifamily Investing. With these opportunities, you act as a Passive Investor and you can learn the investing side at your own if you care to.  

As a passive Investor, you wouldn't be creating another job for yourself! 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    sounds like a perfect candidate for some of the very experienced and premier syndicators out there.. 

    @Brian Burke  has some interesting options..  as well as @Ivan Barratt  those are two I know personally and have the experience and track record one would look for  you just income average into their deals yearly.. 

    As well as there are some nice deals these days running around Oregon.. 

    There are some really good HML ers in Oregon that you could place some nice short term money.. there is one fund that pays 6% with a 30 day call.. I have had a few of my clients put short term money there..

    But I think if for starters you may like to see what Brian and Ivan are working on ..  There is a lot of how to syndicate class's going on now in the US so there are a huge amount of first timers out there.. and I can tell you from experience  that you want to make sure your at least aligned with companies with deep backgrounds in the space.. 

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  • Dustin P.
    Realtor · Tempe, AZ · Member since 2017 · 541 posts · 442 votes
    7y

    You can be a money partner for a full-time investor or invest in syndicates if you want to take the day to day work out of it

    0Reply
  • Jim Chuong
    Rental Property Investor · Toronto, Canada · Member since 2012 · 102 posts · 95 votes
    7y

    @Sam Bapasola why triple net single tenant instead of multi-tenant? Also, wouldn’t you always want long leases? Thanks!

    0Reply
  • Sam B.
    Member since 2019 · 106 posts · 32 votes
    7y

    @Jim Chuong. Yes that's what I saying. Single tenant NNN with a corporate lease is generally almost fully passive. Multi tenant is more work but very manageable. Long term leases are good in low inflationary environments, which I believe we are in.

    1Reply
  • Drew Keitz
    Property Manager · Tampa, FL · Member since 2018 · 5 posts · 2 votes
    7y

    @Frank Procopio

    Hey Frank,

    It would be great to connect with you. I've been a realtor in downstate New York for 20 years, with also a passion in investing.

    Would you be interested in possibly going in on a venture in other states such as Florida?

    0Reply
  • Simon C.
    CA · Member since 2012 · 71 posts · 18 votes
    7y

    @David WilsonHave you consider investing passively? work is done upfront vetting the deal and sponsor. that's how I got started and I can understand and relate where you are coming from. It all depends on how much you want to get involved, what returns you are looking at, and asset class you want. Another way to start is investing in SFR and have a PM manage it for you.

    0Reply
  • Nate Thatcher
    Member since 2018 · 5 posts · 1 vote
    7y

    @David Wilson as others have mentioned NNN properties are a great fit for a busy person. Many have a single tenant and the landlord does absolutely nothing. Leases are already in place with national tenants and many are for 20 years with many renewal option. I was looking at one this week with a 7.5% cap rate and 100% passive!

    Further there is decent liquidity for these types of investments.

    Risks are there for sure (what are you going to do with a stand alone taco bell building if they don’t renew for example) but with the right broker in your corner and a little bit of common sense you can avoid the pitfalls.

    Cheers

    0Reply
  • Noah Mccurley
    Belfast, Northern Ireland · Member since 2018 · 128 posts · 56 votes
    7y

    @David Wilson

    I believe real estate is the best path to retirement and therefore everyone should find a way to make it work for them.

    For you I would consider a turnkey real estate company or hiring a very good management company for your properties. It kind of depends how hands off you want to be.

    0Reply
  • Anthony Rosa
    Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
    7y

    @David Wilson - IMO, RE investing is never totally hands off whether you hire a PM or do the work yourself.  The PM will help alleviate some of the tasks but you'll always receive phone calls & make phone calls from/to the PM regarding tenant & property issues (costs, repairs, evictions, late payments, turnovers, billing, etc.. ) which affect your bottom line . You'll always have concerns because its your investment.  A good PM helps a lot but you pay for their service and other services that they provide.  When money is involved you want to make sure things run as smooth as possible. If you want totally hands off RE investing you'll have to go with REITs, real estate syndication/crowdfunding.

    0Reply
  • Angela MIller
    Property Manager · Madison, WI · Member since 2019 · 26 posts · 10 votes
    7y

    @David Wilson.

    Partner up! You supply funds and partner supplies time and management service. It’s a win/win. :) #currentposition

    1Reply
  • Tanner Marsey
    Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
    7y

    With that kinda cash I’d buy up higher end, low headache homes that are newer and won’t require much maintenance/cap ex for years to come. Break even initially, slowly cash flow as you raise rents and eventually enjoy a mortgage free rental property that has been paid off by the tenants. At 200K “extra” per year there is no reason to be doing anything risky. I am assuming you’re looking for stability and income in the future and not immediately?

    Side note: I know this is a very unpopular opinion amongst the BP crowd but it’s a proven method that has worked again and again in many markets.

    0Reply
  • David Wilson
    OP
    Eugene, OR · Member since 2019 · 5 posts · 15 votes
    7y

    @Robert Freeborn

    Hi Robert. It is 200k extra a year. I’ll email you. Thanks.

    0Reply
  • Roger Hefner
    Yuma, AZ · Member since 2015 · 140 posts · 137 votes
    7y

    @David Wilson start off as a private lender see what's going on out there. Learn from your investors and when u pick up on how things work start buying your own properties..

    0Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    7y

    @David Wilson real estate investing is for everyone, it just depends how you approach it. You can be active and do all of the work all the way to being a passive investor in syndications. Just make sure you’re using your time most effectively.

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  • Thomas J Allen
    Detroit, MI · Member since 2019 · 15 posts · 7 votes
    7y

    @David Wilson

    $200k extra a year? What do you do? I noticed you're a health care professional, but what specifically? Just curious.

    0Reply
  • Tyler Bushey
    Investor · Biddeford, ME · Member since 2017 · 282 posts · 180 votes
    7y

    If I were in your shoes I'd be a private lender.  Offer terms slightly better than the competition and you'll do very well!

    0Reply
  • Alex KhanPro Member
    Specialist · Southeast Michigan · Member since 2015 · 300 posts · 244 votes
    7y
    Originally posted by @David Wilson:

    Hi all. I am a health care professional that has always been fascinated by real estate investing. I have around $ 200,000 extra income a year to invest after maximizing my other retirement plans. I would like to begin taking that extra money and invest it into real estate to diversify my portfolio. However I am very busy with my profession. I understand it will take more work than just placing the money into the S and P 500 but from everyone’s experience, is it reasonable to assume I can do this without creating another job for myself? Thanks in advance!!

     Buy turnkey ready/updated properties in B/ C areas that are gentrifying. 

    All brick, New roof and updated windows/ cabinetry. Will also bring better tenants with less headache and you should still be able to maintain a 10+ cap if you buy the right product. 

    248-979-8119
    0Reply
  • Abel Pacheco
    Rental Property Investor · San Antonio, TX · Member since 2018 · 16 posts · 31 votes
    7y
    Originally posted by @David Wilson:

    Hi all. I am a health care professional that has always been fascinated by real estate investing. I have around $ 200,000 extra income a year to invest after maximizing my other retirement plans. I would like to begin taking that extra money and invest it into real estate to diversify my portfolio. However I am very busy with my profession. I understand it will take more work than just placing the money into the S and P 500 but from everyone’s experience, is it reasonable to assume I can do this without creating another job for myself? Thanks in advance!!

    Absolutely! You can do so without creating another job for yourself. 

    There are a number of ways to invest in RE with minimal amounts of effort to manage the asset. Initially, it will require education on your part. But once you have the knowledge you can invest relatively passively, safely, and ensure top returns. 

    My advice: 

    1) Take time to write down your goals, personal, professional, wealth, time etc. The better defined they are, the easier it will be to achieve your version of success.

    2) As a high w-2 earner week out tax shelters for your RE investing - look into asset classes that allow for cost segregation studies and accelerated depreciation.

    3) Learn how to conduct market research on various markets so you are not limited by geo 

    4) Take Action & have fun

    1Reply
  • Jim Chuong
    Rental Property Investor · Toronto, Canada · Member since 2012 · 102 posts · 95 votes
    7y

    @Sam B. Thanks for the clarification. Out of curiosity how many NNN single corporate tenant product do you own and how do you structure the leases?

    0Reply
  • Victor Robinson
    Rental Property Investor · Jackson, MS · Member since 2018 · 39 posts · 29 votes
    7y

    @David Wilson

    You will certainly get a lot of good suggestions from folks on this topic. Almost all will begin with some derivative of “it depends on your goals.”

    That said, while my path will be very different than yours because we begin in different situations, my GOAL is to own real estate (the dirt, not syndication investing) and for it to provide truly passive income.

    As such, in a perfect world I will grow my (active income) portfolio to the point that I can 1031 into NNN properties that throw off enough cash to allow me to live the lifestyle I want and only be engaged in the work that I want.

    If that sounds like you, you should contact @Joel Owens as he is the resident expert on that topic.

    0Reply
  • Shane Melanson
    Developer · Calgary AB · Member since 2010 · 35 posts · 35 votes
    7y

    Hey @David Wilson - you raise a good point.  I suspect because you're in the Commercial Real Estate Forum that you've tried res real estate and found that in many cases, the size of deal is generally small- making it difficult to generate enough cash flow (or capital appreciation, unless you're doing a significant rehab/development - which is a 2nd job).

    Here's the best advice I would give you, based on the limited knowledge I have on your situation.  I will base it off other physicians I've helped invest in commercial properties.

    1st- investing activity in commercial real estate does require time and energy.  Now, the nice thing is, if you focus on Core assets or even light value add in good locations, you should be able to minimize the amount of time required.  

    The bulk of the work is done upfront in a commercial deal

    1. - finding the property
    2. - negotiating LOI/PSA
    3. - Due diligence
    4. - Financing (equity and debt)
    5. - leasing
    6. - finding the team (management/leasing team)

    I'd say, allow for 2-3 months (once you find a deal).  This is not all consuming during Due Diligence- but there will be time required to manage the process and consultants.

    Ok, once you have the property and team in place to oversee- in most cases a professional property manager will minimize the time required on your part.  I'd say- 1-2 hours a month to 'Asset Manage' your property.  You make long term capital decisions and big picture. Your property manager deals with day to day.

    Generally, I like light bay industrial and retail - as the leases are longer and thus less day to day.  Office can be ok, but your Cap X is more significant when a tenant leaves.

    I've written a few articles and videos on this exact scenario.  Busy professionals who have money but not interested in creating a 2nd job.

    The biggest challenge- I suspect, for new investors to commercial real estate is that learning curve to Commercial is steep.  There is little cross over from Res to Commercial.  

    So finding a good team to help you identify the right properties and proper financing is crucial.

    I think the bigger question is this: "Is it worth the energy and time to learn how to invest in commercial real estate?"

    I'm bias- and believe the answer is yes.  Even if it takes you a year or 2 to get a great commercial deal - one good property in the right location can (or go along way) to replacing your income.

    You control the asset.  You have cash flow today.  Attractive tax deductions.

    Alternative: Find someone you trust to invest with.  It would still be prudent to fully understand the deal so you understand the risks and the partner.  But, that is a viable option and you can learn from the inside so to speak. Don't expect the GP to teach you- but, you will learn some valuable lessons during the investment.

    Hope that helps.

    0Reply
  • John FortesPro Member
    Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
    7y

    This is truly a personal question in regards to your time. Do you want to be more active or passive. Active will be more work and management. Passive will be just monitoring and being updated. Recently recorded two episodes on this topic and mindset. I completely understand the mindset a passive investor goes through. 

    1Reply
  • Daniel DietzPro Member
    Rental Property Investor · Reedsburg, WI · Member since 2011 · 1k+ posts · 857 votes
    7y
    One thing that is only mentioned a bit so far is Partnering with someone on buy and hold rentals. We have 30 units and recently started taking on Private Money Partners (as compared to just being the lender). They bring ALL of the down payments, 20-25%, and we do ALL of the finding, rehab if needed, and all ongoing PM and Business Management too. All they do is collect money and have a once quarterly LLC meeting with us to keep everyone on the same page.

    Returns of both cash flow and all equity growth is split 50-50. In our market there is not a ton of cash flow, but nice loan paydown and slow steady appreciation.

    We are able to each get better than average stock market returns with MUCH less risk and fluctuation. We both know going in that we are planning on at least a 10 year hold with an option for the Investor to cash out or stay in at that point.

    We are on track to add on about 100K - 200K of investor money per year  for the next few years in this fashion.

    Food for thought.
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  • Adan Ibarra
    Member since 2019 · 15 posts · 7 votes
    7y

    HI David

    The firm I work for is a GP syndication firm and our investors are folks like you that have days job and realize they don't have the time to actively manage real estate deals.  What a lot of people don't take into account when they analyze small real estate projects is their own personal time (they don't value it in the financial model).  Someone spending 500 hours a year to find, analyze and manage a real estate transaction has more expenses when they take into account their own time (opportunity costs).   

    So what I'm getting at is to spend your time and get familiar with the syndicators out there for the real estate asset class your most comfortable with (self storage (that is what we are heavily investing in at the moment), multifamily, warehouse, retail, ....). See how they structure their deals (pref return, LP/GP splits, asset management fees, etc...) and make some diversified investments that way. We are targeting returns right now to our LP investors at around 21% IRR over a 5 year hold. There are some guys out there that sometimes target returns north of what we target but again, it boils down to their track record, asset class and deal characteristics.

    So long story short, I recommend starting off by investing with a GP who has a team of real estate professionals with their firm who sole job is to make their LP investors great returns so their LP investors keep investing with them.  

    If you have some specific questions and want to message me directly, feel free.  Have a great day. 

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