RE Investing - Not a good option right now

[Mike K.]

After looking at the opportunities available in RE investing and analyzing the risks and rewards I decided that there are better options available to build wealth.  It pains me to say this since I have been an appraiser for a long time.  In my 10 year time horizon until I retire I believe I can build more wealth as a small business owner and have decided to purchase a business.  I would like to personally thank everyone for sharing your experience and advice. Best of luck to you all.

[Kristi K.]

Quote from @Bruce Woodruff:

Not being able to influence the stock market also means that you have no direct control over the asset's movement up or down......

I like being able to actively influence the value of my asset..... :-)

Couldn't agree more. I got out of the stock market in 2016 (pretty much) because it killed me to see $50,000 losses in one day. Best choice I've ever made.....

[Mike K.]

Thought I'd follow up with all you diehard RE investors. I purchased a website and here is my actual revenue so far:

I've gotten about 52,000 visitors to the website in this time period, mostly from Facebook. Revenue is from display ads on the website.  Net Profit will be around $3,500-4000/mo.  Anyone making this amount of positive cashflow on a 1-2 unit residential property?

Cost of the website was $65,000.  Lower cost - higher profits. No deadbeat renters. No physical maintenance or repairs. Prior owner of the website has a verifiable 24 month history of revenue that is pretty consistent. 

Transferring the domain, website, and social media accounts was kind of a pain in the butt, but once it was done there is not much time or effort needed on my part to operate the website. People visit the website and I make money.

Now that I have most of it figured out it will be much easier to find the next one.

Now is a good time to purchase a website.  Many websites were relying on Google search for most of their traffic and lost 70-90% of there traffic when Google updated their algorithm.  Many of these owners don't know how to generate traffic from social media and have lost most of their revenue. With the lower revenue you can purchase the website at a much lower price.

flippa.com is the best website for purchasing websites.

This is my personal experience. Results may vary.

[Marcus Auerbach]

Quote from @Mike K.:

Thought I'd follow up with all you diehard RE investors. I purchased a website and here is my actual revenue so far:

I've gotten about 52,000 visitors to the website in this time period, mostly from Facebook. Revenue is from display ads on the website.  Net Profit will be around $3,500-4000/mo.  Anyone making this amount of positive cashflow on a 1-2 unit residential property?

Cost of the website was $65,000.  Lower cost - higher profits. No deadbeat renters. No physical maintenance or repairs. Prior owner of the website has a verifiable 24 month history of revenue that is pretty consistent. 

Transferring the domain, website, and social media accounts was kind of a pain in the butt, but once it was done there is not much time or effort needed on my part to operate the website. People visit the website and I make money.

Now that I have most of it figured out it will be much easier to find the next one.

Now is a good time to purchase a website.  Many websites were relying on Google search for most of their traffic and lost 70-90% of there traffic when Google updated their algorithm.  Many of these owners don't know how to generate traffic from social media and have lost most of their revenue. With the lower revenue you can purchase the website at a much lower price.

flippa.com is the best website for purchasing websites.

This is my personal experience. Results may vary.

Well done! And great example! You are making my point: it is called 

real estate in-vesting because cash goes mostly in. 

Businesses are much better for cash flow than real estate! As you just demonstrated. But real estate is a better long term wealth generator. A pretty average investor can generate his first million in net worth within ten years by just buy and hold with actually pretty conservative assumptions. It can be done in half the time. It will take you over 20 years with the website to generate a million. 

So I think the combination of both is where it's at - continue to run the website and invest the money it makes in real estate.

[Mike K.]

 The only ones that have positive cash flow are the realtors...

[Sandra Youkhana]

Yeah, after checking out the real estate investment scene and weighing the pros and cons, you realized there are better ways to grow your wealth. It's kind of a bummer to admit this since you've been appraising for so long. But, looking ahead to the next 10 years before you retire, if you think you'll have more success as a small business owner then go for it. If you are considering buying a business, it's similar to real estate; it's about taking risks and making evaluations.

[Bruce Woodruff]

Quote from @Mike K.:

 The only ones that have positive cash flow are the realtors...

Sorry, but what a unknowledgable comment. Every investment property, of any type (STR/LTR/MTR/Flips) I've ever owned has had a positive cash flow. The STRs i owned had a similar monthly profit as you are talking about here. The difference is that when I sold them after 2-3 years, they had doubled (or better) in value. Factor that in and you cannot touch the profit that is availble to a RE Investor.

I applaud your success in your new venture, but don't come back on here to rub our noses in it, when you obviuously have little clue what you're talking about. But seriously, best of luck to you, we all have our experiences and opinions..

[Henry Clark]

@Mike K.

Congrats on your success.

If you're trying to justify your investment versus REI, you will need to take a broader approach, since REI is so broad. So, I would recommend you do a post vetting out the comparisons.

Scalability- how do you scale. Very few investors in SFH or MFH are going to invest $65,000 or have $65,000 to invest on one deal, especially their first deal. Then you have to identify how to scale with your lending institution. Will they give you 65% LTV or more/less on a "personal/intangible" asset investment? Plus, they will need to understand this asset type to see how transient or not it is. Will they loan you 65% against your $65,000 original investment to do your next investment?

Scalability- how many REI investors can relate or have the skillset or access to the skillset to do your investment. Most investors can relate to Housing, whether they have expertise or not. For example, it might be great to be a doctor, but I know I can't be one.

Then the Government has truly set up REI with unfair advantages:

1.  1031,

2.  Capital gains,

3.  0% loans, or low interest loans.  

4.  Stepped up basis.

5.  Military Base housing allowance- Tax free housing, you can use for buying a house.  Any "C" average student can be a millionaire by the time they are 43.

REI types:

1.  Sweat equity.

2. ADU

3.  Subdivide

4.  Swap rent for equity

5.  The investor gets to control the investment versus wall street or the company owners.

6.  etc.

Please make a post and compare all avenues of REI good/bad versus the type of investment you made. Explain that Search Engines have to continuously change even if the algorithms stay the same.

Congrats on your success.  Next step is to scale. At this rate you should quit your day job before December of this year.

[Marcus Auerbach]

Quote from @Mike K.:

 The only ones that have positive cash flow are the realtors...

Yeah, especially the ones that have owned rental properties for 15 years! I own a top 1% real estate team and we make good money mostly in the luxury segment, (which BTW is not an easy job, you are welcome to give it a try)  but the by far bigger share is still from our RE portfolio.

[Bruce Woodruff]

Quote from @Henry Clark:

@Mike K.

Congrats on your success.

If you're trying to justify your investment versus REI, you will need to take a broader approach, since REI is so broad. So, I would recommend you do a post vetting out the comparisons.

Scalability- how do you scale. Very few investors in SFH or MFH are going to invest $65,000 or have $65,000 to invest on one deal, especially their first deal. Then you have to identify how to scale with your lending institution. Will they give you 65% LTV or more/less on a "personal/intangible" asset investment? Plus, they will need to understand this asset type to see how transient or not it is. Will they loan you 65% against your $65,000 original investment to do your next investment?

Scalability- how many REI investors can relate or have the skillset or access to the skillset to do your investment. Most investors can relate to Housing, whether they have expertise or not. For example, it might be great to be a doctor, but I know I can't be one.

Then the Government has truly set up REI with unfair advantages:

1.  1031,

2.  Capital gains,

3.  0% loans, or low interest loans.  

4.  Stepped up basis.

5.  Military Base housing allowance- Tax free housing, you can use for buying a house.  Any "C" average student can be a millionaire by the time they are 43.

REI types:

1.  Sweat equity.

2. ADU

3.  Subdivide

4.  Swap rent for equity

5.  The investor gets to control the investment versus wall street or the company owners.

6.  etc.

Please make a post and compare all avenues of REI good/bad versus the type of investment you made. Explain that Search Engines have to continuously change even if the algorithms stay the same.

Congrats on your success.  Next step is to scale. At this rate you should quit your day job before December of this year.

Lol, great post Henry!

[V.G Jason]

Mike is not wrong about today, but REI is about tomorrow. So for that, I'll disagree but when folks push back on his original sentiment there's too much running amuck. Like look at this from a TK provider:

Check out his story:

“Matthew Seyoum, Investment Strategist at RTR has provided exceptional support throughout my journey from searching for a rental property to closing the deal. For my first property, the appraisal came in $25,000 lower than expected, which initially concerned me.

However, Matthew reminded me of my long-term investment objective and assured me that the property would appreciate, given the strong real estate market in Alabama. Tomorrow, I will close on this property, and I have another property set to close at the end of the month.
Thank you, Matthew, for your unwavering support at each step!

Thank you, RTR, for providing excellent and valuable services from start to finish, making it easy for out-of-state investors to own income-producing rental properties.”

You can't go around and tell me it's the best time to buy right now, it depends on your intention with it. And even with that said, the lack of underwriting for risk is appalling. If you have buyers like that competing with you, rather go to the next property or sit this one out. 

[V.G Jason]

Quote from @Mike K.:

Thought I'd follow up with all you diehard RE investors. I purchased a website and here is my actual revenue so far:

I've gotten about 52,000 visitors to the website in this time period, mostly from Facebook. Revenue is from display ads on the website.  Net Profit will be around $3,500-4000/mo.  Anyone making this amount of positive cashflow on a 1-2 unit residential property?

Cost of the website was $65,000.  Lower cost - higher profits. No deadbeat renters. No physical maintenance or repairs. Prior owner of the website has a verifiable 24 month history of revenue that is pretty consistent. 

Transferring the domain, website, and social media accounts was kind of a pain in the butt, but once it was done there is not much time or effort needed on my part to operate the website. People visit the website and I make money.

Now that I have most of it figured out it will be much easier to find the next one.

Now is a good time to purchase a website.  Many websites were relying on Google search for most of their traffic and lost 70-90% of there traffic when Google updated their algorithm.  Many of these owners don't know how to generate traffic from social media and have lost most of their revenue. With the lower revenue you can purchase the website at a much lower price.

flippa.com is the best website for purchasing websites.

This is my personal experience. Results may vary.

In bold, just as a small business owner to another. And a REI to another.
1) Yes I make more than that on plenty. Because cash flow is a metric of leverage, fixed costs, and revenue. I have low leverage in some properties, therefore I cash flow a lot. If you meant CoC-- sure but that metric is not best for REI. This is a long term investment, which I'll explain later.

 2) Cost of the website at $65k is great. Solid entry point, lowering fixed costs do help profit but other variables too so it's not going to fix things itself. Yes, no maintenance, no physical cap ex, etc., but also no tangible hard asset that is scarce. The barrier to enter digital space is very, very easy compared to land. Holding hard assets over time is a scarcity play and in turn an inflation move, that's always the best investment time and time again. 

3) It won't necessarily be easier on the follow. It may be, but to assume that you'll be mistaken. Now is it time to buy a website if you have the skills to make it better, you're on REI site. You did a value add, I do value adds on RE and so do many folks here. We go where we can make value. Not sure the average REI BPer knows what to do to make more revenue on an acquired website. It's very apples to oranges.

For the most part I am not against your agreement, I think it's a great avenue. Lots of folks on here that are not real REI should pivot this way. If i compared them side to side, i always take the hard asset. The reason being you just showed me revenue for like two weeks, I always will underwrite the investment on the floor of the underlying investment-- in REI that's your land + physical structure. In digital space, that's the key of your domain name and IP. The latter stuff does not get a primo touch at $65k, that's north of $10MM+. At $65k you can get leveraged into a very good real estate spot. When the site starts to lower revenue, how are you justifying the costs? If my property doesn't get rented, I still own primo property in five points Raleigh or east nashville or coastal West Palm Beach. And guess what, there's less of that available over time.

[Dan H.]

Quote from @Mike K.:

Quote from @Kevin Sobilo:

@Mike K. I hope that works out for you.

IMO opinion, its ALWAYS a good time to invest in real estate.

However, depending on the economic climate deals might look differently. The kind of deal that was easy to find pre-covid might not exist right now, BUT a different kind of deal might be ripe for the picking.

There are SOOOO many ways to invest in real estate that its hard to ever say with authority that "now isn't a good time to invest".

Good Luck!

 Looking at a local service business that currently generates $60k a year with limited owner involvement, no inventory, and very limited equipment required. Basically no overhead and can be scaled up to increase income. Should generate at least $500k wealth in my 10 year time span with very limited risk. I've analyzed numerous 1-4 unit residential deals for both cash flow and appreciation and haven't seen anything close to those numbers.  

Also, I think once the Marxists take over the first people they are going after is the landowners. That's how it always happens.

A property I purchased 2.5 years ago is worth $580k more than I paid.   This includes the discount at purchase, the value added, and market appreciation.   

i realize the market has changed in the last 2.5 years, but value adds can still be performed.  

You can use alternate financing (assumed loan, sub-to, owner financed, etc).  

There is also alternate rent models such as STR, MTR, rent by room.  

note these are the traditional residential options.  

there are numerous commercial RE options such as storage units, mobile home parks, industrial, office, NNN, etc.  

raw land speculation.   In my market they just announced a long term, costly upgrade to an airport.  What do you think this is likely to do to land values near the airport?   Especially seeing that the primary airport is too small and geographically constrained.   The primary airport cannot easily be enlarged.  This upgrade to the other airport may present a real solution to the problem.  

then there is active investing such as development and flipping.  

there are a lot of RE investing options, but it is possible none of them are correct for the OP.  This does not mean that there are not viable RE investment options.

 
best wishes

[Carlos Ptriawan]

Quote from @Kristi K.:

Quote from @Bruce Woodruff:

Not being able to influence the stock market also means that you have no direct control over the asset's movement up or down......

I like being able to actively influence the value of my asset..... :-)

Couldn't agree more. I got out of the stock market in 2016 (pretty much) because it killed me to see $50,000 losses in one day. Best choice I've ever made.....

 let me guess, you purchased just a single stock company isn't it ? if so, that's not investing to stock market.

[Kristi K.]

Quote from @Carlos Ptriawan:

 let me guess, you purchased just a single stock company isn't it ? if so, that's not investing to stock market.

Not at all. I was very diversified.  It was a 401K invested in all different types of mutual funds. 

[V.G Jason]

Quote from @Kristi K.:

Quote from @Carlos Ptriawan:

 let me guess, you purchased just a single stock company isn't it ? if so, that's not investing to stock market.

Not at all. I was very diversified.  It was a 401K invested in all different types of mutual funds. 

 Then when it went down $50,000 you start putting in limit orders to buy depending on how much of a % the 50k equates to. Those are opportunities if it's general mutual funds akin to the s&p, total stock market, etc., to buy. 

The lack of control of it, I understand. The lack of exposure, I do not. 

[Mike K.]

Quote from @Bruce Woodruff:

Quote from @Mike K.:

 The only ones that have positive cash flow are the realtors...

Sorry, but what a unknowledgable comment. Every investment property, of any type (STR/LTR/MTR/Flips) I've ever owned has had a positive cash flow. The STRs i owned had a similar monthly profit as you are talking about here. The difference is that when I sold them after 2-3 years, they had doubled (or better) in value. Factor that in and you cannot touch the profit that is availble to a RE Investor.

I applaud your success in your new venture, but don't come back on here to rub our noses in it, when you obviuously have little clue what you're talking about. But seriously, best of luck to you, we all have our experiences and opinions..

Just trying to help. I assure with 30+ years as an appraiser I know EXACTLY what I'm talking about. I did a deep analysis on over 100 rental property opportunities. Not one have a positive cash flow over $300/mo in a best case scenario.  Appreciation, tax benefits, blah, blah, blah.  Cash is king.

[V.G Jason]

Quote from @Mike K.:

Quote from @Bruce Woodruff:

Quote from @Mike K.:

 The only ones that have positive cash flow are the realtors...

Sorry, but what a unknowledgable comment. Every investment property, of any type (STR/LTR/MTR/Flips) I've ever owned has had a positive cash flow. The STRs i owned had a similar monthly profit as you are talking about here. The difference is that when I sold them after 2-3 years, they had doubled (or better) in value. Factor that in and you cannot touch the profit that is availble to a RE Investor.

I applaud your success in your new venture, but don't come back on here to rub our noses in it, when you obviuously have little clue what you're talking about. But seriously, best of luck to you, we all have our experiences and opinions..

Just trying to help. I assure with 30+ years as an appraiser I know EXACTLY what I'm talking about. I did a deep analysis on over 100 rental property opportunities. Not one have a positive cash flow over $300/mo in a best case scenario.  Appreciation, tax benefits, blah, blah, blah.  Cash is king.

Cash flow is a metric off of diff variables. I have plenty bot in 2023 that have more cash flow than your business monthly. 

You're talking cash on cash, and you're right. But that's a garbage metric for REI.

[Mike K.]

I work for a bank that lost $3 billion last year.   I'm worried about the bank going under and losing my job.  Can't say any more than that. Taking on heavy debt with a negative cash flow on the promise of future appreciation doesn't work for me. Trust when I tell you the house of cards is going to collapse. It's not sustainable. The website I purchased has stable income with a large positive cash flow which will help me feed my family and get through what is coming. I apologize if my tone is harsh. I'm really trying to help people expand their thinking beyond only focusing on RE investments.

[V.G Jason]

Quote from @Mike K.:

I work for a bank that lost $3 billion last year.   I'm worried about the bank going under and losing my job.  Can't say any more than that. Taking on heavy debt with a negative cash flow on the promise of future appreciation doesn't work for me. Trust when I tell you the house of cards is going to collapse. It's not sustainable. The website I purchased has stable income with a large positive cash flow which will help me feed my family and get through what is coming. I apologize if my tone is harsh. I'm really trying to help people expand their thinking beyond only focusing on RE investments.

It's collapsing (slowly) as we speak. The cliff like fall will be subject to a lot more things.

That doesn't change anything I have said or mentioned. 

[Carlos Ptriawan]

Quote from @Mike K.:

I work for a bank that lost $3 billion last year.   I'm worried about the bank going under and losing my job.  Can't say any more than that. Taking on heavy debt with a negative cash flow on the promise of future appreciation doesn't work for me. Trust when I tell you the house of cards is going to collapse. It's not sustainable. The website I purchased has stable income with a large positive cash flow which will help me feed my family and get through what is coming. I apologize if my tone is harsh. I'm really trying to help people expand their thinking beyond only focusing on RE investments.

 You are brave person to able to say that in bp lol

[Henry Clark]

Hopefully the bank does go under then we make money.

To compare against REI develop your scaling model. Tax impact, cash flow, leveraging, etc. How many of these deals do you need to execute to achieve your Financial freedom to replace your job? Sounds like you have a one year timeframe.

[Chris John]

@Mike K.

I'm super curious as to what owning this website entails.  Can you give a brief rundown of the responsibilities - both short and long term?  Thanks

[Mike K.]

Quote from @Chris John:

@Mike K.

I'm super curious as to what owning this website entails.  Can you give a brief rundown of the responsibilities - both short and long term?  Thanks

 I bought a blog website that has been operating for 2 years. It has 350 articles on the same topic. I run facebook ads and people click the ads and go to my website. My responsibilities are to manage the FB ad campaigns. There were a few non-performing ads that I turned off which has increased my profit margin. 

I'm running the same FB ads that the prior owner has been running for the last 2 years. I have not written any new blog posts yet. Heck, I still haven't read all of the existing articles on the website.

I was looking at a cat lovers blog that makes $4,000-$5,000/mo net income from social media traffic. Just couldn't do it because I'm a dog person and I hate cats. 

The nice thing about looking at online businesses is that when you express interest and sign the digital NDA owner gives you a P&L statement going back 24 months. Because it's digital all of the website traffic, income, and expenses are easy to verify during due diligence. I looked at probably about 50 different websites and analyzed their P&L statements and found a few good ones. 

There are several online marketplaces for purchasing digital businesses. Best one I found is Flippa.com. 

Websites sell at a multiple of net profit. If you buy a website and can increase the profit you are instantly increasing the value of the digital property.  The website I bought has over 100,000 visitors/mo and the profit is low for this amount of traffic. I have several strategies I'm gonna try to increase the profit.

[Bruce Woodruff]

Quote from @Mike K.:

Just trying to help. I assure with 30+ years as an appraiser I know EXACTLY what I'm talking about. I did a deep analysis on over 100 rental property opportunities. Not one have a positive cash flow over $300/mo in a best case scenario.  Appreciation, tax benefits, blah, blah, blah.  Cash is king.

I wish you the best.....but if you did a 'deep analysis' on 100 properties and couldn't find a single one with >$300 mo CF, then I would question your metrics. Almost ANY decent vacation rental will provide you with $3,000 a month or so....

[Mike K.]

Not too many STRs in Columbus, OH.  There are only so many Buckeye games a year.