Best Real Estate Investment Strategies for a Busy Software Engineer

[Mikhail Ege]

Hi everyone,

I'm posting on behalf of my friend Alex, who is seeking advice from experienced real estate investors. Here’s a bit about his profile and what he’s looking to achieve:

- Alex is 30 years old and works as a software engineer in San Francisco, earning $167,000 annually. His goal is to grow wealth through real estate investments with a balanced approach, minimizing time commitment, and maximizing returns.

- He recently inherited a 3-bedroom single-family home in Fremont, CA, valued around $1 million, currently rented out for $4,000/month.

Alex's main concerns are balancing his full-time job with the demands of real estate investment, managing cash flow effectively, and understanding the potential tax benefits.

- What investment strategies should he consider?

- Should he invest in another rental property or consider REITs for a more passive approach?

- What tax strategies should he consider?

How would you structure investment strategy with his  current assets? 

Thank you for your help!

[Jaron Walling]

"He recently inherited a 3-bedroom single-family home in Fremont, CA, valued around $1 million, currently rented out for $4,000/month." - If this property is not heavily leveraged (maybe paid off) he should sell this property tomorrow. RE prices have never been higher in most markets. In our area prices are up 6% y/y. If a family member passed away he would be selling at a stepped up basis. The tax savings alone are worth more than $4k in rent every month. He's not an accredited investor so he can't deduct losses on personal income. The equity position/rental income is beyond normal. Take that money and buy RE in other growing markets, stocks, bonds, index funds, high yield savings, or probably a combination of it all. 

If Alex wants to be a REI there's nothing stopping him. Inheriting a $1M property and renting it for $4k per month does not make you a investor. It gives Alex a massive head start on the rest of society. Don't take it for granted and don't put all the eggs in the same basket. Best of luck.