Too Late to Invest ?

Question

I am 59 now. Wondering what the best way to invest in real estate at my age would be.

Stock Market returns from what I have read will average 6% going forward over the long time horizon. Plus if you invest in bonds it lowers that return. And then there are fluctuations. Plus you can only withdraw 4% if you want the money to last.

I work a full time job and can't give that up at this point. Actually I will probably work until 70.

So I would be a part time investor.

I have studied Real Estate over the last year. I have gone to some meetings - Pine Financial, Apartment Investors etc... The various avenues and buy and hold seems to be the best path for the average RE investor from what I gather.

My inclinations are 2 - 4 units.

I have considered out of state turnkeys because I can get good prices in places like Cleveland and Alabama. HOWEVER I have always read you make money in real estate when you BUY. And turnkey you buy retail. The turnkey companies make the money up front and it would take 10 years I think to make money with the turnkey model. And then the 10 year Capital Expenditure tsunami hits - roofs, heaters, etc....

Question 1 - Is it too late given my age ?

I will be using 401K Trust money so I have to go the commercial loan route putting 40% down. This will limit my ability to purchase - which is why I was looking at cheaper markets.

Question 2 - Minnesota markets are not cheap and it is a sellers market right now. Are there still deals out there or should a person wait for the market to drop ?

Question 3 - Given that I do invest in this market how does one go about finding deals ?

I don't have the time to direct market and knock on doors etc.... So find an investment agent ? I am meeting with the Remax folks soon to see what they have to offer.

I don't think I have the time to poor through 50 properties a day and make offers like a full time person could.

Question 4 - If I invested here it would not be MPLS or St. Paul - Prices high, Taxes always being raised, etc...

People seem to be moving farther out - St. Cloud, Owatonna, Cambridge, Mahtomedi etc...

Question 5 - I am a numbers guy. I understand NOI, how to run the numbers on a property etc... But I don't understand how to evaluate a property or a neighborhood. I can't do a walk through and determine what needs to be repaired.

To recap - Is it too late to invest in real estate ? Should I use an agent or broker to find me deals ? Should I look outside the cities ? Should I wait until prices go down ?

Would someone in my situation perhaps be better with turnkey ? Should I perhaps try the BRRRR strategy ?

After a year of figuring out where I want to invest and what area of real estate I want to invest in I am ready to move forward. But I still feel lost as how to best get started. I feel if I just jump in I am going to make big mistakes.

John Woodrich · Answer

Long post - I don't have time to address everything but short answers:Q1 - No. If there is a will there is a way. Q2 - There are still deals, they just don't slap you in the face like they used to. Be smart, find a good realtor like @Jordan Moorhead to help you sort through what is a good deal.Q3 - See Q2, find a realtor who specializes in investment properties or start burying your head in your local market in effort of finding off market deals.Q4 - Talk to a realtor who knows both areas. Some areas are more geared towards cash flow, some are lower cash flow but an appreciation upside.Q5 - You didn't ask a question here.... Network, trust your professional realtor and double check their work if you are concerned.Q(not numbered) - it isn't too late to invest, we all have our ideas on the current state of the market but nobody has an absolute answer. Run your numbers as is, test them under recession terms, and figure out if you will be satisfied with the result.Q(not numbered) - If you invest in turnkey you have to know your upside and make sure you have a grasp of CapX. CapX is a real number, you can plan to sell in X years but you can't plan for the price. If investing in turnkey know what you are getting and make sure you account for repairs. BRRRR is a different animal, if you want a second job the rehab game has large rewards.

Jordan Moorhead · Answer

@Bruce Harding it's not too late.2. There still are deals out there, I've closed two this week. I'm personally still buying.3. I find all of mine on the MLS or through relationships.4. I like St. Paul over Minneapolis right now but there still are good deals there too. MSP is still appreciating well.5. You can learn!

Bruce Runn · Answer

@Pavel Ushakov@John WoodrichI almost hate to tell you how much work is involved in the ones I bought- LOL but yes- baths and kitchen redo’s, Redo floors, add a bedroom to each unit ect and we’ll have a winner-

Pavel U. · Answer

@Bruce Runn @John Woodrich I've been slacking lol, spending money on capex's. About to start splitting my commercial building into 2 units. So far just 1 for me this year, but I'm actively looking.@Bruce Harding as far as "I can't do a walk through and determine what needs to be repaired." - whatever looks like outdated dirty crap, you replace. I know it's vague but not really. For example you can't expect high rent when the place looks like 1970's with green carpet and pink formica counter tops.

Bruce Runn · Answer

I’m closing on my 3rd property of the year so there still is opportunity- 1 MLS- the other 2- hard work to find/buy them

Ryan Evans · Answer

It's definitely not too late. There are plenty of savvy investors who have worked a few years and make enough cash flow to live on. It's not easy, but it's not impossible. And I wouldn't get hung up on the price point of the market in Minnesota. There are plenty of markets out there where you can make money in both appreciation and cash flow. And sure, going out of state comes with its difficulties, but plenty of people do it successfully. Not sure where you got the 40% down number, but 25-30% down on commercial is common. How much are you looking to invest? $25k could get you a solid duplex that cash flows $400-500/month. I see that all the time in my market. A few of those kinds of deals can put someone in much better shape for retirement.

Ric McGuire · Answer

I can't tell you where/how to invest, but I will make a general observation. You are correct when you say "You make money in real estate when you buy". Now, the flip side of that is that in order to buy at a discount, you must be able to "create" value.You can't say things like - "I don't have time to work on a house", or "I don't have the skills", etc. If a house doesn't need any repairs, will qualify for FHA financing, looks great, etc., why/how would you be able to buy it "below market"?Probably not going to happen......Now, here's what I think: First, real estate is a LOCAL business. By this I mean the market in Miami may be different than the market in Bowling Green Kentucky which may be different than the market in Charlotte, N.C. Now that being said, I believe that prices have pretty well peaked for the current "up cycle" in real estate. That's true in the stock market too, but let's stick to real estate....The residential real estate market in the U.S. hit bottom in 2012. 7 years of rising prices has followed. I own a small number of single family rental houses in the Atlanta market. I currently get more post cards (about 4 per week) asking if I want to sell my rental house, than I have ever gotten at any time before. To me, this says the market is "over heated". I will go on record here and say that you will have a better opportunity to buy a single family house in one or two years than you have today. Generally speaking, this market has been too hot for too long. I believe we are at, or very near the top.No, 59 (or 60) years old is not "too late" to invest. Hopefully, you will live another 25 years.....Take the next year to research this subject. Locate a good "handyman", do some networking and and follow sales in your area. Learn as much as you can.Note: The only time you should expect to find a single family house listed in the MLS "wholesale" is in a "buyers market" when there are a lot of foreclosures.Currently, you are not likely to find a "deal" in the MLS. Very unlikely.You typically have to be a little more creative than that to find a great deal.Yes, I know some people may comment to "correct" me here, but I'm not sharing a "theory" with you, I'm telling you how I operate. It's worked quite well for me for almost 30 years now. In the long run, it's hard to beat real estate for an investment. But there are cycles to all investments. Good luck.

Amber Gonion · Answer

At 59 years old you are not too old to invest. Typically I like to look at investments at least two years out. At 59 you can look at investing for supplemental cash flow. At 5 years you should have good cash flow and equity in addition to principal pay down.

Frank Wong · Answer

Hi Bruce,Never too late better 59 than 69. 10yrs is enough time to start now build up your portfolio and have a good amount of income when you are at 70. Obviously, time is not on your side anymore and its time to get to work. No time to horse around you need to execute a perfect plan to make this work. Good Luck.

John Woodrich · Answer

@Pavel Ushakov gave away one of my secrets, I love places that looks like the 1970's with green carpet and pink formica counter tops!