All Forum Posts by: Account Closed

As others have said, you have lots of options in real estate.  Easiest ways to invest passively are through crowd-funding sites or real estate-based funds.  Easiest way to invest actively would be to pay cash for a bunch of rentals and have a property managers take care of them for you.  Personally, assuming you want to go bigger, I'd start off by investing passively as a limited partner on a deal or two with an experienced syndicator to learn the ropes and build relationships.  Then start looking for your own apartment deals.  Bring in other investors to stretch your capital as far as you can.  With $1M, you could invest with others on 10 or more deals and generate a lot more value for yourself.  And don't forget about the sweet tax benefits of running an active real estate business.  Check out Tom Wheelwright's book, Tax Free Wealth, for a detailed run-down.  Good luck!

Adding a vote for Joe Fairless' Best Ever Apartment Syndication Book and the Syndication School series on his podcast.  Great resources.

Do you plan to do any renovations to push up rent prices?  Do you have comps for studios in your area that are updated?  With studios you may be able to make some decent updates without spending a whole lot of money, but only worth it if you can get the rent increases you're planning.  Some folks shy away from studios thinking that people mainly want 2-beds and up.  But in the price range you're talking about a $450-500/mo studio could be a great product.  Like others, I'm just wondering why the monthly rent is so low.  If $350 is really the most you can charge, that's a tenant base you probably don't want to deal with.

House hacking is definitely the way to go. Do you have the ability to move to a less-expensive market?  Not sure if it's feasible with the new job, but you could potentially buy something relatively new that has minimal risk of maintenance/capex and allows you to build equity, save more money, and prepare for your next purchase.  I'd recommend going that route before over-leveraging yourself by putting very little down.  

@Michael Siladi be sure you talk with a real estate CPA about 1031s. I’m not a CPA, but I would not do a 1031 unless I were moving into a cashflow property that I plan to hold until I die. If you ever cash out, you’ll pay taxes based on the gain on your original basis. If you’re not careful, you can get into a situation where you could sell the property for a nice gain, but paying taxes on the gain above the original basis can wipe out your profits. If you hold the property until forever, the basis will be adjusted up to market value when it goes to your heirs.

@Derek Morrison if you have a hunch of furniture already and need to keep it someplace, you can usually get higher rent. You might also be able to do short-term corporate rentals if you have a good property manager. I personally would not go buy furniture for a rental unless the goal was to do short-term rentals to make a lot more $$.

@David De Luna IRR is the discount rate at which the net present value (NPV) of the project is equal to zero. To dig a bit deeper, the discount rate in the NPV calculation is the rate of return you would expect to get on other investments. For example, let's say you do an NPV calculation assuming a discount rate of 8%, because maybe you can get 8% in the stock market. If your NPV is positive, that means your IRR is greater than 8%, and the NPV project is the better alternative. If you play with the rates and find that 14% makes the NPV equal to zero, then 14% is your IRR. Basically tells you the return you would need on another project to be as good as this one. Helpful when investors are trying to figure out where to invest their limited capital.

Ultimately, they will be taking a risk by investing with you, so your job is to make them feel comfortable with that risk.  Try to think of they questions they're going to ask themselves:

• In simple terms, what is the business plan?  How will we make money?
• Do I know this person and trust them?  What is their background?  Do they have experience with this type of investment?
• What are the assumptions behind the numbers?  Are they conservative or unrealistic?
• What are the exit strategies in different scenarios?
• What is the long-term goal?  Will there be additional and/or bigger investment opportunities in the future?

Good luck!

Both median home values and rents have increased 50-60% in the last several years.  As of end-2018, median home value is $273k and rent is $1400... only betting about 0.5% per month.  Going to be tough to make the number work... unless you can find some specific neighborhoods where can can get better returns.  Maybe consider a different market?

I'd recommend using a good property manager.  If the numbers don't work, then the margins are too tight.  Talk to the PM about what you can expect in the area, how they vet potential tenants, and how they handle any tenant issues.