All Forum Posts by: Becca F.

Becca F. has started 28 posts and replied 929 times.

In an effort to see my properties (long-term rentals) are performing, I'm using Internal Rate of Return (IRR). I started comparing these to how my index funds and stocks are doing. I have a couple of REITs and other public market funds (Master Limited Partnerships and Business Development Companies.

Except for few blips like in 2022 and in few months ago, the S&P500 has done really well. I've had returns of tech index funds and stocks in the 15 to 20% range, with a few outliers of 24% over a 3 year period. These numbers don't seem sustainable over the long term. Hasn't the S&P500 had an average 11% return over 50 years? I'm using 8% to be on the conservative side and comparing it to my properties' IRR

I compared my Class A Indianapolis home - the IRR was 12% to 40% depending on which cost basis I used, the original purchase price in 2013 or the cash out refi amount in 2021. The lower number was around Year 1 to 4 then IRR went up at Year 5. This one was a bit muddled, not as straightforward as the Class C numbers since there was a cash out refi

For the Class C Indy home bought in 2023, my IRR was negative to 2% at Year 20 to at best 6% at Year 20. I used 3% appreciation and 3% rent increases for each year with $3600 for annual maintenance costs (my -$300 a month). Optimistically then I used $1500 for the annual maintenance costs, with the reasoning that this home should stabilize at some point, although I think there would be large cap ex the longer I keep it, needing new HVAC, roof, etc.

Here's the calculator I used (those are pre-populated numbers by the site owners, not mine):

https://www.calculator.net/rental-property-calculator.html

Anything missing with this calculator? Is there a better calculator I should be using?

With index funds and stocks, I don't get tax benefits like rental expenses, depreciation, etc but the IRR is higher and what I'd consider more passive income and the exit strategy is much easier than exiting out of a bad property. I do have to pay taxes on this or any interest income from HYSA. The prevailing financial advice I've seen is buy 3 to 4 good index funds (e.g VOO, VTI) and just let it grow, maybe check it every few months, the "VOO and chill".

Also curious to hear from others as far as investment types: crypto, bitcoin, oil and gas, precious metals, I don't have a full understanding of crypto/bitcoin and have heard that it's volatile. Thoughts on the IRRs for those types of investments and how you feel they compare to RE (residential)?

4 Votes

Quote from @Mandhir Hazuria:

@Bradley Buxton @Becca F. - If you'd be open to it, would love to get your referrral/resources as well. I'm in the SF Bay area as well looking at Tahoe (and a few other places including out of State), just staring but looking at a mix of LTR and STR investments within the next 1 yr.

After talking to several local investors, the level of CPA services depends on these factors: are you a W2 employee with a few long term rentals and other passive income (stocks, crypto, etc), do you have STRs?, do you have S-corps or C-corps? Own commercial real estate? A large portfolio of properties? Any syndications? NNN leases? Other businesses or side jobs? Other types of real estate (e.g. land, mobile home parks)? Have you had a cost segregation study done? Plan to take bonus depreciation? Partnerships with anyone or multiple people?

Some of the investors felt the firms charge way above what the services they needed. There were in a similar situation to mine, W2 employee with some LTRs. I answered no to the above questions I posed in the previous paragraph. Paying $10,000 for tax planning and doing my return each year is high

I actually currently don't use a CPA. I know I'm going to get scolded for this but I do my own taxes on TurboTax Premium. I did have a CPA review my return and everything looked correct so I'm continuing to do my own taxes for now.

I spend a significant amount of time reading articles about tax strategies and listening to podcasts and watching videos. I feel that I'm educated and triple check my returns to make sure I took all the deductions before I file. I think doing my own taxes is better than me taking taxes to a company like a random HR&Block office down the street who may not work with any RE investors.

I'm not suggesting you do your own taxes. I'll DM the CPAs I did talk to.

1 Vote

San Francisco, California

Quote from @Evan Polaski:

Totally get where you’re coming from. AI posts can feel generic for a few reasons:

They often lack firsthand experience or market nuance,
They overuse polished phrasing that doesn’t match how real investors talk, and
They tend to recycle common talking points without adding new perspective.

Threads like this are way more valuable when people share real-world insights—what’s actually worked (or not) for them on the ground. Thanks for calling it out...

Oh wait, I used ChatGPT to write that response. But there is a woman from one of the more commonly referenced turnkey groups on these forums that is seemingly just copying a post into ChatGPT and posting the response. Formatting is one of the bigger giveaways to me.

I noticed that one. I thought she was following me around every time I commented on a new California investor post with the same comments...LOL

My comments are all typed from my thoughts with typos - some of its repetitive because it's similar advice to CA investors. I've never even used ChatGPT in any professional capacity or in my personal life.

I've stopped commenting on new investor posts as of a few days ago. I've been on BP for almost 3 years now and I feel like I'm at a repetitive sales convention and not worth my time or energy now to respond back to ChatGPT comments.

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This post generated over 100 comments...wow.. I agree with many of the comments about owning a higher quality asset in an appreciating market. I invest in the San Francisco Bay Area and Indianapolis metro area.

My appreciation and net worth from my California properties far surpasses my Indiana ones. For context my appreciating properties in CA and the Class A Indiana were acquired in 2013 or before. Class C Indy purchased in 2023.

I know a lot of multi-millionaires in the Bay Area who had middle class incomes (teacher, librarian, janitors, etc) who bought long ago (as in 2008 or going back to 1970s) with with just one or two rentals. This was when CA was more affordable and home prices weren't out of reach.

Example (not mine but someone I know):

- S.F. Bay Area home 3 bedroom, 2 bath 2100 sq ft (lower level living area brings it up to 2700 sq ft) purchased in 1960s for $68,000

- listed for sale in 2014 for $1.25 million, bidding war, sold for $1.71million.

- New owner renovates it, listed in in 2021 for $2.5million, bidding war sells for $3.078 million. Owner #2 made $1.368 million (minus commission and closing costs) in 7 years. That's a pretty good return to me.

I tried to read every single post but stopped on page 4. I didn't see anyone mention this but in California our property taxes go up a max of 2% a year (from Proposition 13 passed in 1978). Long time owners (primary home owners and investors) benefit from this but newer buyers pay high property taxes.

I had an Indy property management company do an analysis of my 3 homes. Class A could keep for appreciation, doubled in value but my property taxes go up significantly, 17% the last assessment (at this rate the property tax will surpass my California properties in a few years - not joking). For the Class C homes, he said I'm unlikely to get a good return unless I get a great tenant and they stay for a long time and the properties stabilize (repair calls reduce). The tenants will likely be lower income for a very long time. I sold one of the Class C and the other one is still rented. By the time the Class C appreciates enough I'll be over 100 years old.

If I was going to be cash flow negative from the start, I would have bought one higher quality asset instead of 2 Class C homes. To the OP, Mike D. meaning buying in Hamilton County suburbs (where my Class A) instead of east side of Indianapolis.

I think people who live in low cost markets do better investing there instead of investors who live 2000 miles away. I also think there are sub markets with lower cost markets and I recommended to CA investors to buy higher quality assets OOS not the cheapest house they can find.

Interesting insights and I am in a similar situation to you. I own property in California as well and choose to do most of my investing in the Midwest in spite of the higher (historical) appreciation and rent growth in CA. The reason comes down to return on equity. Many if not most of the people arguing against my ideas, some of them very, very loudly, don't use or understand this concept. Basically, you take all sources of gain (cashflow, appreciation, and principal paydown) divided by your equity in the property (at purchase it's your down payment, and later as appreciation takes place it's whatever the current value of the property is minus your loan balance) and that gives you a percentage showing your total return. I pretty much guarantee that that's higher in the Midwest UNLESS you put down a small down payment in CA and deal with huge negative cashflow. If I were writing my post again I would clearly define this concept at the start since many investors don't understand this and I was just assuming they all did.

If I were evaluating Class A vs Class C I would figure out the amount I need to put down to cashflow and then run an ROE calculation on both. Nothing wrong with Class A as long as you understand the difference in return and make a tradeoff you like. Its ROE will be much lower, but less volatile, less maintenance calls, less annoyance.

Yes, the outskirts of Indy such as Hamilton County give truly amazing ROE due to even better cashflow and lower property taxes than Indy and for some reason are neglected by investors.

Thanks for the feedback!

Mike, I didn't know you had property in CA. Do you mind sharing what counties your Indianapolis properties are in?

I did consider other cities and states but it would have taken months of research and I knew Indy best:

Tennessee: Nashville and suburbs Brentwood and Franklin (have visited before) - possibly, Memphis - no (was sent numbers by a turnkey company)

Detroit, St. Louis, parts of Ohio - no (optimistic numbers sent by turnkey company)

In the turnkey companies ads/sites they say "passive investing" LOL...if OOS investing is passive, I'm the Queen of England

I'm going to address the "grow your net worth twice as fast". Based on the Indy PM analysis, how would my net worth be growing by buying Class C properties on the east or west sides of Indy, if I'm -$300 to -$500 most months? Just as I thought it was stabilizing and received two months of full rent (minus PM fee), I get another repair notification the other day with a $385 repair. I really appreciate this Indy PM's honesty - he could have said, "hey just switch to my PM and I'll make it all better." It's possible I bought a lemon of a house but I'm not going to take anymore chances and buy 5 or 10 more of these types of properties.

I know this is a RE forum, but my net worth has grown more in the last 2 to 3 years from the S&P500 than this east side Indy home. I log into my retirement accounts and brokerage account and have more "cash flow" from these than 3 years of Indy rentals (the Class A and C combined). Yes I'm paying taxes on all this interest income and dividends but I have far less stress. I have a large amount of passive losses on these rentals which can only be unlocked by selling since I'm not a Real Estate Professional and can't offset my W2 income with these losses.

I'm going to try one more time with Nevada. If this doesn't work, I'll just add value to CA properties, raise rents and maybe keep the Class A Indy one and call it a day and invest in index funds, a few REITs, etc. The stress is probably taking years off my life and current happiness level.

Hmm, let's see. First off, I would never invest in class A if you're looking for cashflow, or at all. Class C small multifamily properties are the real meat and potatoes. I'm not here advertising for anybody to buy any real estate investment. It's hard to invest profitably at all right now with interest rates where they are. That said, I am currently in the process of growing my portfolio, so obviously I think it's worth it. These are my suggestions: a) pay the loan down until you can cashflow, b) audit your PM's maintenance expenses, consider dealing with other vendors, c) invest in small multifamily, d) be conscious of property taxes and consider investing outside the city of Indianapolis, where they are high.

I am currently getting around 15% returns on my stuff in Indy, including stuff that's paid down more than it needs to be, and it can be tightened up more to get closer to 20% while still cashflowing. If you are focused on cashflow, note that your total return will always be lower, and I myself accept this to have some cashflow. Total returns are always higher when you use enough leverage to barely cashflow. I wonder if you have calculated ALL your returns including principal paydown and appreciation.

Hope this helps.

I've talked to the PM and the Maintenance Coordinator multiple times and audited the financials. I feel that the repair requests are reasonable - again, if I were local, I'd go there and possibly do some of the repairs myself. I'm paying for a PM since there's no way I'm self managing Class C with this many issues and I'm paying for convenience. They're going to have trip charges built in the repairs invoices.

How are you getting 15% returns? Is this cash on cash or IRR? When did you buy these properties? Over the last 10 to 15 years or more recently?

On the Class A IndyI bought it in 2013 and did a cash out refinance during COVID (to help pay for renovations on my CA rental). On this cash out refi mortgage, my rental property calculator says I'm 1.35% cash on cash return at Year 4 (refi done in 2021), not including the cash I pulled out of it. On the IRR it's much higher over 45% so not sure if this number is correct. Another CA investor briefly calculated my return as about cash on cash return as 8%, if I use my original purchase price. I have about 45% equity on this home with the cash out refi loan now.

On the Class C I'm not paying down an extra $1 towards the mortage on this sinking ship. I'm not trying to be flippant but I could set up a stand at a Farmer's Market and bake cookies and sell them and cash flow more than this house. For cash flow I'm looking at starting a business, which is a lot of work with a W2 job.

With Nevada, my intention is to leave an appreciating asset to my kids and if they want to move into the home later or continue renting it out or leave CA and move into as my primary when I retire - lots of moving parts so my plan may not work after I look in Vegas. If I cash flow or break even I'd be ok, I'm increasing my net worth property wise but liquid cash wise, no.

Are you self managing your Indy rentals? How are you getting 15% to possibly 20% returns? If you pay cash and don't use leverage, you're locking up more of your money. Someone please explain this to me - my brain hurts from thinking about this.

He discusses an allocation of about $200/month sustaining maintenance/cap ex and I believe he self manages based on his role with the maintenance. 15% would not be good considering PM alone in his market would be charging at least 10% all inclusive (placing tenant, tenant renewals, inspections, managing maintenance, dealing with tenants including collecting payments and dealing with late and delinquent payments, etc.)

I also believe he maybe including the appreciation. I hope it is not including the appreciation for his sake.

I suspect you know this, but IRR is superior to COC on measuring the overall quality of an investment.

Have you calculated IRR on your CA property? I have one property that I have not done the calcs in real long time but the worse I have done calcs on is in the 70% to 80% per year. This is using to date actuals since purchase plus projections to the various exit times. this is better than my sustains projections which makes sense as I allocate pm in my projection but is not in my LTR actuals because we self manage the LTRs and because a lot of the large cap ex items have ever been replaced.

S&P has lifetime near 10% return. Investing in RE as owner (not including as LP, REIT, etc) should produce returns far greater than this because it requires significant more effort even with the use of a pm. If you are self managing, the value of the effort should be subtracted off the return because your time is precious and deserves to be compensated. I would highly recommend self managing property if the projected return is not significantly above 25%/year (6% to 12% is PM value, near 10% is S&P historical).

Inexperienced RE investors under estimate expenses, the value of the effssciated with self managing, and the effort involved with being the asset manager even with the use of a pm. They think 20% self managed is a good return; it is not.

best wishes

Based on the comments from the OP, it seems like he's including appreciation in his 15% return. Are you using 25%/year with IRR as the return, meaning it's better to self manage if it's lower than 25%?

I have 2 CA properties (one SFH, one multi-unit). I haven't done an IRR calc on them but the financials from the PM on multi-unit, my return is really good. I self manage the SFH.

I find the calculations with S&P500 and rentals to be challenging because it's not an apples to apples comparison. I don't get tax write offs on my index funds or stocks. It could very well be that my return on the Indy Class A is more than than 8% - it's doubled in value and I pulled out a cash out refi during COVID.

For Class C which I would never buy anywhere even in CA, being -$300 to -$500 is terrible for Midwest. If it was going to double or triple in value in 5 years, might be worth it but when I ran the rental property calculator out 20 years using 3% appreciation and 3% rent increase, using $3000 for annual maintenance (took -$300/month and multiplied by 10 months), could be more. My beginning IRR is negative then slowly increases to 0.7% at Year 10, 2.5% at Year 20. it's worse than I thought.

I just talked to an Indy agent and investor who confirmed that it's better to buy a higher quality asset. I've been on BP since 2022 but I had heard cash flow was pushed from 2008 to 2018ish. Look like some people are still operating in that mindset.

>Are you using 25%/year with IRR as the return, meaning it's better to self manage if it's lower than 25%?

if you are self managing and not achieving/projecting more than 25%/year IRR, why are you investing in RE? the reward does not justify the effort and risk. For me because I am spoiled from the RE market prior to 2022, I have hard time wanting IRR less than 50% and ideally much higher.

LTR pm fees vary by market. Typically he higher the rent point the lower the pm fee as a percentage of rent. But if we use an exclusive pm cost of 10% meaning including everything (tenant placement, lease renewal, tenant turn over, tenant interface (rent collection, late payments, delinquent payments, evictions, tenant drama, etc), handling maintenance, unit inspections, etc) and use an S&P lifetime of 10%, it means you are risking a lot of money and time to be an asset manager for 5% of additional return above S&P lifetime.

is it worth it for a projected 5% extra return? Not to me, but maybe to someone just starting their journey.

>For Class C which I would never buy anywhere even in CA, being -$300 to -$500 is terrible for Midwest.

I own some class c (maybe c-) in San Diego. 1) if I were doing it again I would try to have gone a little higher class 2) the c class tenants in San Diego pay their rent and typically take pretty good care of the units because of the housing shortage and difficulties getting decent unit at a fair price without a strong LL reference.

higher class means even better tenants. After a few years of holding the cash flow gap between the class c property and class b property is inconsequential compared to the other sources of return. This knowledge came with experience. So I have some class c units.

>I've been on BP since 2022 but I had heard cash flow was pushed from 2008 to 2018ish. Look like some people are still operating in that mindset.

I have been on BP almost exactly 10 years with a profile (this month is my 10 year anniversary). I was a lurker for a while, but not long (maybe 2 months). My view about appreciation being so much more critical in the wealth building was very much in the minority back then. I did not have as much RE assets then as now (I was not yet to 8 digits), but if we only pulled the users that were at 8 digits or on their way to 8 digits in RE, the appreciation would have been king even back then. The tide has definitely shifted. Back then investing for appreciation was called in many posts not investing. I posted multiple times definitions of investing. People viewed it as gambling. Some/many viewed cash flow as certain. It was also around the time I first saw the case shiller rankings on residential return since 2000. It was interesting not because the top of the list was all appreciation markets, but because those markets also ranked highest in the cash flow. There were now stats. Circa 2018 BP put out its ranking since I believe 2010 residential return. The calculations had a big flaw for CA in that the prop tax did not take into account prop 13, but it showed the appreciation markets had high appreciation but it showed the cash flow in just 8 years went from bad to ok (my market was near the middle in cash flow in just 8 years). I viewed the BP data at confirmation of the case shiller data as the appreciation markets were climbing on the cash flow and given more time would continue to rise. Now there were 2 sources that basically showed the same thing (except 8 years was not long enough to fully replicate the case shiller data). Case Shiller very recognized source as their case shiller index some still look at as the gold standard for appreciation (it emphasizes same property sales) .

Today most BP users recognize the wealth building of the appreciation. They realize gains from appreciation are tax deferred even if extracted via a refi or ELOC. The gains from cash flow get taxed annually. Prior to the rate increase, I actively worked at keeping my leverage high. It was mostly to leverage the money on other investments to maximize the return. However, it had the side benefit of minimizing cash flow which minimizes my taxes. I claim my cash flow is modest, especially after accounting for depreciation. Seeing I am not thrilled at the prospect of doubling my rate, I have been less active in maximizing my leverage and my cash flow is slowly increasing. The lower leverage impacts my return, but so would a higher interest rate.

This thread demonstrates how much the BP user community has moved from cash flow is king to appreciation is where the real wealth is created.

Good luck

I went and re-calculated my numbers for Class A and C Indy. For Class C, I re-entered the maintenance as $1500 (-$150 x 10 months) to be optimistic, so 50% of my original maintenance costs of $3000 a year, still using 3% appreciation and 3% rent increase. I'm using the premise of this property should "stabilize" and I won't be losing $300 to $500 most months for 10 years straight, now I'll have new HVAC, new water, new roof, the longer I hold onto this house. HVAC and roof estimated to be 6 to 8 years old by inspector in 2023.

Class C: IRRs at Year 2 (current rental year) -8.7, Year 5: 3.6%, Year 10: 6.7%, Year 15: 6.94%, Year 20: 6.51%

For Class A Indy: I used original purchase price (from 2013) then I switched it to the cash out refi amount in 2021 and put 0% down but put in the actual closing costs. I've already replaced the HVAC and water heater when I lived in that house in 2017 and 2018 so I didn't factor those in. I put in $1000 for annual maintenance and 17% increase for property taxes (the percent could be less after the COVID years of overvaluation)

Class A IRR: Year 1 (2021) NA, Year 2: -11.7%, Year 5: 49.7%, Year 10: 45.8%, Year 15: 42.2%, Year 20: 40.5%

I'm self managing Class A now. On appreciation and rent increases, it's not linear, some years it's more than 3% but could be less other years. So looking at this, I should sell Class C and keep Indy Class A and not try to sell it and buy in Nevada?? Is there something I'm missing?

In all markets, how sure are we of appreciation? And increasing rents in the lower cost "higher cash flow" markets? If people are losing their jobs especially someone making $40k, they're not going to be able to pay higher rent in these Midwest/South markets. What if we have WWIII, recession, depression, or another 2008 style crisis? We're looking at in hindsight. Anyone who owned property in California in 1960s to 90s didn't know it would appreciate this much in 2018 to 2025.

>Is there something I'm missing?

It appears that your maintenance/cap ex is a WAG. Using actuals will result in wide fluctuations in the allocation. Having a year without a large cap/ex will look good. A year without a large cap/ex will look bad. For example if you expect the roof to last 25 years and it’s. 8 years old, here is the cap ex on a $10k roof replacement: $10000 / (25-8) /12 =$49.02/month.

If you realize this one cap ex is ~$50/month, it shows $150/month is far too low if it is intended to be maintenance and cap ex on a sustained basis (if it truly is maintenance only and you have a different cap ex budget it could be ok but I suspect that is not the case). Also why did you use 10 months and not 12 months in your calculation? If you use 12 months, your allocation is $1500/12= $125/month. Another approach is you do not allocate for a sustained hold cost and realize when you go to sell you will either sell below full market price or have selling costs that include significant cap ex/maintenance. Regardless you will pay for the maintenance/cap ex in some manner, either you pay for them or you give a discount at selling.

>In all markets, how sure are we of appreciation?

My view on appreciation is anything can happen in the short term. Few people forecast the GFC, COVID, Tech bomb, etc. since 2022, I have done my underwriting with zero appreciation for 5 years because I am expecting modest appreciation in the near term (and 2024 had modest appreciation in my market). For long term appreciation I use a number a little below the neighborhoodscout published appreciation for my market for the century. Note this century had the tech bomb, GFC, Covid. It has not been event free. Shorter durations could magnify a single event. It is my belief my market is likely in the long term to come close to the appreciation that it has experienced over the last 25 years.

Reality is no one really knows. Use the history, metrics, etc to derive conservative estimates. Recognize especially in the short term, anything can happen. The next large GFC can happen this year or in 50 or more years.

good luck

I used $1500 to be more conservative on the maintenance but I think it's higher. My original calculation I used -$300 x 10 months = $3000 since I do have at least 2 months of the year with no repairs.

The rental calculator asks for an annual expense not monthly. I just put $3600 for annual maintenance (-$300 x 12 months). I even reduced the property tax increase to 10% a year (not 17%) My highest IRR is 4.05% is at Year 17. I find these calculators a bit problematic because like you said, you're not replacing an HVAC/water heater/roof every year, the cap ex/ large expense makes the numbers worse.

There's no way to sugarcoat it. The numbers, 80% of my investor friends, and my stress level say to sell the Class C and not hold onto it for 10 to 20 years hoping it'll get better.

I really disagree with buying more cheaper properties and I feel it's better to have fewer high quality properties to grow net worth. Some people on BP are going to buy more sub $200k (or whatever the low cost number is in your market) properties that "cash flow" - more power to them. I say we check back in 5 and 10 years and compare notes.

Sure, you can sell out of C class. It's your money! I can tell you with 90 percent likelihood, without seeing any numbers other than what you've already given, that your overall gain would be greater in this than your other investment, and the reason you can't cashflow is because someone sold you on unrealistic numbers. You just need to pay it down more. People repeat that A class is better and appreciation is better without knowing why. I refer them all back to my first post, it shows exactly why it's not true.

Mike I respectfully disagree with you. I know out of privacy you don't want to post zip codes or numbers (rent, mortgage payments, repair costs, etc) of specific properties. My own experience in Indy shows this, Class A bought in 2013 has appreciated, low interest rate, good IRR.

With Class C bought in 2023 I had two honest Indy agents and a PM tell me that these properties that my return isn't going to be great. Sure if you hold onto a property for 20 to 30 years it'll appreciate. If I bought 10 Class Cs some of them might do better than my current one, and some worse.

I'm not taking that risk, which is a gamble for me and will consume so much of my time. My higher risk strategy: go play some slot machines when I'm in Vegas, buy some crypto (haven't invested in this so far) and 5,000 shares of NVDA (that one's done well for me so far).

I think this topic has been argued to death. Neither of us will agree and it's perfectly fine, just like I wouldn't try to talk my non-RE friends into buying rentals.

I like the 5,000 NVDA action, but I'd argue it's a very low risk strategy, not high, especially when add in using the wheel method.

Selling covered calls 5 strikes OTM, is on average $10k-$12k per month at an average risk of about 18-20% of having shares assigned.

If keep margin use less than 60%, it would take a GFC/COVID level market melt-down to get in any trouble.

No tenants, no toilets, no capex, and time requirement is all of 15min a month and as-much-as 1hr a year with CPA.

Tax's suck, that's the big hit, Uncle Sam.

$450k, net about $134kyr........ 5hrs a year..... Just sayin.

We're at 284 comments before my comment now that I'm typing. Your comment posted 3 times...strange.

On the slot machines in Vegas I was being sarcastic and funny but I could win some money, who knows 😁

I've been heavily buying tech index funds and 5 individual stocks, but balancing it out with bonds and other types of stocks. REITs aren't doing that great for me - apartment complexes are decent return but I bought those in 2018, self storage I bought when the value was higher and its declined.

I'm still trying to figure out covered calls. I think to watch a tutorial at least 5 times.

I've heard of selling stocks then re-buying them later for tax harvest loss reasons so the gains and paying tax isn't as high. Need to ask a CPA how that works.

For my peace of mind, I'm not trying to buy 20 properties and have 100s of units. Four or five high quality properties is good for me.

Covered calls are selling calls that you own the underlying shares of. You have 100 shares of Apple then sell a covered call on it. For example, if you bought 100 shares of Apple(mark to market value today of $22,000(100 shares x $220) but your cost basis is $188/share so $18,800 in basis you are $3,200 in the money on unrealized gains(pre-tax).

If you use the option chain of today's settle. Say you sell .10 delta call against a Nov 21, 2025 expiry, so a $265 strike price, for $1.20 premium. You instantly gain $120($1.20 x 100) as a net credit.

By Nov 21, 2025, if AAPL is $265 or higher, your option will expire in the money(ITM) and gets called up on. So you sell $265 x 100 shares= $26,500 versus your $18,800 cost basis and collected a net $120 up front for it lowering your cost basis to $18,680(for easy math).

It can also be ITM prior to Nov 21 2025, and get called. If after Nov 21, 2025 happens and it does not exceed $265 so it is OTM(out of the money)-- you keep the premium($120) and your shares and your cost basis is still $18,680(if you net them). In our crypto thread we talk alot about equities and which, I put a notice on AAPL(for example) about two weeks ago.

Now, if it explodes to $300, you will have some regret. If it tanks to $200, you'll feel like a king or queen for you. You're able to trade the actual covered call option(the $1.20 net credit) to manage your exposure. This is just the math of it, there's tons of other stuff you need to look at such as short interest, earnings, etc.

Not to take anymore from this thread, but this info is imperative and good to learn as a way to look past RE. I would argue most here are not fit for RE, and if they are, it's best in the 4-8 property(across 2 cities) with low LTVs(progressively, maybe not day 1). Everything else should be in other asset classes. It's also why I say rather than invest in $250k indianapolis that the OP is suspiciously on about, I would take my capital to equities, btc, etc., before that.

https://www.biggerpockets.com/forums/963/topics/1233770-putt...

I understand most of your explanation with the covered calls but actually executing it when I'm my brokerage accounts, I wouldn't want to mess that up. I've held onto most of my stocks and index funds.

I agree with your assessment that many people aren't fit for RE, maybe house hack and buy a couple of quality properties. There's a reason many financial people tell most people "just buy some VOO and chill" I'm not trying to collect properties or scale quickly - if they perform poorly or are causing me lots of stress, may as well look at other forms of investment.

What broker do you use for the trading account?

There is actually a lot of difference between them all, especially there trading platofrms/software.

Think or Swim has long been coined the "best" for the self actuated trader or all levels, but I'd argue that it's gotten far too complex for the novice even though it's got amazing depth of education for use, most are not into investing the substantial time required of education and paper-trading to master it's use.

IBKR, no novice should ever try, there is many nuances to IBKR that can really burn the novice and there not readily disclosed and clear on them. namely around options executions.

I personally believe Webull is the best one out there for any who doesn't have a very specific need, which comes at advanced levels, and when at those advanced levels your with advanced knowledge and everything is a bit different then.

Yes, I have actively used all of these I mention, and still have all 3. For me, each has a different use. Schwab is my slow rolling things. IBKR is where i do leveraged trading. Webull is my primary active trading platform, when execution time matters. Which means a clean, simple interface matters, good data that's easy to quickly read, and with good live-time feed's etc etc..

Webull is the one I'd most endorse for others to use/start with.

I won't trade with Robbinhood, no way. They could offer me $10k to roll accounts over n try it for 30 days and I still won't. Very shady stuff they do behind the curtain that I strongly dislike.

It's one of the major three brokers but I'd rather not specify. I don't use Webull. I have a small amount in Robinhood - what I consider my play money but I'm no longer buying in that account.

I've been mostly buy and hold with index funds and stocks, bought another index fund in place of the original one which wasn't performing great. I'll take a look at Webull.

When we're comparing IRRs of rental property with S&P500 or NASDAQ, I'm getting some very high returns with tech index funds and individual tech stocks, like 15 to 20%. Is that sustainable? We'll always have tech - should have bought some more during the beginning of COVID lol

I'm using 8% as the comparison IRR which is why the Class C Indy home isn't a good return for me besides the headache factor.

Thoughts about buying gold or silver or oil and gas funds? I know we're getting off topic - I might start a new topic comparing different forms of investing vs. RE.

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Quote from @Stetson Oates:

Quote from @Marcus Auerbach:

Quote from @Jay Hinrichs:

living off of rental income to me is just another business.. your running a rental business instead of working for someone else.. IE self employeed still takes risk/effort and attention to details.

I think were many get romanced into this is thinking Rentals = no or very little work..

There are many business you could live off of cash flow with the same investments. IE millions in debt and Lots of cash dumped into them to buy the rentals..

Just another form of American Small business which is the backbone of our economy and lifestyles here in the US>

One thing that does make it easier to enter though many can get debt with zero experience where as buying a business acquiring debt normally takes some experience.

Lastly to me it really depends on the Asset class IE if your buying lower end C D section 8 much more work required and less likely you will ever live strictly on the cash flow over debt and cost to run them..

And of course the bonanza happens when you retire your debt like many who have posted thats when life gets good.. but today max debt cash flow assets is going to be very hard except for those that are also flipping and creating income outside of the rentals and never touch rental income

One trend I see in the responses here is that people who live off their rentals are also the property manager and the handyman. I don't mean that negatively in any way; I love working with my hands and it is very satisfying. But financially speaking, a portion of their income is compensation for doing these tasks.

When you look at the guys that really have scaled, most of them have started their own PM company and are vertically integrated. But that's the cool thing, you can design your biz the way you like it, do the things you can enjoy and outsource what you are not good at. (Or hate, like in case my bookkeeping LOL)

I don't think I could stomach giving away deposits and 10% of rents to a management company who could care less about my property. I can do 90% of what they do, but only better with minimum time spent on my part all while keeping my W2. At some point I'll have to start my own and hire an employee, but that's after scaling to 50ish doors. IMO management companies are like factoring invoices, IFKYK.

Great point. I just started self managing my Class A Indianapolis SFH. I was paying a small time PM 10% of monthly rent and he wouldn't do annual maintenance checks. His thought was "if I don't hear from my tenants, all is good"...geez. That's the flip side of a tenant that is constantly calling you with issues. A quiet tenant could be ignoring signs of damage in the house or not be aware of them. Luckily my tenant would bring up concerns pro-actively and this is a newer home (not the 100 year housing stock like my Class C).

He also wouldn't call service people for me - I'm the one who called the plumber and handyman and I'm 2000 miles away. I communicate with my great long-term tenant frequently.

I think Class A properties with excellent tenants can be self managed from far away but it's more difficult with Class C, which I use a large PM company for.

0 Votes

Milwaukee, Wisconsin