All Forum Posts by: Joel W.

I should clarify my comment above. I meant that the returns on appreciation are low. Home prices are obviously much higher than they were in the past. 

Serena, 

Hi. I'm new to REI, so take these thoughts with a grain of salt.

I've been struggling with this too. I'm looking at single family rentals in the mid-west that are close to whether my in-laws live. It's not close to my primary residence, but I will be traveling to that area on a fairly regular basis, making it easier to look at properties. Maybe you can buy something out of your heated up/expensive area, but close enough to manage, or close to family? 

Also, I've read that in the long run real estate appreciation is actually very low. It requires you to be able to time the market correctly, something that people do only on accident, despite what they may say or think. I'm reading Irrational Exuberance by Robert Shiller (Nobel prize winning economist) who did a study of US home prices since the 1800s. He found that over the long term homes only appreciated 1-2% at the most. Of course, that does not necessarily mean that will be the case going forward, or that national prices are the same as regional prices. It greatly varies by region and that is a long long time frame to analyze.  

That said, I'm going to try to focus on cash flow and equity. It's almost like arbitraging between the higher income people can potentially get in bigger cities, vs. the lower prices for homes in the mid-west, etc. You make more money living in a bigger coastal city but the real estate is also more expense. So you can take that higher wage and use it in lower-cost areas. 

Interested to hear what you think of my ideas, and what anyone else more experienced than me reading this thinks. Am I totally wrong? 

Thanks, and congrats on the new baby! 

Joel 

Hi Tia, 

I'm a newbie like you, so take these thoughts with a grain of salt. 

I've been reading a book called Irrational Exuberance by Nobel Prize winning economist Robert Shiller. He says that over the long run home appreciation is actually very low, especially compared to the stock market. My point is that I think we should probably focus on cash flow vs. appreciation. Just something I was thinking about. You may get lucky and realize a lot of appreciation gains (I hope you do!), but timing the market doesn't work from what I've read.  

I live in Portland, OR where it's super expensive, and thinking about investing out of state as well. I'm originally from the mid-west and still have family there, so that's where I'm thinking of looking. It makes me a bit nervous to think about investing out of state, but if you know the area, you have family near by, and you're likely to travel to that area fairly regularly, it makes sense to me to invest there. 

Good luck and thanks for sharing! 

Joel

Just make sure it's not a 5g tower. Don't want to help spread that COVID. :) 

Hi Mason, 

I live in Portland, OR, but am thinking of buying something in the St. Louis area. I have family that lives up in western Illinois, so it maybe makes sense to invest in a SFR as we travel through STL fairly often. Although it may change a bit in the coming months, things are way too expensive out here in Portland, and the rental laws are nuts. I want to make sure whatever I buy cash flows.

What do you think about the market in the St. Louis area in general? 

I've been doing a bit of research into the St. Charles area, and other areas to the west of downtown. Just looking on Zillow, I see that some of the properties cash flow (as much as one can trust Zillow numbers). I've never seen anything that remotely cash flows on Zillow in the Portland area. 

Anyway, I'm very much a newbie, but trying to find a market to focus on and get educated as much as I can. 

Thanks, Joel 

 Thanks Jaysen, 

You definitely have me thinking. At a minimum, I may stop my 401k contributions (except for the matching my company gives), and focus on paying down the house. I don't think I'll need to have it paid off completely before I feel comfortable enough to buy a SFR. I could also use that equity in the house. Robert (above) was talking about some really good deals on HELOCs, etc., that I may look at. Either way, I think I'll wait 6 months or so and see what housing prices do. I don't see how they can do anything but go down eventually. With this many people out of work I don't see how it's avoidable.

Joel

 Thanks again Robert,

Not too much information at all. Very useful and interesting. I had to read it a few times, but that's just because it was packed so full of good info. 

I have a lot to learn about financing. I had/have this idea that there are only a few standard options, but it seems like there's a lot out there that's somewhat flexible depending on the financial institution and the borrower's situation. 

I think I was a bit nervous about taking a loan out on my home, but it makes sense to do it as a low-risk way to get better financing rates and to have the cash in order to get better (and faster/easier deals). That is, if your house is already paid off and you have good income, etc., taking out a loan like that (especially with low or no fees and a good interest rate, and no annual fee) seems low risk. And I like the BRRR method, minus the refinancing R. I wonder if those doing BRRR right now are over-extended and regretting it.

I'll definitely add both of those books to my list. I really like Scott and Mindy's podcast and listen to it fairly often. 

Joel

 Thanks so much for the thoughts Robert, 

I agree with not investing in those Oregonian counties. The new housing policies are nuts, and are likely to get worse given the current situation. I've been mostly looking at Vancouver, WA areas, or maybe something closer to my parents' home in the mid-west.  

I feel that being conservative and paying off our primary is the best move, but it's hard when I'm so excited about getting started and because it seems like this may be a good opportunity for good deals in the next year. Or maybe I listen to Dave Ramsey too much! LOL 

I want to make sure I understand you. Are you saying that you took out a HELOC or second mortgage out on your primary residence to buy an investment property and the interest was tax deductible? I need to do more research on the tax benefits to RE investing. I'll find a good book and add it to my list.

Thanks again, 

Joel

Thanks Kenneth, 

I'll have to look more into the tax benefits of depreciation, etc. Maybe I can find a good BP book on that specific topic. If we pay off our house 50% more we may feel comfortable at that point to invest in a SFR. Also, if we get enough in our retirement accounts to have our retirement taken care of (assuming 5% growth) we may jump into the game at that point too. I guess this is more of a personal/philosophical question, and there is no right answer, but I thought it couldn't hurt to see what others think.

Joel

Thanks Jay! 

LOL. I'm sure I'll get a certain type of answer on this website than others, but you never know! :) I'm also curious to see what the Portland, OR market does. That said, I'm not really interested in Oregon due to the housing policies recently implemented.