All Forum Posts by: Anne M.

I guess that depends on what "a very good areas" is.

My guess is that doubling the value in ten years means some devaluation down the road. In other words, doubling the value in ten years (even less) can happen but you need a lot of luck to know when to buy and when to sell, just like with stocks (not index funds). 

In the end it's a market with supply and demand. Yes, in some areas where it could be very hard to build more supply (like Manhattan or San Francisco), I can see how demand can drive prices up significantly but even then, the market would have already "expected" that. Since you always have costs on keeping property, I'm not sure it's a good idea to count on such properties to keep doubling their value every 10 years indefinitely?

It just doesn't make sense to me for money to simply double itself with zero work and little risk or everyone would have been buying houses like that? 

@Clayton Mobley I wholeheartedly agree. Back when we started investing in the stock market, there was definitely a learning curve. My husband was in charge of that (he actually has an MBA degree, not that it really helps that much ;) ). He's done tons of reading and we still managed to make at least one, possibly two, big mistakes. The first was going with a local investment company which basically ripped us off by selling and buying every few days. We've since moved to Vanguard's products. The second - which may or may not prove out to be a mistake in the long run - was putting a lot of our money into emerging markets. We've since moved on to invest mostly in the US market but still have a big chunk of our portfolio is tied up in emerging markets (being long-term means we didn't sell when they went down, we just make different decisions with new purchases).

So, yes, there is certainly a learning curve for that as well and yes, it takes time and effort. I don't expect REI to be any different. The only difference being that this one's on me ;)

@Mike D'Arrigo I absolutely agree. Which is why we decided to wait. I'm going to take a few more months to learn this in detail and explore several markets in depth before making any decisions. One of my favorite US towns is Bozeman and I already found out it's probably way too saturated to be a good place for newbies to invest in. So, no, I'm not going to choose a market just by how much I just enjoyed hanging out in that area ;) I also want to explore vacation rentals as an option, so that's going to take a while too.

@Thomas S. 50% of revenue going into expenses, that's what I heard too. We also got to %5-6 return and that's not enough, especially in a high-risk area as this seems to be. Thanks!

@Account Closed That's very interesting. Wouldn't owning land be as speculative as buying stocks though? Who's to say if land will rise in prices much faster than the rate of inflation? The way I see it, rental properties are a way to ensure a cash flow that guarantees returns on your investment, regardless of appreciation. Just buying without renting means you rely 100% on a very significant rise in value that may or may not happen. 

 No worries! Your secret is safe with me!

We're investors from overseas (Israel) and were looking into REI in the US. I posted about this in my introduction thread and some more thoughts here. A recap: No experience in REI, have $70K to invest and right now looking for passive income investments that might be better than just more index funds.

We have a friend who's a broker (I think that's the term) working in the Memphis and Atlanta metros. She owns several units there herself. She suggested a property for us and before we say no, I wanted to get some feedback here.

It's a single family home in Memphis. Zip code 38118.

She bought it for $18K last year (I checked the records) and it was in a terrible condition (I saw the pictures on Zillow). She fixed the place and has a tenant coming in this month. So this is essentially a turnkey.

Asking price: 69,500$

Rent: $850

She's setting us up with a PM at 10%. Taxes are $1500 a year and insurance is $750.

As far as I can tell (and it's not very far ;) ), this is a good deal. Even with two months vacancy a year, we'd still make more than %8 on our investment.

What do you think? This would be a class C property, right? I'm not sure that's a good option for us, being newbies and from overseas. 

Frankly, no offense to anyone from these areas but I think it would be better for us to invest in the midwest. We've traveled a lot in the US (44 states and counting) and it's the midwest and the northwest that we liked the most. I realize that's not necessarily a good way to choose where to invest but I think I would feel more comfortable taking more time to learn about REI and explore the viability of different markets.

I'm basically posting here to see if more experienced investors think this is a deal we absolutely should grab with both hands and not let go. 

Thanks in advance!

Wow, thank you so much, everyone! It's great to see so many opinions from people with different perspectives on the field. That is so helpful.

My own thoughts at this point are that money generally "knows" how to grow itself by 3-7% a year. That's not a small gap there, I know. I guess we can say that's an average of 5% a year (long-term investment, let's say for 20+ years). 

That's 100% hands-off (buying index funds which can literally take no more than a couple of minutes to do).

If you want to beat the 5% and make more, you need to trade that for something. That something can be work or risk, or both. I consider "work" to be anything that you need to spend time on. For example, Learning about investing in stocks (not index funds) or in real estate I also consider to be work. Just because it takes time.

We're in our forties. To use the concepts in @Ali Boone's great blog post (thanks for sharing here!) we have a lifestyle which we're currently happy with. Both are self-employed and we choose to travel a lot and are generally happy with our lives. Our goal isn't financial freedom per se (we feel we're free enough as it is) but to be able to retire 20-30 years from now with a good quality of life (including travel expenses). 

At this point, we feel like we need to see if we can prod and push our money a little and use the next 20 years to grow it at a rate that's faster than 5% a year. Just so we can have more once we decide to stop working (if that ever happens ;) we enjoy what we do too much at this point).

Some people told us how awesome REI is as a way to grow your money at a higher rate. The same people talked about entirely passive investments. Buy a property, get a PM and forget about it. Collect your cash flow and you're sure to get 8-10% a year. Which sounds better than index funds, right?

As I suspected, seems like there are no free lunches. For 8-10% a year you need to sacrifice either time (even if only in setting up the operation on the ground with the right team) and/or risk. The less time you spend learning the ropes as a new investor, the greater the risk (and vice versa).

Here's where I'm leaning towards in my conclusions for our own case, after reading for awhile on these awesome forums, including the replies in this thread.

1. REI seems to have the potential to make good money for those willing to put in some time and effort. As I understand it, you can make a lot more than 5% annually if you really know what you're doing. 

2. What I'm seeing is that the big opportunity here (correct me if I'm wrong) is with leveraging money. I still need to figure out the in's and out's but essentially, I'm seeing people put a chunk of money, then leveraging it to get to returns of 20% annually. That would mean putting time put into learning + taking a risk but it all looks pretty doable for those willing to put in both. That could be us at some point.

3. Buying turnkeys and renting them out without leveraging your investment - I'm not sure that's a good enough option for us. Still considering this but my hunch is that the overall return would be around %8 annually. I wonder whether the extra 3% that our money could make would be worth the extra risk + time put into learning the ropes (just to to get to that point). 

On a personal note, REI seems like a fun game! And I love games :) By this I mean, I'm an entrepreneur by nature. I left a promising military career when I was 26 to create my business (one of the leading websites in the world today, in its niche). I still keep looking for new opportunities online and have new websites that I try to nurture into successful businesses. I do that not just for the money but because I enjoy the challenge, the learning curve, the "game", if you like. In that sense REI is tempting for me. I can see myself spending a few hours a week here on BP, reading blogs/books, taking webinars etc. and getting to the point where I may take the plunge into the game.

As I explained in my introduction post, we have an offer right now, by a friend who's a broker in the Memphis and Atlanta areas. She actually suggested a specific property to us a couple of days ago. I'm going to post some details to get more feedback, but at this point it's basically to make sure we're not letting go of some "Deal of a lifetime" opportunity. Otherwise, I think we're going to be buying index funds for a bit longer, while learning more about the advanced REI opportunities to see what - if anything - could work for us.

Did I thank everyone already? Never hurts to do that once more, so again, thank you! I really do appreciate everyone's input! More feedback on my conclusions so far is welcome. Thank you! 

We started looking into investing in US real estate a few weeks ago.

We're looking to diversify our investment portfolio. Right now, it's all in the stock market (mostly index funds). 

Listening to the podcast, reading the blogs and posts here on the forum, I see that many investors treat this more like a business. They put a lot of time and effort into finding just the right asset, leveraging it and actively increasing their portfolio. It all looks very interesting but I have my own business that I work at and I'm not really looking to develop another one.

Should I even look into investing in rental properties then? How time consuming is it? And by that I also mean time required to learn the basics to the point where the risk is within reason and we get at least 8-10% annual yield after expenses. Anything less than that, and buying index funds is so much easier and safer (we're long term investors), so why even consider real estate? I currently have an offer for a turnkey rental property in Memphis and I wonder if it's really worth even the hassle of going through with the buying process. If it's going to end up costing us more time down the road, maybe we should just take the $70K and put it into more index funds?

I'd love to hear from other investors here who do this as an actual investment for passive income rather than as a business. What's your impression following several years of owning a rental property? Is it worth the hassle? Is it really a form of investment (passive income) or is it a business that requires managing?

Hi Ariel, great to meet you!

Not sure what the 70% rule is? I know that where we live (Kiryat Ono) the 1% rule can't be met. We live in an apartment that's worth 2.3 million shekels (~$600K) and pay 6500 shekels a month in rent ($1700). The cash flow is pretty terrible here. People hope the appreciation will be worth it but we're looking for an investment that's less speculative. 

Great question about meetings and teaming up. It brings up a topic that's been on my mind since joining here (ok, I know that's not long!)

Seems to me like many investors here invest a lot of time into this, not just money. Making this into a business rather than an investment. Which is perfectly ok, of course, but it's not a far cry from passively investing in index funds. I absolutely get that the profits can be much higher this way but that's money you get for putting work (including learning time) into your business. Currently, we're both fully employed (both self-employed but working full time) so I'm not sure if we'll have the time to put that much time and energy into this?

Thanks for the replies, everyone, and the offers to help (including via PM's).

My contact is there 4 times a year and visits both of her markets on every trip (two markets: Memphis and Atlanta). 

I know this business is competitive, do you think it's ok for me to post the details of the deal before we make our final decision? Should I avoid mentioning the exact address (I guess that would be part of the assessment of the property though). 

By the way, any other overseas investors in the US market here? I know a few people invest in US real estate without ever flying out (using a broker or agent they trust). No guarantees either way, I guess. Our first plan was to fly and do the whole things ourselves but I think that we may save that for our second property. That way I'll have time to learn more. 

We expect to be in the US again in the summer of 2017. We want to come and see the great eclipse. Right now the plan is to drive up and travel from Oregon (where we'll see the eclipse) to Alaska and back. I guess that doesn't leave time for much else ;)

My impression is that the right markets for buy & hold are in the east coast, and maybe the midwest? We'll be traveling from California to Alaska, so not many of those on the way ;)