All Forum Posts by: Paul Moore

@Danny Morrell great question and you are in the same position a lot of people started out in. I highly recommend you consider Air BnB arbitrage or lease option sandwiches. I did a lease option sandwich once with no money out of pocket and made about $50k. It is a little more work but it is certainly possible. 

I recommend you consider the book Real Estate on Your Terms by Chris Prefontaine. You can also check out Brandon Turner's book Investing in Real Estate with No Money Down. You may have more opportunities to invest like this in the future so stay tuned! 

Hi @Bob Willis! You got some great responses above. I agree with @Jim Pfeifer that the effort involved in both is similar since you need to do a lot of due diligence either way. And I agree with @Taylor L. that the taxes can be higher in a debt deal. 

Have you considered investing in a syndication that does debt that provides debt financing? This might give you the best of both worlds in one. 

By the way my fund invests in both syndications and private debt. In my experience, the returns for most syndications are stronger than the returns for most debt deals. Feel free to PM me if you want to do a brief call to discuss. Good luck and happy investing!

Hi @Evan O'Brien! You got some great advice above. You asked a great question. I'm going to ask a related question and then give my best answer. 

What type of asset often provides the best risk-adjusted returns? In other words, what is often the safest type of investment? 

I would say in my experience that assets that cashflow provide better risk-adjusted returns than those that don't. Those that cashflow already have a calculable value (Value = Net Operating Income / Cap Rate). A similar formula works for residential properties you could say. This comes down to speculating versus investing. Investing is when your principal is generally safe and you have a chance to make a return; and speculating is when your principal is not at all safe and you've got a chance to make a return. Especially when using debt in real estate, assets that don't cashflow are often on the speculative side. Assets that cashflow and therefore have a value, are assets that are safer. And after 20+ years investing in real estate I realized that safer will likely (not always) win the race. For a similar analogy, look at how Warren Buffett looked at the tech bubble and crushed investors who said he was out of touch with reality by not speculating in companies that did not cashflow. Of course he won in the end and I believe you will likely do so as well. 

Now if you can find an asset or fund that does cashflow but allows you to reinvest your cashflow along the way to grow potential returns, you might have the best of both worlds. There are some options like that out there. Good luck and happy investing!

Hi @Adriel Cisneros! I think you're looking for better returns than you will probably find in those suburbs and better returns that most institutional investors. Institutional investors sometimes have an extremely low cost of capital and expertise in due diligence that allows them to do well on much lower returns. Actually, they are smart about looking at risk adjusted returns which is what we all need to do anyway. 

I recommend building up a stash of cash and equity lines and preparing for potential fallout in 1-3 years from now. It may not come, but like Warren Buffett says, you can't strike out by NOT swinging in investing. And you can actually get pretty good returns on T-bills now anyway. Good luck and happy investing!

Hi @Alda Watlington! You got a lot of great advice above! 

I've been both a real estate broker and a real estate investor. Though it seems like they are closely related, I felt like the I was multitasking and I couldn't do either one to it's full potential. This may not be what you wanted to hear but I recommend that you consider eventually focusing all on investing or all on real estate brokerage. Then do your very very best with that "one thing". Of course I recommend the great Gary Keller and Jay Papasan book "The One Thing." 

One way to pull off doing both well is making a lot of active income in real estate brokerage and investing in passive real estate. Through syndications, real estate funds, or being a local lender. Those who have taken this path have done quite well I think. Good luck and happy investing, have a wonderful year of education. 

Hi @Salvatore Lentini! The number of price reductions in my local residential market, as well as the time on the market is increasing is making this point obvious. Of course there are places where supply and demand are so out of balance that it is still a sellers market. 

I'm in my 3rd decade as a real estate investor and my take is that there will be a delay until you start seeing screaming deals. If we do it at all. I'm guessing it will take 1-2 years to see a lot of bank foreclosures and other deals that are really below market. 

Many people don't remember this but the true bottom of the market from the Great Financial Crisis was around Q1 2012. Most people seem to remember 2007-2009 but the worst part of the fallout happened on the tail end and beyond. 

My advice is to get a large equity line on any real estate you have and keep that powder dry in case any of the deals arise. They may or may not but the equity line will give you cash and you can pair that with other cash reserves you have. Remember Warren Buffett has had over $100 billion in reserve for quite awhile waiting for the potential downturn. We should learn from him. Good luck!

Hi @Randy Smith! Thank you for posting this! Your experience is almost identical to hundreds of investors I've spoken with. I've spoken to very few who have successfully managed active real estate investments, especially if they have a high paying career or retirement. I wish I could take your post and copy it to hundreds of other forums about investing on the side. 

Can you imagine Michael Phelps training part time for the Olympics while he had a job? Can you imagine Taylor Swift being a part time singer while holding a server job? It makes no sense and I marvel at how people pull it off. I admit some people do pull it off but I don't see how they do it part time. And I doubt they are making as much profit as they planned or having the lifestyle they hope for. 

To those like @Vincent Plant looking to go down this path I highly recommend @Brian Burke's book The Hands-Off Investor for due diligence and @Jim Pfeifer's Left Field Investors to connect with a community of like-minded people plus education. Good luck and happy investing!

Hi @LaMancha Sims! There are a lot of important questions that could surround your question. But I'll quote these 3 important question from Keith Cunningham who wrote a great book called The Road Less Stupid: 

1. How much can I make? The more importantly...

2. How much could I lose? Then most importantly...

3. Can I afford that loss? 

Good luck!

Hi @Sean Osch! I agree with @Chris Seveney above. I'm in my third decade as a real estate investor and I've noticed that people who have a full time career or retirement, typically don't multitask into real estate very well. It's not as easy as it looks on HGTV and you probably have friends who are doing it, I would bet they are either doing it full time or they are not enjoying the ROI and quality of life you would like to have. I highly recommend that you set your sights on passive investing while you are strapped for time. If and when you can quit your J-O-B, then I recommend considering active investments in real estate.

Until then your options include NNN leases which are somewhat passive. That could include lending money to house flippers. That could include investing in a syndication or fund. Many options for passive investors and if you choose your operator/manager well I would predict you will make more money and have far more free time in your life. Good luck and happy investing!

Hi @Ryan Cullen! Great question. If I were you I would not even dive deeper into this question until you honestly answer this first one: 

Do I have a full time career where I enjoy income...or am I enjoying a full time retirement? 

I'm in my third decade as a real estate investor and I've found time and time again that those who have a full time career or retirement, especially if you have family's and hobbies, don't have adequate time to actively/intensely manage most real estate deals. What I mean is that flipping houses, running Air BnB, managing rental properties, and a hundred other things, are pretty hard to do well on the side. Can they be done on the side? Absolutely, and millions do. But I'm talking about ROI. I'm talking about quality of life. I'm talking about early burnout. I'm talking about the fact that you probably won't get the results that you see in 30 or 60 minute shows on HGTV. It is possible but it is the exception.

So what strategies does that leave you with? Anything passive. That could leave NNN leases which are somewhat passive. That could include lending money to house flippers. That could include investing in a syndication or fund. Many options for passive investors and if you choose your operator/manager well I would predict you will make more money and have far more free time in your life. Good luck and happy investing!