All Forum Posts by: Rafael Ro

Quote from @Colby Fryar:

@Rafael Ro have you thought about passive investing in syndications?  Sounds like you have a lot on your plate my friend!

I actually have not looked into that. Do you mean like a REIT or something else?

Quote from @Tim Delaney:

A lot going on in your question. As someone that over analyzes things as well, I’d suggest you step back and think about what your goals are in order to help determine what path to take.

I like JD’s suggestion about reinvesting in your business. Can $25k in more marketing or equipment or staff increase your profitability even more? Or free up more of your time depending on your goals? Or can you acquire another business in an adjacent field that increases profitability?

I also noticed you left out an option to park that money in index funds and let it grow. I’m guessing that is because of your pessimistic view on the economy right now, but even if the markets dip temporarily, based on history, they will rebound to even higher points (I know just cause it’s happened before doesn’t guarantee it will happen again).

Personally I have a successful business, but opted to diversify into real estate because my industry is heavily regulated and one change of a law could make me MUCH less profitable. However, I got into real estate mostly relying on OPM - private lenders, seller financing, and business lines of credit.

I also don’t like the idea of buying turnkey properties at a premium. I don’t know the Memphis market, but I’m guessing there is not crazy appreciation. So if you are not cash flowing and there isn’t appreciation then the only advantage you are getting is debt pay down. If you are going into a moderate appreciation area I’d be looking for great cash flow.

That makes sense and it is sort of what I was leaning towards. 

I was thinking that if Memphis (and the sort) have cash flow but no appreciation... And if CA and such has negative cash flow but good appreciation.. then maybe I can find a place that has a balance of both. 

Memphis can totally cash flow - I just don't think the turnkey properties would, due to the premium.. They would offer a more hands free approach, but eat up the profit in return. But if I bought their 120k property for 95k by buying it direct, then the numbers seem to pencil out. 

Through some research I started looking at Greenville or San Antonio... I'm completely open.. I think it's more about the people honestly - if I decide that I'm going that route than I'd narrow it down to 4 or 5 cities and I'd try to meet some agents and property management companies from there. 

And if I find a reliable agent and reliable property management company in one of those cities, then I'd start there. Obviously I'll never know if they're reliable until I actually work with them, but I'd do my best to vet them thoroughly.. 

Do you think that sounds like a good plan?

Quote from @Henry Clark:

OP I would follow 

@JD Martin

Advice on investing in your business, investing in your businesses building and third invest in your personal residence.  

Since you’re in CA go for appreciation vs Cashflow .  If you have significant equity in your house sell it.  $250,000 capital gain per spouse is not taxable.  If you have lived there two years.  Check with your accountant for CAL specific tax laws. Take that plus your $50,000.  Pick the worst house in a great neighborhood and upgrade it.  Live there 2 years or more and do again.  

This would make perfect sense, and we do have great equity in our house. However, with 2 young kids, schools, and the community we've built, it would be too big of a risk to do that. The upside would have to be major and I don't think the current market is the time to do that. 

I did consider it for a minute - to sell our house and buy something maybe in Texas, so we can get a comparable home but pocket some money.. but my wife shut it down, and I understand why. If I was a bachelor I would 100% do that.

Quote from @Nathan Gesner:

I recommend you read "Long-Distance Real Estate Investing" by David Greene. He spells out how to invest in other markets from a distance.

I do think you are over-complicating it. Part of the problem is that we have so much information available that we don't know what is right and what is wrong, which path to choose, etc.

Slow down. Look at how people invested 20, 40, or 60 years ago. They saved up money. They found a community they believed in and a lovely house that could pay for itself with the rent income. They bought it and held it, come hell or high water. If you want more, you buy more at a pace that is comfortable for you. Once you have the number of homes you want, you pour your cash flow and extra income into the smallest mortgage until it is paid off, then you move to the next and create a snowball effect. You end up with X homes fully paid for and some crazy cash flow to live out the remainder of your days, donate to charity, or whatever your heart desires.

I hear you, and that's what I want to do too. The question is where.. In my local area, the lowest of all lows would be a small condo at 200k+ which would have a pretty high HOA too, and would rent for about 20% less than the cost of the mortgage/insurance/tax. Add some maintenance and maybe some vacancy and the numbers look pretty bad. Plus my target market would be the people looking for the cheapest option - likely not the best tenants. I'd only be banking on appreciation. 

That's why I'm thinking out of state... 

Quote from @JD Martin:

Quote from @Rafael Ro:

Hello all,

I would really appreciate your insights here.

I live in CA and have a family with 2 kids - we're not moving anywhere. Have about 50k I would invest (access to more), with excellent credit and good income too, from my full time job. I'm the sole breadwinner. 

I tend to overanalyze things, often leading to inaction, mainly because I have a somewhat pessimistic outlook on the economy and I'm trying to avoid getting overexposed. 

Realistically, BRRR or wholesaling or other ideas that require a bigger time investment are not good for me - I run my business so I don't have much time left.

With that in mind, my first idea was to buy a condo or a house in my local area (Palm Springs, CA) and use it as a long term rental. 

The issue there is the current prices and CA laws - for the past year I've been struggling to find a property that's somewhat turnkey and that would at least break even... And CA is extremely tenant friendly so it's not a great place for a rental. 

That's why I started looking out of state. I found a good turnkey property company out in Memphis. Everything about them seems to check out, and their properties (which they sell already tenanted, and they manage) seem to break even with 25% down. They claim a small cash flow, and while that looks too optimistic, I believe that they can at least break even, so the tenants would be paying it off which is great. 

Another cool thing about that is that most their properties are in the low 100s, which means that I can buy 2 of them, and then buy another every time I can gather 25k more. It's scalable. And they sell lots of them.

My issue with them is that from a quick look it looks like they're selling everything at a 20-30% premium (which I understand and respect). At the same time, I can't help but think that if I could get connected with a great agent and property manager, then I could do the same and save a great deal of money. 

Then again this would also mean that I'd need to build a small team, and I'd need everyone to perform whereas they're bringing it all in one.

Another big thing here is the risk - as I said above I have a fairly pessimistic view about the economy in the next couple of years.. If I own a property with a 1k mortgage per month and it stays empty (or I'm trying to evict) for a couple of months then I'll be ok. But if the mortgage is 2k or 3k then I'll be in a tough spot. 

I would love to make a move before the end of the year and so I keep trying to decide which of the following is best for me:

1) Buy 1 more expensive CA property near here, and thus a better tenant (less likely to cause issues), but lose a little bit of money every month due to the current numbers, while hoping for future appreciation? 

2) Buy a few out of state properties over the next few years, through a well vetted turnkey provider like the one I mentioned above, which should more or less break even or give me a little bit of cash flow, and since I'd end up with a few doors my risk would be a little more spread out? 

3) Buy a few out of state properties directly through an agent and work with a property manager to manage them? 

4) Keep my money in a guaranteed savings account making 4.5%, until rates drop more or something changes, and the numbers are better to make a move?

Thank you in advance to everyone who read this, and moreso to those who respond with their thoughts. 

 #5: Invest the money you'd be spending on rental properties into the business you already own, creating greater profits than any of the previous 4 scenarios.

I don't know what kind of business you have, but *in general* money invested in a profitable business is going to beat anything on "passive" real estate. RE rentals is more where you park spare money when you don't have any better opportunity for the money. I'm not saying you can't make a decent return on rentals - I and many others here have done great with it - but if you have a well-functioning, profitable business that you know, why would you gamble money into Memphis *******es, to put it bluntly? 

It is almost always best to invest in markets you know. California is tough because it's expensive and tenant friendly but the right areas can make some killer appreciation. Houses in Memphis will barely be worth more than they are now 20 years from now, so you have to hope to have a good solid cash flow to make it make sense.

So I would say really take a look at your business and see what opportunities there you'd be foregoing by investing in RE. 

You and a few others I've spoken to make the same very good argument - investing in my business. 

It's an agency, and I could invest in ads to drive more business.. in theory the return there would blow the return of rentals out of the park. 

In practice, my business works mainly on referrals and organic leads, and I haven't managed to make ads successful... They're expensive.. I could keep trying and realistically it would eventually perform and help me make more money, but if I'm being honest it just doesn't sound as exciting.

This does make me think though.. am I looking at real estate just because it sounds interesting? Not because it has the best return for me? Maybe.. 

But then again the idea that I can buy something by putting down 25% of it's value and that I get to benefit from the appreciation of 100% of it.. while a tenant is paying down my principal... It just sounds like a great way to build wealth. 

I also love the scalability of it. The idea that every time I gather up X amount of money, I can add to my portfolio.. and I can make that money go to work. 

In a way it sounds easier to me than investing in my business, because I've struggled scaling my business with paid ads (which is the main investment I could make on it) and because with real estate as long as I don't try to play smart (by buying a foreclosure or a fixer or something inherently risky) and if I keep it long enough, then chances are that it would make money in the long run.. don't you think?

Hello all,

I would really appreciate your insights here.

I live in CA and have a family with 2 kids - we're not moving anywhere. Have about 50k I would invest (access to more), with excellent credit and good income too, from my full time job. I'm the sole breadwinner. 

I tend to overanalyze things, often leading to inaction, mainly because I have a somewhat pessimistic outlook on the economy and I'm trying to avoid getting overexposed. 

Realistically, BRRR or wholesaling or other ideas that require a bigger time investment are not good for me - I run my business so I don't have much time left.

With that in mind, my first idea was to buy a condo or a house in my local area (Palm Springs, CA) and use it as a long term rental. 

The issue there is the current prices and CA laws - for the past year I've been struggling to find a property that's somewhat turnkey and that would at least break even... And CA is extremely tenant friendly so it's not a great place for a rental. 

That's why I started looking out of state. I found a good turnkey property company out in Memphis. Everything about them seems to check out, and their properties (which they sell already tenanted, and they manage) seem to break even with 25% down. They claim a small cash flow, and while that looks too optimistic, I believe that they can at least break even, so the tenants would be paying it off which is great. 

Another cool thing about that is that most their properties are in the low 100s, which means that I can buy 2 of them, and then buy another every time I can gather 25k more. It's scalable. And they sell lots of them.

My issue with them is that from a quick look it looks like they're selling everything at a 20-30% premium (which I understand and respect). At the same time, I can't help but think that if I could get connected with a great agent and property manager, then I could do the same and save a great deal of money. 

Then again this would also mean that I'd need to build a small team, and I'd need everyone to perform whereas they're bringing it all in one.

Another big thing here is the risk - as I said above I have a fairly pessimistic view about the economy in the next couple of years.. If I own a property with a 1k mortgage per month and it stays empty (or I'm trying to evict) for a couple of months then I'll be ok. But if the mortgage is 2k or 3k then I'll be in a tough spot. 

I would love to make a move before the end of the year and so I keep trying to decide which of the following is best for me:

1) Buy 1 more expensive CA property near here, and thus a better tenant (less likely to cause issues), but lose a little bit of money every month due to the current numbers, while hoping for future appreciation? 

2) Buy a few out of state properties over the next few years, through a well vetted turnkey provider like the one I mentioned above, which should more or less break even or give me a little bit of cash flow, and since I'd end up with a few doors my risk would be a little more spread out? 

3) Buy a few out of state properties directly through an agent and work with a property manager to manage them? 

4) Keep my money in a guaranteed savings account making 4.5%, until rates drop more or something changes, and the numbers are better to make a move?

Thank you in advance to everyone who read this, and moreso to those who respond with their thoughts. 

Quote from @Bob Stevens:

Hey all, I see so many posts, " I am researching, " I am doing my homework" , I am trying to build my team" "Deciding on which area"  So many are TRYING but never do anything, like a hamster on a wheel, A LOT of movement but staying in the same place. What is holding you back?  Who needs help, or just some advice. 

I started out not know a darn thing. Literally got into RE while at a family BBQ about 15 years ago. My Cuz pulled up in a new SL 500. I said, Joe, I thought you were an extra tech. Well, he was, but he took action and got into RE. So that was my ah ha moment. Within my 1st month I flipped a contract for 19k, yes 19k my 1st month. At that moment I realized there is money in this. All I did was look at a property, run the comps, and got a reno budget, So nothing to intense. My next deal while I was just about to sign the contract on a house in Glenn Cove LI. a truck pulls up. The realtor says, may I help you?  Nope says the driver with a lock and chain in is hand. I am here to lock it up, its going into foreclosure. I grabbed the contract and offered 100k less, and got it, Talk about timing. At that point I knew the universe was telling me, RE is my calling.  Well, 500 deals later, (about 15 in LI the rest in Cleveland ) there is nothing I have not done. Purchased various sheriff auctions, short sale, and just low balling. 

If you are stuck, not knowing where to turn, please feel free to reach out, happy to provide some advice.  

All the best 

Hello Bob -- I would love to take you up on this. I have been spinning my wheels for quite some time and some input would really be amazing. I sent you a private message -- thank you in advance!

Quote from @Michael Baum:

Hey @Rafael Ro, there has been a few topics on this area with mixed results from owners.

Seeing as you are interested in using it quite a bit, are you willing to lose money on the place?

Hi Michael,

That's a great question and the answer is that it sort of depends. 

The way I look at it is that if this was solely for an investment then I would likely look elsewhere where I would get better and safer returns. But because it's also for personal use, I'm a little more flexible. 

For example, I can consider the amount of money that we would spend as a family to vacation for a few weeks per year, and count that in as "profit" for this property. 

But at the same time, I don't think it's a good strategy to buy something "expecting to lose".. I'm not very experienced, and while I'll do my due diligence and try to make smart decisions, I may end up underperforming... So if I'm expecting to lose some, then I may lose a lot, which I would not be ok with. 

That's what I'm trying to figure out -- is Big Bear a market where someone could make some profit or at least break even in? If so, I'd be very interested because I like the area, and I can see it appreciating long term too. 

Hello all,

I am very strongly considering a buying a house in Big Bear to use as a STR for part of the year and for some personal use too.

I've been hearing that the market is getting (or already is) saturated, the prices are high, and there are even stricter rules about STRs, but I would love to get some info from people that are invested or working in the area.

I went up there last winter and had a hard time finding a place to stay, so I wonder if there may still be room. Of course I understand that winter is high season - but still, it looked like almost everything had been rented. 

As a sidenote - I live about 2.5hrs from Big Bear and seeing as this would be my first rental I would want it to be within driving distance. That's why I'm looking for something around SoCal, even though I understand that it's not a great market for several reasons.

Thank you all... You really got me thinking here. 

@Dan H. I read about Mission Beach and the lottery... So sorry that the 2nd property didn't make it. That sounds scary as hell... To have a whole business based on something that we really don't have much control over (ie. local regulations) and that many people are actually opposed to... And in a state like CA... Doesn't sound like a great idea. 

But at the same time it's where we live... Anything out of state would just make it much harder to get to.. and I would plan to use this at least for 4 weeks each year, maybe 8, maybe even 12.. 

Based on what I've learned through my research so far I would not buy a CA property just for Airbnb, unless if it's somewhere where I could potentially use it for a long term tenant if things were to change.. but this is a little different. 

Are there maybe other beach towns near CA where rules are more STR friendly?

@Caleb Bryant I would love an intro please. It would be good to connect with a local agent that has relevant experience.