All Forum Posts by: Sarah Ali

Hey Sarah, if you're going to give up THAT easily, when random strangers on the interwebs just have to quote a few stats and numbers at you to make you fold up your tent and wander off into the night...well, the first thing you need to work on is telling anyone who doubts your resolve to go eat their dinner out of a dumpster.

I do not view you as too old, but I question your timing.   RE performed outstanding from 2011 to 2021.   Appreciation was great, cash flow was great, few areas had cracked down on STRs, etc.  

interest rates have more than doubled since the end of 2021.   Prices have not fallen due to low inventory due to how many owners have loans far below current rates. Low supply leads to rising prices.   So we have all time high in RE prices and interest rates near highest in many years.  Combined this leads to high cost of leveraged purchases. 

In virtually all large city markets it is currently cheaper to rent than to own.  This implies in those markets the average residential investment purchase is cash flow negative. 

In addition, active residential RE is not passive even if using a PM.   It requires more effort/work to be successful than most non experienced investors realize.  

Normally this may be where I suggest passive RE options such as a limited partner in a syndication, but in the last couple of years many syndications are struggling.. So similar to golden era of active RE having possibly passed due to higher interest rates, I fear it may also be true for syndications (I am in one syndication that I fear an equity loss which would be my first time if this comes to pass).  

Note RE has been an outstanding investment in recent times, but it will not always be the best investment option.   In the case of the OP, they would be entering a tough RE market with virtually no knowledge including no understanding of the effort required and the risks. 

I recommend people enter RE at this time only if it is a passion and they are extremely motivated and hard working.  These people can succeed even in a tough RE market.  There will be many people who entered RE in 2023 that fail in large part because they did not have a good understanding of the underwriting, thought RE investing was more passive than it is, expected interest rates to drop in the short term, and/or over leveraged.  

RE investing was easy a couple years ago.  The cash flow was far better due to lower interest rates and the RE appreciation was outstanding.  It is different today.  

By the way I have not purchased since Dec 2021 (purchased $4m that month) because we do mostly BRRRR (and no flips) and my underwriting shows after refinancing that I would be large negative cash flow.

Good luck

Hi Sarah. I've helped a couple of my clients with house-hacking, and I am happy to share a few analyses we did and see whether the numbers make sense for your situation. 

Paying off a mortgage can be one goal, but it's probably not even a goal for a whole lot of investors. Reimagine the way that you look at debt. Make it a good thing. 

Here's homework - write down 5 ways that debt is positive and can help you.

Having a free-and-clear investment property is not even always considered a great thing because it can attract the sharks, lawyers who see it as a huge dollar sign.... better to keep it mortgaged so it doesn't look so attractive.

So yes you could look at it as shuffling around numbers, but your ultimate goal (as you stated) is to live off of your investment properties. Do you care how you get there as long as you can service your debt? 

What if I told you that your mortgage payments would be $20k a mo, would you not want to do this? What if I added that you would have $50k mo income? Makes a difference, eh?

Seriously, if the concept of mortgage payments is going to bother you, REI is probably not where you should be headed.

@Sarah Ali Just something I’ve been thinking about lately:

I also live in the Bay Area and this is a place where I know people “retiring” in their 40’s after working 10/15 years at the big tech firms. I think it stems from the illusion startup founders project by becoming young billionaires. This is also a location where you never feel rich because you are surrounded by affluence. But when you look at many of the business heroes many folks on bigger pockets read and follow, they made their biggest money between 40-60 and beyond. 

If RE is brand new to you, I would focus on playing defense:

1.) Shortcut your learning curve by learning from experienced players who do what you want to do. 

2.) Focus on making course corrections on your early mistakes fast and moving on or problem solving. 

3.) Utilize unintended advantages that you’ve gained over the years. For example, you may already know people who are crushing real estate and you’ve just never had the conversation with them. You may also know other people who have also been thinking about investment in this stage of their life and have the financial means. 

4.) Only do it if you think it’s going to be fun/interesting or you feel you will be good at it. Why waste the next decade or more otherwise. 

OK, this is what I see here.

 1. I cannot currently work in a traditional sense (ie, desk job). "Cannot" in this sentence as a red flag. There are very few people who pull off real estate investing without doing a LOT of desk jobs. And far less pleasant, safe, and clean jobs as well.

2. Yeah, you're in your late 40s. You're at a disadvantage. But if all your imagination is able to see happening in the next thirty years of real estate investing is that you will pay off your mortgages slowly and steadily, you're already dead in the water. I don't agree with @Bruce Woodruff about many things but he knows what he's talking about here.

3: "I would like to live off income from REI." You and every hopeful investor in America. The goal of getting out of whatever job you work at as quickly as possible to do REI full-time is typically a loser's dream in this business. Forget the promises of education and coaching you hear, it's going to take years and years before you can stand tall with your own, hard-won insights into this business. If you need handholding and spoonfeeding, hire a nanny. Don't come to real estate and expect to be mollycoddled. Anyone who promises you an easy time of anything in this business is without a doubt looking to take advantage of you.

4. Househacking is a great idea for a first investment. I do it, even though I got into it much later than I should have. Househacking in the Bay Area is a difficult proposition from what most people tell me.

5. Clearly, not even for a second are you considering the idea of moving to a place where it's easier to make a start than the Bay Area. You will have to make a lot more significant and burdensome investment decisions than this one.

Conclusion.

You're in your late 40s. You're only going to get older. Time to get the lead out of your butt, one way or another. But don't expect to do what everyone else is doing and be an unqualified success in life. You have to take that leap into the unknown, and keep taking more after it, and you could ruin yourself. These are fears you have to live with in REI, and choices which have consequences that you have to make.

No, you are not too old. I really got started in 2016 at age 46. I now have 33 doors and 135 storage units.

Even if you only bought one house and paid it off in 15 years, you would be age 65 with another $3,000 or more in monthly income. Every little bit helps if you choose/need to retire.