All Forum Posts by: Sarah Ali

Quote from @Sarah Ali:

Quote from @Dan H.:

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

 I know, I missed the bus... If RE is no longer a good option, do you have any other suggestions? 

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. 

Quote from @Sarah Ali:

Believe it or not, we have discussed here on the Forum how there are tenants who are not good people. professional scammers. They will find out that you owe nothing on your rental and fake a fall (or ?), because now you have a lot of equity for them to go after. These types are less likely to even bother if you carry a mortgage, even a smaller one.

Quote from @Sarah Ali:

Quote from @Bruce Woodruff:

Quote from @Sarah Ali:

I'm one by one tackling my fears by reaching out to BP community!

Next fear: I'm late 40s and have no RE. Am I too old to get started? in 30 years when my mortgages will finally be paid off, I might be dead.  

You're still young, just do it! You don't just make money when your mortgage is paid off....a lot of people never pay off a mortgage....just keep buying, selling, refi'ing.

Your goal is NOT to just pay off your mortgage.....

This is a new perspective for me. If not to pay off mtg, what is the goal? Yes I understand it's to make money, but could you elaborate more please? Do you just keep shuffling mortgages? It just feels like there'll always be something hanging on my neck. Help me understand this process better so I don't feel this way. THank you.

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.