All Forum Posts by: Sean Tracey

@Charles Moore I agree regarding the tax efficient investing methods you touch on. I'm all about reducing my tax burden. I have briefly researched turnkeys, but I'm skeptical that they can offer me enough of a ROI. I'm looking to outperform my stock funds with RE, at least initially, and think I'd have a better shot by avoiding turnkeys. I'm still learning, so my thoughts may change on that. Currently, I'm considering looking within a 2 hour drive radius from me, finding a realtor that can show me some foreclosures that require superficial work and have a general contractor fix the place up a bit to create some more value. The thought of having someone else take care of all of that for me is extremely tempting, but I know I'll be paying for it with reduced returns.

@Luka Milicevic glad to see you've moved towards passive index fund investing. Luckily I never got into active stock trading. I doubt I'll ever move completely away from my index investments since they offer a great balance between risk, reward and the effort they require. There are also a lot of ways to utilize the tax-advantages of retirement accounts. I will start out slow with my RE investing, and as I learn more and get comfortable with doing it I'll adjust my allocation accordingly.

I'm ok with the lower returns of stocks since they require so little effort. If real estate works out for me, it will be a great way to soften the blow of the volatility of stocks.

@Chris Martin thanks for the reply. I guess I'm thinking in terms of playing it safe. I could never keep reserves in stocks due to the volatility, so my reserves would be in savings, CD ladders etc. Since that money would otherwise be sitting in the market for the long term, I feel the need to factor it in. I can't stand holding cash, so it's definitely an opportunity cost for me.

That sounds like a good return, @Abdulaziz Albahrani. I wish you the best of luck in achieving it. Keep reaching out to the members here for feedback as you move forward. I wish I had more knowledge to offer you on this particular investment, but I'm not too familiar with what kinds of returns turnkeys are capable of generating. I am a bit skeptical on 10% returns, though, especially considering the passive nature of the investment. If it's possible, though, I'm sure once you post more numbers for people they would be able to tell you. 

Thanks for sharing @Dawn Brenengen. When it comes to investing, it's all about what we're comfortable with. It's great to see you're still maxing out all tax-advantaged accounts. You're definitely getting the best of both worlds with that. I'm not "good" at stocks either, so I just throw my money into total market index funds like total u.s. market, total international etc., with some tilts towards smaller sectors. I hope you get that financial freedom you're looking for. For me, my #1 priority is to have financial independence, so hopefully real estate can help me achieve that goal faster, or more efficiently. In a little under 10 years I'll be evaluating my next steps as far as retirement goes. I'll either continue working to pad my portfolio, look into a lower stress + slightly lower paying job, work part time or travel the world cheap for a few years and then live off my investment returns. Best of luck to you, and if you ever have questions about the tax-advantaged accounts/early retirement don't hesitate to reach out. I follow a few great blogs and forums that offer a wealth of info on both subjects. 

@Craig Moore you really come off as motivated, man. I wish I had your mindset when I was younger. I'm also researching real estate investing in order to diversify my portfolio. I'd like to briefly mention the importance of good personal finance habits in order to achieve your investment goals. Make sure, if you're able, that you are putting all available dollars to work through investments. I save well over 50% of my income each year, and invest every cent of it that I can. Like you, I want to have the ability to be a stay at home dad, or just not be reliant on a 9-5. Save as much as possible while still making sure to not deprive yourself of things you enjoy. While researching real estate, don't be afraid to also look into books about investing in general because there are a lot of common themes no matter what asset you invest in. 

With that being said, I think your best bet is the duplex house hack with an FHA loan. Maybe you can find something slightly distressed that could use some minor, superficial work. Maybe a 203k could be used. If you can have a tenant cover costs for you, then you can focus on earning more money through your day job and utilizing leverage to your advantage for your next property. Investing requires patience, so don't rush into things. Be smart and make sure you keep your risk at appropriate levels, so you don't set yourself back too far if things go south. Good luck man.

@James Masotti the place looks like it has potential, and your focus and drive are apparent. I'll be following your progress on this. Is there any reason in particular you're not doing a more traditional 15-30 yr loan with a bank? How did you connect with your private money lender? 

Hi All, 

Do any of you calculate the opportunity cost of the cash reserves you need in order to be prepared for repairs and capital expenditures on your investment properties? For example, the opportunity cost of not investing that money in passive investments like a 80/20 stock to bond index fund portfolio, which over time tend to average 8-10%. 

If you have 100k of reserves for a mature rental portfolio in savings, treasury bills or a CD ladder, that's an 8-10k/year loss compounded annually. After inflation you're often times getting negative returns on the 100k to keep it liquid. 

This is totally irrelevant to those that would never put their money in stocks or bonds, but for myself this is a real loss that I will factor in. 

I've seen quite a few lists of expenses when people discuss analyzing a rental property e.g. vacancy, repairs, maintenance. Those seem to usually entail your basic upkeep for a property i.e. clogged toilets, landscaping, snow removal etc. That got me thinking about expenses that may be totally unexpected and unique to one's particular area. Do any of you have things that became a regular expense that you would never have imagined?

 In the end it will come down to you running the numbers on what they offer you, and seeing if it makes sense. What return on your investment are you looking for? Are you willing to accept lower return in exchange for less work on your part? Turnkey providers would need to be exceptionally good at finding under valued/distressed properties, and then getting a return so high that there's enough for you after all is said and done. There are some very smart/hard working investors out there, so I'm sure it happens, but it will probably be the exception to the rule. That's where running the numbers comes in, but you'll want to be very knowledgeable before pulling the trigger. Otherwise how will you know how to analyze the merits of their proposition?

When you say they'll "guarantee the rent and maintenance for the first year", what does that entail?