All Forum Posts by: Simcha Davidman

@Troy Hebert your post resonates strong with me! And your concerns are primarily what has kept me out of RE for these last few years as I've learned more and more about it. (I'm actually about to go full throttle into RE, but that's for another time.)

Why should I invest in an illiquid, risky asset when I can get better returns in the stock market? And to get the type of returns that make it worth it, I'd need to pour hours and hours into it - at that rate, I can get another job which could pay as much as a return on a small investment property.

If you want to get into RE, the way I see it, you have two options. The first is easier, if you're trusting of other people. Partner with others who will do the active management (including rehab, mgt, maybe even deal sourcing). This can be through any of the million syndicators out there or a friend/business associate who you trust that is involved or wants to get into it.

The other option is to go searching yourself. You have to commit to looking at deals until you find one that suits you. Literally, you cannot stop until you actually find something. Because otherwise you may spend months looking at dozens if not hundreds of deals which are not good enough for you - only to quit. And then you wasted all that time. If you commit and push through until you close on something, retroactively all that time "wasted" becomes part of the process, which it is. Ask any seasoned investor and they will tell you that finding a good deal is only a matter of pushing through until you find one.

The high IRRs you hear about are partially due to capital appreciation, but more directly, usually a function of improved property performance. If I can improve the NOI, my IRR can go up significantly. Now that my property is worth more because it is shooting off more income (on larger multi-family and commercial, value is strongly related to NOI - hence, you can significantly effect capital appreciation with minimal broad market influence), I can further raise the IRR by cashing out a refi or selling for nice profit. But again, you either need to commit to scouring the planet until you find something or partner with someone/company that's already doing this.

As far as market timing goes, just be conservative when you underwrite your deals. If you project that in a downturn, your expenses can withstand a drop in rent, so you're protected. One thing that was not mentioned was that if you end up in a larger property with a commercial mortgage, they're typically 5-10 year loans with 20-30 year amortizations. If your property loses value when your loan comes due, you may have a significant challenge refinancing, unless you have a ton of equity that you (temporarily) lose.

Best of luck and keep us posted on your decision and journey!

@Austin Mize  If you're not going to use the transaction-free ETFs offered by TDAmeritrade, I'd recommend against that platform.  If your trade amounts are not high, the higher commissions will eat into your returns.  If you're going to stick with commission-free ETFs, it shouldn't make a difference.

I might get some flack for this, but I also don't necessarily recommend opening an IRA or a Roth IRA. It really depends on what your goals are. I know people who invest, or plan to invest, in index funds until they have enough money for a down payment on real estate. If you put your money into an IRA you get hit with a penalty if you withdraw it (and taxes if it's an IRA and not a Roth IRA); and if you don't withdraw it, I think you will be taxed on it as ordinary income once you withdraw and lose out on the tax benefits of investing in real estate. Full knowledge of your income/net worth and your age would be important for this analysis - you should discuss the different options with a qualified tax planner (your CPA).

But I strongly follow everyone's recommendation that you should get started saving and investing.  The sooner your start, the sooner you kick off the power of compounding.

@Stephen Kunen I'm interested.  Thanks!

@Moisey Meyer here's a quiiiiiiiiick tip.  When responding to someone, type the @ symbol and then start typing their name, and this way they will be tagged and know that you responded to them.

I love the ambition; never confuse ambition with action.  Best of luck!!!

@Jason K.  I recommend doing a search on BP for "syndication" or something like that.  This is what it sounds like you're trying to do, and you will likely need a securities lawyer to draft the Private Placement Memorandum (PPM).  If it's small enough, there are exceptions, or exemptions, and depending on the location of the investors and property, only state "Blue Sky" laws may apply, as opposed to the federal SEC regulations.  Bear in mind that most of these types of deals are limited to accredited investors.

I also found some pretty interesting videos about the topic on youtube.

Best of luck!

@Aisha S. I find myself in a similar situation.  Most of the feedback I've received is that it will be hard with no experience to make that transition, and most real estate firms are small enough that when they hire, they hire because they have a need and therefore need experience.

With that being said, I'm pushing, pushing, pushing.  There are ways into this industry.  Just about everyone you find within these digital walls has their own story of how they got into it.  One of my contacts recently told me that he recommends me keep a regular (not RE related) job for stability and work towards building out the RE business simultaneously.

Keep at it and best of luck!

@Mark K. investing in quality companies is one way to go, and it's been proven successfully for decades.  But that's the beauty of investing in equities - there are so many different paths someone can take.  Just like real estate... :)

@Mark K. I agree with you.  It is a bit disappointing to hear the ignorance of people trashing stock investing.  As this is a RE investing site, I'd think it'd be better for those who don't know to stay quiet.  And I really like @Scott Trench on the podcasts - he's funny and he always has really great points/questions.

However, if you read the comments to that article (originally posted 2 years ago), rest assured there are plenty of stock investors on this site who agree with you.

Congrats and good luck @Nick Bleser!  Your local RE lawyer should have all docs you "need."  But hopefully some experienced LLs will give you some things to add.

Is the building near you/will you be managing it?

Thank you!