All Forum Posts by: William P.

Exactly, here in the SF Bay area there are not a lot of new properties in the good areas.  Its all been built up years ago.  The stuff is exurban and quite a drive from the employment centers.

Out here, I think location frequently trumps condition.  After all, its location that makes a 3/2 1500 square foot house in Palo Alto go for 1.8M

I would like to attend.  I am new the the process.  Is there a way to identify the group?

 Nate  - I totally agree with you.  I am sure Jon has a number of models that give him confidence that his markets will appreciate at 5% a year, but who knows.  If the 10 year Treasury moves up 200 basis points, he may find a different outcome.  Not saying he doesnt have a good system or investments, but any projections based on prices 5 years from now are just slightly better than a crystal ball.

Jon - I do agree with much of your post tho,  if you are renting high quality properties to high quality tenants, the math works against using a prop mgr.  The rents are higher, so their take is more, and the effort for them should be less.  

Extreme example,  recently I was a tenant in a house with rent of 3K per month.   We lived there for 3 years, and I think I talked to the owner twice.  Maybe 4 emails.  I had my bank account autopay him rent every month.

The fridge broke, he said just go buy a new one, send receipt,  deduct it from your next months rent.  Had a plumbing issue, he said - use the plumber you like and deduct from rent.  He collected about 100K in rent - that would have cost him 7K in prop mgr fees for 1-2 hours work!!!!

 My first reaction was that this feels like a bit of killing a mosquito with a hammer, but your later postings reveal that you find them to be a troublesome tenant.

You likely have cured them of fixing things without your permission, but I doubt their complaining is going to stop.

 I am about the same age as you, and it would never occur to me that it is too late to start. Lets say it takes 5 years to really get rolling.  Then you have ages 50-65 to make your funds. 

Sounds like you are concerned that your current retirement funds are not adequate.  That may be, but it doesnt speak directly as to if you can make $$ in real estate.

Privately initiated 100K loan at 3%, 30 year fixed for a RE investors first deal.  

There has to be more to the story.  Simplest is that the lender is a friend or family.

How would moving and renting the property mitigate your financial losses? If this development is going to hurt the property value, it will hurt it whether you live there or not. SFR renters dont like living next to 3 story apartment buildings any more than than you do.

I think you need to do something about the front yard.

And, like everyone else is saying, it must be price.  Really doenst matter how much you have in it, only matters what the market will bear.  Just get it sold and move on.

As and aside, I love that style of house. That house would sell tomorrow for $1M in my town.

Lots of good insight.  

Sharad - I think my goal is to get ROI commensurate with the risk I am taking, with a little kicker for my effort. And that raises a good point how material all this is. Lets say I put the 250K into Vanguard REIT index (Kathryn, I disagree with your claim that owning the asset itself is less risky. Only risk to the REIT index is the general market risk, which is not trvial. But the variability in return in owning your own property is way higher, which is why you can expect to make more doing it yourself on average.) Anyway, Lets say in the REIT index my expected ROI is 7%. Compare to private lending, where maybe I can expect 10% ? So in exchange for the work, I get 3% more on 250K. That's 8K a year. Nice, but prob not worth the effort unless I can do it in an hour or two a week or so. If I had 10M to invest, then a different story.

Ali - your point about taxes is valid of course, but I would hold the REIT in tax deferred account. Helps a bit.

Brian - your point about a being part of a syndicated investments resonate.  Biggest challenge there, of course, is how good/trustworthy is the investor.  One assumes that if he is REALLY good, he has lots of access to capital, including a ton of his own.  But maybe that's ok, its all trade-offs on the risk-return frontier.  I am an accredited investor, but 250K to put to work in RE isnt much.  what is the typical size of investment you see?  ie is it 10 investors at 100K each?  50 partners at 250K each?  And of course where do you find them?

Jeff

Excellent point about being local.  Seems to me the a very important element of hard money lending would be diligence on the flipper.  Harder to do that non locally.

I think the very high cost of local RE is a challenge for private lending if I am going to limit to 250K.  On the flip side, you don't have to diligence as many deals to get your funds at work, so that's a plus.  

THe other challenge of private lending is that it creates income now, which I distinctly dont need living here in calif and near my career earnings peak. The funds I have to invest in RE are "post tax", but I suppose I could allocate differently and use IRA funds, but I would be more limited how much I could invested vs post tax $,