New property

[riverwed070707]

What keeps me away is the unknown and the hassle factor, and maybe that really isn't such a big deal, but I'm not terribly handy and don't want to be spending my free time fixing other people's problems. I have enough trouble fixing my own. I don't want phone calls from tenants telling me a sink is dripping or a toilet is clogged or the washing machine stopped working. And I don't want to deal with someone being late on the rent or the whole process of finding and screening tenants in the first place.

And those are all very real things. All I've dealt with and its frustrating. Emotionally I'm not a good landlord. I tend to be a push over and let people get away with way too much, take the hit for things I shouldn't have to just to relieve tension/stress. I think I've mentioned before but once I hit 8 doors I'm hiring a property manager - that will be my motivation and reward for hitting that milestone sooner rather than later.

[disneysteve]

Emotionally I'm not a good landlord. I tend to be a push over and let people get away with way too much, take the hit for things I shouldn't have to just to relieve tension/stress.

Yep, that's me too. I just don't think I'd be good at the game, so I choose not to play.

I understand "traditional" investing. Not to say I'm an investment genius, but I've done okay over the past 25+ years that I've been at it. My track record is solid and I'm happy with the returns I've achieved. And there just aren't any hassles to worry about. It's not particularly exciting but it works and it's mostly hands-off, passive stuff.

[TexasHusker]

If I ever came across as preachy, I apologize. I probably did. My wife says I can be too opinionated at times.

I guess it's human nature that we tend to promote that which we've had success in.

I like certain types of real estate, and that's about all I can say. It would be similar to saying "I like the stock market" when in fact I only like investing in GE or Biogen.

I do think there is great value in seeking out and finding our own niche when investing, which can be infinitely more profitable than the averages if we learn that niche well. And that niche could be a whole host of things, from fine art to pork bellies.

[disneysteve]

I do think there is great value in seeking out and finding our own niche when investing, which can be infinitely more profitable than the averages if we learn that niche well. And that niche could be a whole host of things, from fine art to pork bellies.

Agreed. We just have to remember that other people will have different niches. It doesn't make yours wrong. It doesn't make theirs wrong.

Personally, I've found the Rolex discussion fascinating. To me, a Rolex was always just an obscenely expensive watch, but hearing more about the collectors market has given me a whole new view on the topic. To learn that people are making thousands buying and selling Rolexes brings a whole new perspective to the subject.

[james.hendrickson]

If I ever came across as preachy, I apologize. I probably did. My wife says I can be too opinionated at times.

I guess it's human nature that we tend to promote that which we've had success in.

I like certain types of real estate, and that's about all I can say. It would be similar to saying "I like the stock market" when in fact I only like investing in GE or Biogen.

I do think there is great value in seeking out and finding our own niche when investing, which can be infinitely more profitable than the averages if we learn that niche well. And that niche could be a whole host of things, from fine art to pork bellies.

Texas - whats wrong with REITs? Or an index fund that focuses specifically on real estate?

[corn18]

Texas - whats wrong with REITs? Or an index fund that focuses specifically on real estate?

REIT's are nice for some diversification, but they act a lot like equity or bond funds. When the underlying value of the investment moves, so do the REITs.

For a true brick and mortar kind of RE investor, the key is leverage and cash flow. I can get a solid 10% return by investing only 80% of the capital. I know TH does better, but he owns his own management company, so that helps with expenses.

To illustrate: goal is to generate $10k / year net cash flow

For REITS, that would take $250,000 (4% rule). For RE, that might only take a $50k downpayment on a $250,000 property.

Multiply that x 10, and you would need $2.5M to generate $100k of income from REITs (4% withdrawal rate). For RE, you would only need $500k.

The power of leverage.

[TexasHusker]

Texas - whats wrong with REITs? Or an index fund that focuses specifically on real estate?

Corn summarized it best. You can't leverage your $$ with REITs.

The number one benefit to RE is the power of leverage. That is, someone else is paying for the majority of the investment.

I own maybe $1 million in investment real estate - vacation homes - but I only have about $200K of my own loot in those. Someone else is paying off that $1 million investment over time. Of course, even a tiny move in RE appreciation - 2 percent a year - is another $20K in my pocket on paper. Then again, the flip side is I could "lose" 2 percent on paper in a decline.

The other often-overlooked value of RE is a favorable tax code. Let's say I depreciate $1 million worth of real estate over a 27.5 year period per the IRS code. That is a $36,000 annual deduction for 27.5 years. Nothing to sneeze at.