Invest in Real Estate Even with No Passion?

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Kandinsky
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Invest in Real Estate Even with No Passion?

Post by Kandinsky »

I have been an avid fan of Boglehead investing since I was young. However, more recently it seems like everyone and their mother is buying rental property. I can't say I'm terribly excited about the idea of doing it but as a capitalist, it feels like a responsible step I "need" to take to produce an additional source of passive income. After reviewing the benefits - equity appreciation, depreciation for taxes, cashflow, and leverage - it feels almost like a no-brainer to diversify into real estate investing.

It all makes financial sense but part of me just can't get excited about this. I'm wondering if I'm not interested because I am not a DIY-oriented person at all (I know I can hire someone else for that and even a PM). I also don't like dealing with people if I can help it but I suppose it's a necessary evil. My friend tells me it's passive. He only uses 20% of his time about every few months or so and some months you have nothing going on.

I have a great paying job and I have excess cash to invest so I thought an alternative could be multi-family syndication. It's as close to owning a property as you can get without being involved in the day to day. I guess I have a bit of FOMO/keeping up with the Jones syndrome because I see him buying rentals and taking a passive approach like a syndication would yield lower returns.

My friend also offered to partner with me to start doing REI even though he already has 12 properties. I would bring all the capital and he would bring the operational know-how for a 30% stake. He has done well so far with his real estate in single-family homes. Not sure how to evaluate whether that deal is a good one though. It does seem like a nice symbiotic relationship where he would handle the parts I don't care to do.

Ever since REI has entered my head, it has started to mess with my investing principles. I feel like it makes me want to chase returns (by owning property directly for the most control and highest rent yield) and of course there is something satisfying about owning your own business.

As a software engineer, I am inclined to stay more on the sidelines and keep stacking money for index funds/syndication but I can't help but feel like I am missing out on a "better" or "bigger" life. Sorry if this all feels like a ramble. Just wanted to do a brain dump more than anything. With lots of ways to invest in RE, I just wanted to see what the wisdom of the group had to say.
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Re: Invest in Real Estate Even with No Passion?

Post by DarkHelmetII »

Kandinsky wrote: Thu Aug 05, 2021 2:41 pm I have been an avid fan of Boglehead investing since I was young. However, more recently it seems like everyone and their mother is buying rental property. I can't say I'm terribly excited about the idea of doing it but as a capitalist, it feels like a responsible step I "need" to take to produce an additional source of passive income. After reviewing the benefits - equity appreciation, depreciation for taxes, cashflow, and leverage - it feels almost like a no-brainer to diversify into real estate investing.

It all makes financial sense but part of me just can't get excited about this. I'm wondering if I'm not interested because I am not a DIY-oriented person at all (I know I can hire someone else for that and even a PM). I also don't like dealing with people if I can help it but I suppose it's a necessary evil. My friend tells me it's passive. He only uses 20% of his time about every few months or so and some months you have nothing going on.

I have a great paying job and I have excess cash to invest so I thought an alternative could be multi-family syndication. It's as close to owning a property as you can get without being involved in the day to day. I guess I have a bit of FOMO/keeping up with the Jones syndrome because I see him buying rentals and taking a passive approach like a syndication would yield lower returns.

My friend also offered to partner with me to start doing REI even though he already has 12 properties. I would bring all the capital and he would bring the operational know-how for a 30% stake. He has done well so far with his real estate in single-family homes. Not sure how to evaluate whether that deal is a good one though. It does seem like a nice symbiotic relationship where he would handle the parts I don't care to do.

Ever since REI has entered my head, it has started to mess with my investing principles. I feel like it makes me want to chase returns (by owning property directly for the most control and highest rent yield) and of course there is something satisfying about owning your own business.

As a software engineer, I am inclined to stay more on the sidelines and keep stacking money for index funds/syndication but I can't help but feel like I am missing out on a "better" or "bigger" life. Sorry if this all feels like a ramble. Just wanted to do a brain dump more than anything. With lots of ways to invest in RE, I just wanted to see what the wisdom of the group had to say.
Sounds messy and a good way to soil a friendship. My 2 cents ...
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Re: Invest in Real Estate Even with No Passion?

Post by Jack FFR1846 »

You've described your personality pretty well, I think. With that in mind, I can guaranty you're going to find 2 things if you invest in real estate.

1: You're going to lose money.

2: You're going to be anxious, miserable and paranoid.

If those sound good, head over to biggerpockets and read everything.
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Kinkajou82
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Re: Invest in Real Estate Even with No Passion?

Post by Kinkajou82 »

I'm just a newbie early on in the accumulation phase, but I do own (mortgaged) real estate in the form of my primary home, an out-of-state rental, and a vacant plot of land I want to build on.

That said, wouldn't the most "Boglehead" thing to do in this direction to be investing in an REIT in a tax-advantaged account? (And I suppose owning your own home.) It's likely to be both WAY more passive and WAY more diversified. And the simplest? Acting as an individual or partner in specific properties, or even in a syndication for a number of specific properties, seems more complex and like the risk is not very diversified geographically?
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Kandinsky
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Re: Invest in Real Estate Even with No Passion?

Post by Kandinsky »

You know I strangely get what you're saying. I am one to worry about a lot of things and mull over pros and cons for a long time before taking action. I think my friend is more of a professional acquaintance than a personal friend and we have worked together in the past although never in a partnership. He has the "street smarts" whereas I have the book smarts. I think I have a good amount of common sense but he does tend to have a bit more than me when it comes to how to handle scenarios in real estate. He is also more of a people person.

So I guess I need to just try to ignore the "lucrative" opportunities of REI and stay the course. Although maybe syndication would be a good thing to consider.
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Kandinsky
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Re: Invest in Real Estate Even with No Passion?

Post by Kandinsky »

Kinkajou82 wrote: Thu Aug 05, 2021 3:37 pm Acting as an individual or partner in specific properties, or even in a syndication for a number of specific properties, seems more complex and like the risk is not very diversified geographically?
I've heard syndications can potentially be more profitable than doing direct investment due to the scale of the deal and the experienced team acting as the general partner. Sure you could invest in a fund of multiple properties with some syndicators but I think picking two different syndications to be in would be a nice balance between higher returns and tax efficiency vs. doing direct investment with more work involved. REITs feel like a step further removed with more overhead and lower yield?
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retiredjg
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Re: Invest in Real Estate Even with No Passion?

Post by retiredjg »

Kandinsky, one does not need to invest in rental properties to build a successful retirement portfolio. You don't seem to be suited for it and it does not seem like it would bring you pleasure in the doing.

Why would you consider getting involved in something you will not enjoy and probably not be good at...to make money you don't actually need?
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Re: Invest in Real Estate Even with No Passion?

Post by humblecoder »

You have serious FOMO, but that's not a good enough reason to invest in something. It has to make sense from a cost, effort, risk, and reward standpoint.

You listed all of the things which you think makes real estate investing a "no brainer", but you didn't list any of the downsides. In most desirable markets, real estate prices are through the roof (no pun intended) so your buy-in is going to be higher, reducing your IRR. Finding a good tenant isn't a trivial thing, especially with an eviction moratorium possibly still in place in some areas. Not to mention the usual unplanned items that you need to deal with when you own a rental.

You mention that your friend says that it is a passive investment but spending 20% of one's time every few months doesn't seem very passive to me. As you point out, you could delegate the tasks to a management company (or your friend-partner), but then you are reducing your profits. Plus from what I understand, evaluating the deal up front before you buy is important, but sounds like you don't know what constitutes a good deal.

Finally, you mention that you have no passion for real estate investing but you say that there is something satisfying about owning your own business. Why not look into owning a business in an area that you DO have passion for? That seems like a better route than just defaulting to what everyone else is doing. Everyone says eggplant is good, but I hate it. So why would I eat something I don't like just because everyone else is eating it? I"ll get my veggie fix from broccoli or spinach which I like a lot more.

Before jumping into this, I would suggest educating yourself on real estate investing more. There are many books and websites in this area. I know the website "biggerpockets" is mentioned as a resource. Learn what it takes to do well in this space and get a feel for if it is really for you. Ask your friend to open up his books, show you his balance sheet so you can see what his ACTUAL ROI is. That way, you are going into this endeavor with your eyes opened.

Otherwise, I might be safer and simpler to stick with the 3 fund portfolio. Not sexy, but at least it doesn't call you in the middle of the night because the furnace broke!
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Re: Invest in Real Estate Even with No Passion?

Post by veindoc »

There are other alternatives like peerstreet.com which allow you to invest in real estate without being directly involved. It’s akin to being a hard money lender. I understand what you mean. Everyone and their mother seems to view owing real estate as a status symbol. For me it seems like a headache. My husbands family is astounded we are not using real estate as a retirement fund. It’s hard to grasp that we plan to retire on a very basic boglehead portfolio.
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Re: Invest in Real Estate Even with No Passion?

Post by GibsonL6s »

I have been involved in RE as a lender, syndicator and as an institutional investor and I would recommend against investing passively in other people's deals. In RE control is everything and without it you are along for the ride with someone who may not have your best interests in mind or may candidly not be talented enough to pull off the business plan in addition to the may fraud scenarios we read about constantly. If you are not willing to learn the business and source and manage your own deals, I would pass.

Many a fine fortune have been made without real estate, besides the fact one could argue the market is quite overvalued at this time.

Good luck!
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Re: Invest in Real Estate Even with No Passion?

Post by Kandinsky »

Thank you humblecoder (love the username btw). I have seen his financials and I'm impressed with how easy he makes the whole process seem. We talk at length about it on the phone and I also go to a local real estate meetup. At least in my local market, it seems like the moratorium has affected a very small percentage of the people in our group and it could be ending soon. I've evaluated more deals than I care to count and I think I have a pretty good feel for how to evaluate them (again, the book smarts) but not so much for the operational side and dealing with people that he seems to be good at and I don't care to deal with. So it does seem like a good fit.

I was actually locked into a deal for 5 units and backed out because the financing (should've gotten that locked up first) terms got worse as the deal progressed. But overall I felt excited when I initially got the deal because it felt like I was making a large and meaningful move forward in my future. Up to this point I've been an avid investor and have about $1 million in savings mostly in index funds.

I definitely want to continue investing in my software business and my true dream is to build a SaaS product with a Stripe integration as my "passive" income. However getting something off the ground and marketed has been a challenge vs. what seems to be straightforward with RE (everyone needing to live somewhere). I think that's why I gravitate toward it because there is a lower barrier to progression in growing a business but I also question if my lack of interest comes from my lack of DIY skills or if my subconscious is playing tricks on me and it really won't be that big of a deal to handle whatever may come up.
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Re: Invest in Real Estate Even with No Passion?

Post by surfstar »

REI is an outdoor store, not an investment strategy ;)

Also, investing in something because everyone else is doing it and making money - is exactly the wrong time and reason to do so.

Index investing is boring and easy. Why mess with a good thing?
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Re: Invest in Real Estate Even with No Passion?

Post by Kandinsky »

GibsonL6s wrote: Thu Aug 05, 2021 4:06 pm I have been involved in RE as a lender, syndicator and as an institutional investor and I would recommend against investing passively in other people's deals.
So you wouldn't even consider a properly vetted GP as part of a syndication deal? I've heard/seen IRR advertised that seem better than some of the deals I looked at locally. Basically anything more than 15% was my target. I also thought about an extra investment using a home loan since it is "real estate" but would diversify across two deals at a minimum if I went the syndication route.
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Re: Invest in Real Estate Even with No Passion?

Post by Wricha »

I own and have owned commercial real estate for 25+ years. I really think it is an excellent asset class and generally recommend it. I think, given what you have written this may not be a good fit. REIT’s might be a better fit with that said REITs and owning your own real estate are two different animals irrespective of what you will see discussed.
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Re: Invest in Real Estate Even with No Passion?

Post by finite_difference »

Run, don’t walk.

Unless you are very passionate about it, and love managing the properties and doing it yourself, then don’t do it.
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GibsonL6s
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Re: Invest in Real Estate Even with No Passion?

Post by GibsonL6s »

Kandinsky wrote: Thu Aug 05, 2021 4:14 pm
GibsonL6s wrote: Thu Aug 05, 2021 4:06 pm I have been involved in RE as a lender, syndicator and as an institutional investor and I would recommend against investing passively in other people's deals.
So you wouldn't even consider a properly vetted GP as part of a syndication deal? I've heard/seen IRR advertised that seem better than some of the deals I looked at locally. Basically anything more than 15% was my target. I also thought about an extra investment using a home loan since it is "real estate" but would diversify across two deals at a minimum if I went the syndication route.
I would not. The IRR is their projection which will of course be shown optimistically to be enticing. I also would not use leverage to get into a leveraged deal. In a downturn if the syndication goes south, you have lost your investment and still have a debt to pay, not worth the risk in my opinion.

The internet has many stories like the one here.

https://www.sec.gov/news/press-release/2020-236
calwatch
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Re: Invest in Real Estate Even with No Passion?

Post by calwatch »

I own a home with a mortgage and am overweight in REITs. I have no reason to be a landlord.
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Re: Invest in Real Estate Even with No Passion?

Post by JoMoney »

Being a landlord, even a relatively "passive" one using a management company or otherwise is not something I would want to do.

This made me :shock: :
Kandinsky wrote: Thu Aug 05, 2021 2:41 pm... I would bring all the capital and he would bring the operational know-how for a 30% stake...
So right off the bat, you lose 30% of your money? :shock: I would buy a REIT fund if I wanted to passively own real estate.
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Re: Invest in Real Estate Even with No Passion?

Post by Watty »

Kandinsky wrote: Thu Aug 05, 2021 2:41 pm I would bring all the capital and he would bring the operational know-how for a 30% stake.
Run!

You could buy a REIT for small fraction of that cost.

If you do decide to do this keep in mind that one huge risk if that you will have a mess if your friend gets hit by the proverbial Mack truck and all the sudden you have to start doing everything yourself.
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JoMoney
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Re: Invest in Real Estate Even with No Passion?

Post by JoMoney »

Watty wrote: Thu Aug 05, 2021 11:14 pm
Kandinsky wrote: Thu Aug 05, 2021 2:41 pm I would bring all the capital and he would bring the operational know-how for a 30% stake.
Run!

You could buy a REIT for small fraction of that cost.

If you do decide to do this keep in mind that one huge risk if that you will have a mess if your friend gets hit by the proverbial Mack truck and all the sudden you have to start doing everything yourself.
... and if the friend doesn't run things the way you hope, you may wish he had been hit by a truck rather than stuck in something with a 30% partner.
There's lots of warnings out there about mixing friends and business.
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Re: Invest in Real Estate Even with No Passion?

Post by cchrissyy »

Kandinsky wrote: Thu Aug 05, 2021 4:10 pm
I was actually locked into a deal for 5 units and backed out because the financing (should've gotten that locked up first) terms got worse as the deal progressed. But overall I felt excited when I initially got the deal because it felt like I was making a large and meaningful move forward in my future. Up to this point I've been an avid investor and have about $1 million in savings mostly in index funds.
how old are you? a million dollars already invested is very successful!
even if you didn't add any more, how many times will it naturally double in your lifetime?

i think you should hold on to your savings and not take money out for a side venture.
you are doing well! these other people making money a different way are fine, and they have the exciting social chatter and meetup groups when all your index funds have is a bunch of bogleheads (ha!) but seriously, my advice to you is you have a good thing going and don't mess it up by getting greedy or taking unnecessary risks for fun. just stay on the path where you keep adding to your pot and watching it slowly, steadily double, and then again and again.
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Kandinsky
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Re: Invest in Real Estate Even with No Passion?

Post by Kandinsky »

I'm 34 currently. I'm hoping to retire at around age 45 and if my consulting business does as well as I hope, I might be able to retire with about $5.4 million between the estimated gains on what I have now plus the amount I'll contribute over the years.

I am very proud of where I've gotten using just index funds (VBTLX, VFIAX, VGT, VTIAX, VTSAX). Admittedly it didn't seem like much was happening with them until covid hit and then I had some crazy gains finally. It could also be the money is large enough to see a difference in the gains now when the market moves. I look at people like my parents that have a pension from working for the government and think, main I would kill to have some kind of incoming cash in retirement so I didn't have to touch my principle. Yeah I'll do more bonds for income but man, RE felt like the modern day form of a pension.

Thanks for the input everyone. I think it's about what I expected given I am on BH. :sharebeer
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Re: Invest in Real Estate Even with No Passion?

Post by Kinkajou82 »

Kandinsky wrote: Fri Aug 06, 2021 2:29 pm Thanks for the input everyone. I think it's about what I expected given I am on BH. :sharebeer
I think it's also very interesting that a lot of us WITH Real Estate aren't jumping at the bit to recommend this asset class to you, haha! Personally I've been lucky so far with tenants and my property management company, but that could turn south unexpectedly so there's always that... I also didn't buy either of my 'investment" properties because I wanted a rental per se, but because I actually HAD a family member I was trying to help with housing. (That, of course, is another story.)

I'm also wondering why you would want to complicate things now with this potentially risky real estate play when you've already got a successful investment strategy and a growing business, both of which could benefit even more from your resources and attention.

Could this be a "grass is always greener" type of situation?
Last edited by Kinkajou82 on Fri Aug 06, 2021 3:52 pm, edited 1 time in total.
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Re: Invest in Real Estate Even with No Passion?

Post by White Coat Investor »

Kandinsky wrote: Thu Aug 05, 2021 2:41 pm I have been an avid fan of Boglehead investing since I was young. However, more recently it seems like everyone and their mother is buying rental property. I can't say I'm terribly excited about the idea of doing it but as a capitalist, it feels like a responsible step I "need" to take to produce an additional source of passive income. After reviewing the benefits - equity appreciation, depreciation for taxes, cashflow, and leverage - it feels almost like a no-brainer to diversify into real estate investing.

It all makes financial sense but part of me just can't get excited about this. I'm wondering if I'm not interested because I am not a DIY-oriented person at all (I know I can hire someone else for that and even a PM). I also don't like dealing with people if I can help it but I suppose it's a necessary evil. My friend tells me it's passive. He only uses 20% of his time about every few months or so and some months you have nothing going on.

I have a great paying job and I have excess cash to invest so I thought an alternative could be multi-family syndication. It's as close to owning a property as you can get without being involved in the day to day. I guess I have a bit of FOMO/keeping up with the Jones syndrome because I see him buying rentals and taking a passive approach like a syndication would yield lower returns.

My friend also offered to partner with me to start doing REI even though he already has 12 properties. I would bring all the capital and he would bring the operational know-how for a 30% stake. He has done well so far with his real estate in single-family homes. Not sure how to evaluate whether that deal is a good one though. It does seem like a nice symbiotic relationship where he would handle the parts I don't care to do.

Ever since REI has entered my head, it has started to mess with my investing principles. I feel like it makes me want to chase returns (by owning property directly for the most control and highest rent yield) and of course there is something satisfying about owning your own business.

As a software engineer, I am inclined to stay more on the sidelines and keep stacking money for index funds/syndication but I can't help but feel like I am missing out on a "better" or "bigger" life. Sorry if this all feels like a ramble. Just wanted to do a brain dump more than anything. With lots of ways to invest in RE, I just wanted to see what the wisdom of the group had to say.
You know you don't have to be a direct investor, right? Especially if you qualify as an accredited investor. A private real estate fund passes through the depreciation and all that but basically functions like a mutual fund that sends you a late K-1 every year.
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Re: Invest in Real Estate Even with No Passion?

Post by tibbitts »

JoMoney wrote: Thu Aug 05, 2021 11:10 pm Being a landlord, even a relatively "passive" one using a management company or otherwise is not something I would want to do.

This made me :shock: :
Kandinsky wrote: Thu Aug 05, 2021 2:41 pm... I would bring all the capital and he would bring the operational know-how for a 30% stake...
So right off the bat, you lose 30% of your money? :shock: I would buy a REIT fund if I wanted to passively own real estate.
At first I thought that but then I revised my thinking, so maybe it's more like 30% of the profits if any but 0% of the losses. So not 30% of the investment. Of course the OP could still lose 100% of the investment.
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Re: Invest in Real Estate Even with No Passion?

Post by Sandtrap »

Don’t do anything that you don’t have a passion for.
Without that “magic sauce” not only are the odds of success reduced, but it is no fun at all.

From investment finance to business investment finance to ping pong, to fishing, bring passion to every effort.
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Re: Invest in Real Estate Even with No Passion?

Post by hi_there »

"I would bring all the capital and he would bring the operational know-how for a 30% stake."

Are you saying that you would buy a property and your friend would own 30% of it, in return for managing tenants and maintenance? If so, this sounds like a really bad deal for you, possible the worst deal of all time.
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Re: Invest in Real Estate Even with No Passion?

Post by schwank »

Don't feel you have to do anything with RE. I don't invest in real estate regardless, but especially not at current price levels and in my state which has laws favoring tenants over owners.

I already have a good job, as does my wife, so we're on a good path. We have kids and I would way rather spend my time with them and on some personal life for myself than chasing tenants for rent or having to maintain the properties. My primary residence is hassle enough. I've seen firsthand my friends having to spends 10s of thousands and lots of personal time to make a property habitable again after a bad tenant, with no recourse.

No way would i sign up for all of that hassle and overhead. Buy an REIT fund if you really want, but don't feel left out. Everyone always tells when they won at the casino, but not how much they lost
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Re: Invest in Real Estate Even with No Passion?

Post by ZWorkLess »

You will definitely not get good returns if you give away 30% off the top, imho. I don’t think your friend is a very good friend offering you that kind of “deal.”

Skip it. I’ve made plenty on RE but I think the sp500 has done at least as well for me and is zero work.

“Be yourself. Everyone else is taken.” RE isn’t your jam. It doesn’t need to be!
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Re: Invest in Real Estate Even with No Passion?

Post by mffl »

hi_there wrote: Fri Aug 06, 2021 4:38 pm "I would bring all the capital and he would bring the operational know-how for a 30% stake."

Are you saying that you would buy a property and your friend would own 30% of it, in return for managing tenants and maintenance? If so, this sounds like a really bad deal for you, possible the worst deal of all time.
Right? I only own one rental property (my first home which I simply didn't sell when I moved to a new home because I didn't want to give a real estate agent 6%), and I manage it myself so maybe I'm wrong about this, but doesn't this sound like the friend is just acting as the property manager? And isn't that typically more like 10% of rents received, and maybe a larger portion of the first month's rent for a new tenant? Not 30% ownership.

Count me in as another landlord telling OP not to do it. I think I've been pretty lucky overall, but it's often a headache (for just the one home!) and today's real estate prices combined with eviction controls sounds so unappealing. I am actively deciding not to add to my RE portfolio right now, and this thread has helped cement that.
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Re: Invest in Real Estate Even with No Passion?

Post by Kandinsky »

I did feel the deal with my "friend" (more of a professional acquaintance than a friend) was not really enticing but to be fair I had read about deals where it is common for one partner to bring capital and another to bring the sweat equity. Plus that 30% is equity so it's not a monthly fee that goes out the door like it would to a PM. It is 30% ownership of the business for his efforts and experience. Sure he could eventually want out but while he is there, the money is working for the business instead of going out as a PM expense is how I looked at it. The thing that really left a sour taste in my mouth was when he suggested leveraging his equity into a larger equity position - 30% of rents (his portion of ownership) would be assigned to a bank account to gradually buy up in equity up to 50% so we would be 50/50 partners. That definitely wasn't going to happen. I value sweat equity but wow.

Thank you all for the motivation to not go down this route for now. Although boring, index funds have always been more exciting to me when it comes to saving and investing. Private syndication deals may be what I look at if I do want a taste of RE with a smaller portion of my portfolio. As long as the projected returns of a syndication deal are greater than the historical returns of the S&P I may consider adding one (probably north of 15% IRR). If I do, I will reconsider my home loan approach :)
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RootSki
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Re: Invest in Real Estate Even with No Passion?

Post by RootSki »

There is no such thing as “passive income” in real estate investing. Being a landlord is an active job that requires all sorts of pro-active and reactive tasks you may or maybe not are prepared for. If you are not handy with repairs and upgrades (when tenets move out) then you will incur higher expenses to contract those tasks out
UpperNwGuy
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Re: Invest in Real Estate Even with No Passion?

Post by UpperNwGuy »

This idea is just plain crazy!
SashaWalpole
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Re: Invest in Real Estate Even with No Passion?

Post by SashaWalpole »

I'm a landlord with 3 rental properties (11 units). Based on what you've written, i'd actually advise against real estate. It sounds like you already have a high income job and a lot of money in index funds. Why take time and energy away from what's already working for you in order to learn something else entirely, particularly when you're not even passionate about the something else? To be honest, if i were in your shoes with $1 million in index funds, i'd probably just retire and see the world.
Pragmatix87
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Re: Invest in Real Estate Even with No Passion?

Post by Pragmatix87 »

Your "friend" is trying to take advantage of your money and clearly thinks you're naive, which tbh you do seem to be since you're *still* actively mulling his "offer" throughout this thread. What PM on earth would ever cost 30% of the building's equity of plus 30% of the incoming rent?! Jfc.

No. Just no.
Last edited by Pragmatix87 on Sun Aug 08, 2021 4:51 pm, edited 1 time in total.
l8_apex
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Re: Invest in Real Estate Even with No Passion?

Post by l8_apex »

You're not a good fit to be a landlord, even one at arm's length.
hoops777
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Re: Invest in Real Estate Even with No Passion?

Post by hoops777 »

People like to talk about all the great things investing in real estate bring.
There are also a lot of potential not so great things.
It is not a game to be played to brag about at parties.
You need to know what you are doing and be committed.
K.I.S.S........so easy to say so difficult to do.
hiduplex
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Re: Invest in Real Estate Even with No Passion?

Post by hiduplex »

cchrissyy wrote: Thu Aug 05, 2021 11:37 pm
Kandinsky wrote: Thu Aug 05, 2021 4:10 pm
I was actually locked into a deal for 5 units and backed out because the financing (should've gotten that locked up first) terms got worse as the deal progressed. But overall I felt excited when I initially got the deal because it felt like I was making a large and meaningful move forward in my future. Up to this point I've been an avid investor and have about $1 million in savings mostly in index funds.
how old are you? a million dollars already invested is very successful!
even if you didn't add any more, how many times will it naturally double in your lifetime?

i think you should hold on to your savings and not take money out for a side venture.
you are doing well! these other people making money a different way are fine, and they have the exciting social chatter and meetup groups when all your index funds have is a bunch of bogleheads (ha!) but seriously, my advice to you is you have a good thing going and don't mess it up by getting greedy or taking unnecessary risks for fun. just stay on the path where you keep adding to your pot and watching it slowly, steadily double, and then again and again.
I think real estate historically and even to this day has this flashy get rich quick kind of showmanship to it. I have gone to a number of real estate investment events such as meetups or bigger pocket networking. I have found them interesting. Some people there own nothing and want to get started. Others have a really big portfolio.

The best real estate group that I've been a part of is the county and state landlord association people who are members there have to own at least one rental property and this group's been around since at least the 1970s most of the members are at least twice my age and have been doing this work for decades I've learned a lot from them gotten the standard state application and other paperwork that landlords would use as well as a lot of good referrals for contractors lawyers Etc but I feel they do it right you really have to treat it as a small business and part-time job.

I only own one rental duplex but for me it's been one of the best investments I've ever made. I owner occupy it and it keeps My overall cost of living down. I'm not in any rush to buy other properties. If I did buy more properties it would only be in the small town that I live in. I know everybody who works for the city and they know me we have a good working relationship. I think you really have to have an interest or passion for rental property to get involved in this.

 I don't really believe much in teams or partnerships. I like to own stuff that's just my property. I think that joint ownership just creates more drama and it's kind of a mess. I do like the tax write offs. OP have you thought more about this?
teamDE
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Re: Invest in Real Estate Even with No Passion?

Post by teamDE »

White Coat Investor wrote: Fri Aug 06, 2021 3:45 pm
Kandinsky wrote: Thu Aug 05, 2021 2:41 pm I have been an avid fan of Boglehead investing since I was young. However, more recently it seems like everyone and their mother is buying rental property. I can't say I'm terribly excited about the idea of doing it but as a capitalist, it feels like a responsible step I "need" to take to produce an additional source of passive income. After reviewing the benefits - equity appreciation, depreciation for taxes, cashflow, and leverage - it feels almost like a no-brainer to diversify into real estate investing.

It all makes financial sense but part of me just can't get excited about this. I'm wondering if I'm not interested because I am not a DIY-oriented person at all (I know I can hire someone else for that and even a PM). I also don't like dealing with people if I can help it but I suppose it's a necessary evil. My friend tells me it's passive. He only uses 20% of his time about every few months or so and some months you have nothing going on.

I have a great paying job and I have excess cash to invest so I thought an alternative could be multi-family syndication. It's as close to owning a property as you can get without being involved in the day to day. I guess I have a bit of FOMO/keeping up with the Jones syndrome because I see him buying rentals and taking a passive approach like a syndication would yield lower returns.

My friend also offered to partner with me to start doing REI even though he already has 12 properties. I would bring all the capital and he would bring the operational know-how for a 30% stake. He has done well so far with his real estate in single-family homes. Not sure how to evaluate whether that deal is a good one though. It does seem like a nice symbiotic relationship where he would handle the parts I don't care to do.

Ever since REI has entered my head, it has started to mess with my investing principles. I feel like it makes me want to chase returns (by owning property directly for the most control and highest rent yield) and of course there is something satisfying about owning your own business.

As a software engineer, I am inclined to stay more on the sidelines and keep stacking money for index funds/syndication but I can't help but feel like I am missing out on a "better" or "bigger" life. Sorry if this all feels like a ramble. Just wanted to do a brain dump more than anything. With lots of ways to invest in RE, I just wanted to see what the wisdom of the group had to say.
You know you don't have to be a direct investor, right? Especially if you qualify as an accredited investor. A private real estate fund passes through the depreciation and all that but basically functions like a mutual fund that sends you a late K-1 every year.
Could you point me/us to any additional resources on this subject? This sounds appealing.

OP, I hear you. My brother just bought a vacation rental property and my BIL is talking about moving to a new house and keeping the old one as a rental. There is some FOMO as we could get into that... but it also tickles my spidey sense a bit..
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White Coat Investor
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Re: Invest in Real Estate Even with No Passion?

Post by White Coat Investor »

teamDE wrote: Tue Aug 10, 2021 11:56 am
White Coat Investor wrote: Fri Aug 06, 2021 3:45 pm
Kandinsky wrote: Thu Aug 05, 2021 2:41 pm I have been an avid fan of Boglehead investing since I was young. However, more recently it seems like everyone and their mother is buying rental property. I can't say I'm terribly excited about the idea of doing it but as a capitalist, it feels like a responsible step I "need" to take to produce an additional source of passive income. After reviewing the benefits - equity appreciation, depreciation for taxes, cashflow, and leverage - it feels almost like a no-brainer to diversify into real estate investing.

It all makes financial sense but part of me just can't get excited about this. I'm wondering if I'm not interested because I am not a DIY-oriented person at all (I know I can hire someone else for that and even a PM). I also don't like dealing with people if I can help it but I suppose it's a necessary evil. My friend tells me it's passive. He only uses 20% of his time about every few months or so and some months you have nothing going on.

I have a great paying job and I have excess cash to invest so I thought an alternative could be multi-family syndication. It's as close to owning a property as you can get without being involved in the day to day. I guess I have a bit of FOMO/keeping up with the Jones syndrome because I see him buying rentals and taking a passive approach like a syndication would yield lower returns.

My friend also offered to partner with me to start doing REI even though he already has 12 properties. I would bring all the capital and he would bring the operational know-how for a 30% stake. He has done well so far with his real estate in single-family homes. Not sure how to evaluate whether that deal is a good one though. It does seem like a nice symbiotic relationship where he would handle the parts I don't care to do.

Ever since REI has entered my head, it has started to mess with my investing principles. I feel like it makes me want to chase returns (by owning property directly for the most control and highest rent yield) and of course there is something satisfying about owning your own business.

As a software engineer, I am inclined to stay more on the sidelines and keep stacking money for index funds/syndication but I can't help but feel like I am missing out on a "better" or "bigger" life. Sorry if this all feels like a ramble. Just wanted to do a brain dump more than anything. With lots of ways to invest in RE, I just wanted to see what the wisdom of the group had to say.
You know you don't have to be a direct investor, right? Especially if you qualify as an accredited investor. A private real estate fund passes through the depreciation and all that but basically functions like a mutual fund that sends you a late K-1 every year.
Could you point me/us to any additional resources on this subject? This sounds appealing.

OP, I hear you. My brother just bought a vacation rental property and my BIL is talking about moving to a new house and keeping the old one as a rental. There is some FOMO as we could get into that... but it also tickles my spidey sense a bit..
I write about it from time to time. No, I cannot provide a link or tell you where I write about it. I'm hardly the only one though. Search for private real estate funds or real estate syndications in your favorite browser and you'll find something.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Ricchan
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Re: Invest in Real Estate Even with No Passion?

Post by Ricchan »

Maybe look at it from the perspective of an increase in salary for additional work responsibilities. I don't know the numbers for your situation, but say you were offered an extra $100k / year (hypothetical difference between active RE returns and passive investing) for an additional ~20% extra overtime doing a task you don't enjoy, along with a binding contract that may prove a pain to get out of, would you take it?

You said earlier your "true dream is to build a SaaS product..." Personally, I'd rather spend that 20% extra overtime building something like that. Even if it doesn't pay off financially, it'll be something I enjoyed doing and was meaningful to me. And if in the process I learn skills I can apply to future hobbies, then it's not a waste of time either.

Of course, everyone's financial situation is different. If the extra income from active RE is essential for you to reach your financial goals, then it may be worth pursuing. Though from what I've read, that seems to not be the case.
JBTX
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Re: Invest in Real Estate Even with No Passion?

Post by JBTX »

teamDE wrote: Tue Aug 10, 2021 11:56 am
White Coat Investor wrote: Fri Aug 06, 2021 3:45 pm
Kandinsky wrote: Thu Aug 05, 2021 2:41 pm I have been an avid fan of Boglehead investing since I was young. However, more recently it seems like everyone and their mother is buying rental property. I can't say I'm terribly excited about the idea of doing it but as a capitalist, it feels like a responsible step I "need" to take to produce an additional source of passive income. After reviewing the benefits - equity appreciation, depreciation for taxes, cashflow, and leverage - it feels almost like a no-brainer to diversify into real estate investing.

It all makes financial sense but part of me just can't get excited about this. I'm wondering if I'm not interested because I am not a DIY-oriented person at all (I know I can hire someone else for that and even a PM). I also don't like dealing with people if I can help it but I suppose it's a necessary evil. My friend tells me it's passive. He only uses 20% of his time about every few months or so and some months you have nothing going on.

I have a great paying job and I have excess cash to invest so I thought an alternative could be multi-family syndication. It's as close to owning a property as you can get without being involved in the day to day. I guess I have a bit of FOMO/keeping up with the Jones syndrome because I see him buying rentals and taking a passive approach like a syndication would yield lower returns.

My friend also offered to partner with me to start doing REI even though he already has 12 properties. I would bring all the capital and he would bring the operational know-how for a 30% stake. He has done well so far with his real estate in single-family homes. Not sure how to evaluate whether that deal is a good one though. It does seem like a nice symbiotic relationship where he would handle the parts I don't care to do.

Ever since REI has entered my head, it has started to mess with my investing principles. I feel like it makes me want to chase returns (by owning property directly for the most control and highest rent yield) and of course there is something satisfying about owning your own business.

As a software engineer, I am inclined to stay more on the sidelines and keep stacking money for index funds/syndication but I can't help but feel like I am missing out on a "better" or "bigger" life. Sorry if this all feels like a ramble. Just wanted to do a brain dump more than anything. With lots of ways to invest in RE, I just wanted to see what the wisdom of the group had to say.
You know you don't have to be a direct investor, right? Especially if you qualify as an accredited investor. A private real estate fund passes through the depreciation and all that but basically functions like a mutual fund that sends you a late K-1 every year.
Could you point me/us to any additional resources on this subject? This sounds appealing.

OP, I hear you. My brother just bought a vacation rental property and my BIL is talking about moving to a new house and keeping the old one as a rental. There is some FOMO as we could get into that... but it also tickles my spidey sense a bit..
WCI has his own site. He's not supposed to link to it, but I can!

https://www.whitecoatinvestor.com/how-s ... al-estate/

https://www.whitecoatinvestor.com/real- ... sting-101/
bltn
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Re: Invest in Real Estate Even with No Passion?

Post by bltn »

Kandinsky wrote: Sat Aug 07, 2021 2:32 pm I did feel the deal with my "friend" (more of a professional acquaintance than a friend) was not really enticing but to be fair I had read about deals where it is common for one partner to bring capital and another to bring the sweat equity. Plus that 30% is equity so it's not a monthly fee that goes out the door like it would to a PM. It is 30% ownership of the business for his efforts and experience. Sure he could eventually want out but while he is there, the money is working for the business instead of going out as a PM expense is how I looked at it. The thing that really left a sour taste in my mouth was when he suggested leveraging his equity into a larger equity position - 30% of rents (his portion of ownership) would be assigned to a bank account to gradually buy up in equity up to 50% so we would be 50/50 partners. That definitely wasn't going to happen. I value sweat equity but wow.

Thank you all for the motivation to not go down this route for now. Although boring, index funds have always been more exciting to me when it comes to saving and investing. Private syndication deals may be what I look at if I do want a taste of RE with a smaller portion of my portfolio. As long as the projected returns of a syndication deal are greater than the historical returns of the S&P I may consider adding one (probably north of 15% IRR). If I do, I will reconsider my home loan approach :)
I was involved in a couple of private syndication deals during my early investing career. These never made me any money but I didn t lose any.
And I was offered the opportunity to participate in a couple of others. These seemed weak and I declined. Learning about the limitations of private syndications was part of my early education about successful investing. You ve already learned about indexing. You re doing fine.
As for that 30% offer from your acquaintance, that guy is going to get rich if he can get a number of those. You ll do well to break even to make up for your 30% loss of equity.
teamDE
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Re: Invest in Real Estate Even with No Passion?

Post by teamDE »

JBTX wrote: Wed Aug 11, 2021 1:53 am
teamDE wrote: Tue Aug 10, 2021 11:56 am
White Coat Investor wrote: Fri Aug 06, 2021 3:45 pm
Kandinsky wrote: Thu Aug 05, 2021 2:41 pm I have been an avid fan of Boglehead investing since I was young. However, more recently it seems like everyone and their mother is buying rental property. I can't say I'm terribly excited about the idea of doing it but as a capitalist, it feels like a responsible step I "need" to take to produce an additional source of passive income. After reviewing the benefits - equity appreciation, depreciation for taxes, cashflow, and leverage - it feels almost like a no-brainer to diversify into real estate investing.

It all makes financial sense but part of me just can't get excited about this. I'm wondering if I'm not interested because I am not a DIY-oriented person at all (I know I can hire someone else for that and even a PM). I also don't like dealing with people if I can help it but I suppose it's a necessary evil. My friend tells me it's passive. He only uses 20% of his time about every few months or so and some months you have nothing going on.

I have a great paying job and I have excess cash to invest so I thought an alternative could be multi-family syndication. It's as close to owning a property as you can get without being involved in the day to day. I guess I have a bit of FOMO/keeping up with the Jones syndrome because I see him buying rentals and taking a passive approach like a syndication would yield lower returns.

My friend also offered to partner with me to start doing REI even though he already has 12 properties. I would bring all the capital and he would bring the operational know-how for a 30% stake. He has done well so far with his real estate in single-family homes. Not sure how to evaluate whether that deal is a good one though. It does seem like a nice symbiotic relationship where he would handle the parts I don't care to do.

Ever since REI has entered my head, it has started to mess with my investing principles. I feel like it makes me want to chase returns (by owning property directly for the most control and highest rent yield) and of course there is something satisfying about owning your own business.

As a software engineer, I am inclined to stay more on the sidelines and keep stacking money for index funds/syndication but I can't help but feel like I am missing out on a "better" or "bigger" life. Sorry if this all feels like a ramble. Just wanted to do a brain dump more than anything. With lots of ways to invest in RE, I just wanted to see what the wisdom of the group had to say.
You know you don't have to be a direct investor, right? Especially if you qualify as an accredited investor. A private real estate fund passes through the depreciation and all that but basically functions like a mutual fund that sends you a late K-1 every year.
Could you point me/us to any additional resources on this subject? This sounds appealing.

OP, I hear you. My brother just bought a vacation rental property and my BIL is talking about moving to a new house and keeping the old one as a rental. There is some FOMO as we could get into that... but it also tickles my spidey sense a bit..
WCI has his own site. He's not supposed to link to it, but I can!

https://www.whitecoatinvestor.com/how-s ... al-estate/

https://www.whitecoatinvestor.com/real- ... sting-101/
I think I was more baffled at the time I asked that than I should I have been. I subsequently searched and found some good info. Thanks for those links, WCI is a good resource!
dbr
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Re: Invest in Real Estate Even with No Passion?

Post by dbr »

Kandinsky wrote: Thu Aug 05, 2021 2:41 pm I have been an avid fan of Boglehead investing since I was young. However, more recently it seems like everyone and their mother is buying rental property. I can't say I'm terribly excited about the idea of doing it but as a capitalist, it feels like a responsible step I "need" to take to produce an additional source of passive income. After reviewing the benefits - equity appreciation, depreciation for taxes, cashflow, and leverage - it feels almost like a no-brainer to diversify into real estate investing.

I think you should review this thought process.

1. No one "needs" to have an "additional source" of passive income.

2. Decisions should not be made because "everyone and their mother" is doing something. In the first place it isn't true, and in the second place that does not provide a reason for you to do something.

3. Making decisions because something "feels like a no-brainer" is a really bad idea.

None of this means investing in real estate is a bad idea, nor that it is a good idea. It is an alternative that some people are able to profit from nicely and which other people lose their shirts in, or it is just in the middle -- some profit and some pain.

One thing for sure doing something you are going to hate because you feel you need to doesn't make any sense.
Broken Man 1999
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Re: Invest in Real Estate Even with No Passion?

Post by Broken Man 1999 »

OP, if you hold a total market index fund, most likely your fund holds REITS up to the cap of their proportional market weight.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
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