So, I know there's a stock market thread, but I feel this deserves its own... Anyways, I have some money I'm looking to invest. We're fairly young, and feel that we should explore options of making our money work for us (instead of just earning the interest in the bank), but we don't totally know where to start... I don't know much about the stock market, to be honest. Far less than I should if I invest, but I feel that if I try to invest with a stock broker, they will take the money, diversify the crap out of it, charge me fees, and my potential reward will be little to none. I have some research to do in this area, and some people to talk to. As far as real estate goes, here's how I feel: I've always been interested in real estate, and I feel that having a tangible asset, that I have more control over, would actually be good for me. Now, I don't have a ton of money to invest, but I've always been fascinated by the vacation rentals market. I've posted topics on here before about it. So, say I buy a condo in a vacation area, and rent that out. Am I wrong to think that this is a great option, as it leads to rental income, while also leaving the door open for appreciation? I realize there is a ton of research for me to do on this subject, as I said. I also realize (and will explore) there are many resources out there to discuss this with. I'm just wondering if anybody has any experience on the real estate side of this (really, any real estate investment). I'm also wondering how those with stock feel about this? P.S. I probably did not type all that I wanted, and this may not be coherent. I should not be posting things like this in the middle of the night.
as long as you understand the difference between "investing" and "speculating" you should be fine. No disrespect to "speculating" intended, but can we agree that it isn't "investing" as the OP title states.
I understand what you're saying, and I know I hinted at not wanting to diversify. In reality, I just don't know enough about the market. I don't think I'd ever fully lump the majority of what I have into one avenue, either. I would never discount any advice on the stock market.
Research REITs in booming markets like Houston... that's where I would play money. It's the cross between real estate and stocks. Buying land, in Houston, and hoping to bank off appreciation, well, the train to buy low already left the station friend. But it's still going up if you're wanting to roll your dice. Look at areas where the gentrification is spreading.
<iframe width="420" height="315" src="//www.youtube.com/embed/Nl9409NQPuU" frameborder="0" allowfullscreen></iframe> Real estate is not for the faint of heart. It's a lot of work. First you have to find the right property at the right price. Second you have to either find someone or do much of the maintenance yourself. And last but certainly not least....Taxes!!!! Is it worth it worth all that hassle? As far as I'm concerned, YES!!
Not totally sure, to be honest. Ideally, and I know this is a lot and I will probably get laughed at, maybe 25 - 30%. I don't think that is totally unrealistic, though, with enough research, and a little bit of luck.
I looked into buying a Galveston beach house and renting it out. Doing the math, the rental income would pay the taxes but not the mortgage or up keep.
Consider finding a partner, split the cost, limit potential losses, see how it goes, then determine if you want to scale and continue doing it on your own.
I think the better question is, how much are you willing to lose? If you're willing to lose 30%, I'd say that's a high appetite for risk and putting all your eggs in one basket might be right for you. I'd say it was dumb and you should diversify, but then I have a very low appetite for risk.
I bought in to two REIT's that specialized in Houston and Texas commercial properties and they both went under and are currently liquidating. I think it borders on fraud. If you want to look at them they were AmREIT I and II Monthly Income. My experience with non-liquid assets so far is that they suck. Once you're in, you have no options and are at the mercy of the General Partner, and they always pay themselves first.
So I've got some insight here as I know many people who are into making money on real estate. I'll break it down by returns and what they're doing and what is required: Spoiler ~10% Hard money lenders--soley fund small residential construction projects for flips. These guys take a lot of risk but only work with reputable and established GC type outfits. I've seen these guys typically put up about 60 to 100k for small residential projects and get their interest and small RIP when the GC is done and the home is sold or refinanced. As a money guy, you do none of the work here. Gotta be established to play here and have a lot of faith in the flipper. These guys have trusts and people who mange the process while they work full time as drs and professionals so they give up some of their profit to the professional admin overhead for liability/risk purposes. 10-12% I know a guy who buys and flips mobile homes. He's actually looking for about 50k in cash that I know of in increments of 5k. Flips are short term with money rolling over and investor doesn't have to do any of the manual work. I've really thought about putting 5k with him but decided to pay off some debt at the moment. 15% I have another guy with a big nest egg I know who works with a realtor. Realtor finds people who don't have the credit to buy a house and finds them a property. Realtor then works with the money guy to find really good deals in suburbs that are newer (like less than 10 yrs old). Money guy buys the property and then rents it to the client with poor credit for a year or two. Then when client has shown stability they'll do an owner finance deal. 20-22% I know some development opportunities in some bigger commercial real estate projects ~30 to ~60mil projects. You'd be a hard money guy working with big construction outlets but need about $5mil to bring to the table. 25-35% You can make this money but refer to example one as the flipper. Gotta be this person. Lot of risk here and you need a dependable crew. I know a couple flippers in the heights but they're experienced in construction matters and interior design and doing it legit. It took them many many flips to get to the point where they have almost unlimited LOC with their hard money guys and they've got 4 to 6 full time carpenters. They have to manage inspections/permits with the city, all the subcontractors, banks and working with realtors to sell. They've got deadlines they have to meet and typically 4 projects going at one time. They're true construction outfits. One of these people holds properties and has a portfolio while the other sells them. As Ziggy suggested, these 25-35% people had to understudy for a while. It's like any opportunity, gotta work and learn the biz. Keep building the nest egg though because eventually you can let your money work for you.
Will you have a good amount of cash leftover after investing on the property? You will need to have a sufficient cash reserve whether you are looking to speculate or make money from rent. If you can't pay the taxes, mortgage or even the HOA dues, you can lose everything when you get foreclosed on. You need to have the cash in case of bad vacation seasons or if something major needs to get fixed. May I assume that you won't live close to the investment property? If so, it may be unduly burdensome to have enough control over it. Contractors and other services need supervision. Will you be able to go and supervise them when they are working? If you have multiple properties, it might make sense. It's very difficult to justify that for just one property. Investment in rental real estate is not simply investing money, you'll need to invest a significant amount of time as well.
