Investing in Real Estate

invest for rental income and avoid negative cash flow

do your homework on local markets, diversify geographically

screen tenants

turn over 1 property every 5-7 years

don't get caught in the hype

finance 101 wrote:

If it's not your own money is probably debt. In that case, you have higher fixed costs to own the property (e.g., debt service which could be principal, interest, or both). Higher interest expense eats into returns. Also, if you lose tenants at your property (& thus cash flow) it is more difficult to pay debt service.

If you have a high risk tolerance and good attorney and/or significant cash reserves, using leverage is a great way to maximize returns.

Exactly.

Though I don't know why you brought in the attorney. :)

You would also, of course, realize the greater rents over time.

what the hell are you talking about 98% lost money or 98% lose money. Where do you get this percentage? And you mean 98% of traders lose money in the market or 98% of investors lose money. There is a difference you know. Also we wouldn't be having this conversation if there wasn't a bubble in real estate just like you probably thought there was no better investment than technology and internet stocks back in 1999 right.

All indicators say the R.E. bubble will burst sooner than later. There will be alot of miserable people stuck with loans they can't make the monthly payments on. The bankruptcy filing rules have changed this year for the worse. People will be jumping off of buildings soon.

J.R. wrote:

It is very well known that 98% of investors lost money in the stock market. The only ones who make out like bandits are the investment brokers, whereas it is in their own personal interests to distort the truth to you.

You lost all credibility about real estate investing when you made these patently false statements about stock market investing.

No, I have never invested in technology or internet stocks.

There have been many of your bubbles, big and small, since I have been investing in real estate. Thus nothing changes and it is always the same. These are good things really. By the way here is another great book about investing, in general, which is:

"How to be rich", by J.Paul Getty.

This book is more about investing in general, and no for real estate in particular. Still it is a very excellent and valuable book. I have a paperback copy that was from a used book store and don't remember what it cost. Maybe it was 50 cents. Excellent book.

In my opinion the best way to invest in companies is with groups of stocks, not individual ones which have the poor return stated above. I have personally taken some advantage investing in these due to their tax exempt status as IRA's and and similar deferred programs, but only in small amounts. Regardless, over the last 25 years these have come to be sizeable amounts. I always avoid the brokers for these, look up the individual companies myself and deal with them directly. Also I have gotten a different company each year to diversify. I won't be using them any more though as, being retired now, my primarily interest is to keep expanding with real estate.

Groups of stocks is meaning mutual funds but, again, not just any of them but do your own research and pick the ones with the best current and historical returns and also that are ones that you like. There are thousands of funds, and less than 1% of them that I would consider having for investments, so look at them carefully. Also I have averaged a 20% return from these over the last 25 years so that's not too bad anyway.

JR and Finance101:

Investors leverage real estate to put the risk on someone else (namely the bank) -this decreases your risk not increase it.

Real estate investors always put as little into a deal as they can, probably often just 5%. A guy like Trump can probably get some of the equity with nothing down, just the use of his name.

Your first #1 and #2 don't make sense because in the second instance although you have to rent it out to pay the debt, you have an extra $112,500 to invest somewhere else that you don't have in 1. In case 1, why wouldn't you rent it out the full year? Then you've got the income. You seem to be treating the cases differently.

Your second 1 and 2 don't make sense either (in the first case you wouldn't have any loans so you could invest all the rental income in other places) and illustrate the point anyway that the investment is less risky, by only putting 10% down on 10 different properties your risk of default is spread out over 10 properties instead of 1 - this is less risky.

I hope you guys invest using nonrecourse loans.

oldguy wrote:

You lost all credibility about real estate investing when you made these patently false statements about stock market investing.

I don't need any credibility with you since you're probably in the poor house anyway.

What is amazing is that you would chose to be there but then there is no accounting for taste.

hoodoo wrote:

Investors leverage real estate to put the risk on someone else (namely the bank) -this decreases your risk not increase it.

No, it increases your risk.

You are using other's money, yes, which increases your potential, but it also increases your risk.

Contrary to popular opinion, the bank has very little risk at all, if any. In the first place, they are lending money owned by people who deposit in the banks. It is not even the bank's money that they lend to you! And they can lend 11 times as much as deposits. Hey don't worry so much about banks. They know what they're doing.

J.R. wrote:

Also I have averaged a 20% return from these over the last 25 years so that's not too bad anyway.

Yeah, and I've run a 4 minute mile.

"Give not that which is holy to the dogs, nor throw your pearls to the swine; otherwise they will trample them under their feet and then turn and attack you"

If you invest 10%, you bear the risk for the first 10% of a decrease in price, below that, you walk, and the bank/lender/guarantor/taxpayers if it's an S&L is at risk for the rest.

If you put all your money in, then you bear 100% of the risk of loss.

Now, which investment is riskier to YOU?

Some areas maybe. But most areas don't look like there really is a bubble.

You look at the tax advantages of real estate investing (write off the interest payments and don't have to pay capital gains on $250,000 for single or $500,000 if married) and the fact that people have to live somewhere coupled with historically low interest rates and prices are pretty reasonable.

I don't see prices continuing to go up at the rates they have been and may flatten out as interest rates rise but that isn't a bubble.

J.R. wrote:

It is very well known that 98% of investors lost money in the stock market. The only ones who make out like bandits are the investment brokers, whereas it is in their own personal interests to distort the truth to you.

There is a big difference between losing money and not beating the S&P 500. I think that the stat is something like most mutual funds don't beat the S&P.

It is much easier to beat the S&P by yourself because mutual funds have such high loads.

ytrewq wrote:

It is much easier to beat the S&P by yourself because mutual funds have such high loads.

#1- That's not true. Individual stocks have much higher loads over time.

#2- Take a few years to read over my previous messages. I said there are less than 1% of the mutual funds that I would invest in. Of course just don't take any old mutual fund and invest in it. Is that your method for investing in stocks?

#3- However, I never invest in load funds anyway, and I always go directly to the company. Anyone can do this.

Look, of course most mutual funds are very costly. And when you invest through a broker, who is a middleman, they are keeping most of the profits for themselves. Plus the fund doesn't pay them as much as you would get on your own for a fund of your own choosing, because brokers choose funds that will pay them the most, not that would give you the highest return. You'll still do better with mutual funds than with individual stocks, but heck if you're not going to research or do any work then just put your money in a bank or hide it under your mattress.

J.R. wrote:

Groups of stocks is meaning mutual funds but, again, not just any of them but do your own research and pick the ones with the best current and historical returns and also that are ones that you like. There are thousands of funds, and less than 1% of them that I would consider having for investments, so look at them carefully. Also I have averaged a 20% return from these over the last 25 years so that's not too bad anyway.

Name a single mutual fund that has averaged a 20% return over the last 25 years.

You seem to have Venture Capital, No Loads, Loads, Mutual Funds, and maybe the S&P confused. That's my consensus after reading your prior messages.

Or, you're a brilliant troll.