Property / Real Estate As An Investment

[Alpha Hunter Zero]

@Alpha Hunter Zero - Not sure if you know what they are, but aren't interested in that option; or don't know what they are. @magoo mentioned REITs in his post. These are exchange traded funds of managed real estate, that pay a dividend from the rental income. I think that they are superior for most people, as they offer exposure to the solid real estate sector without any of the management hassle.

See - https://www.forbes.com/sites/invest...for-reliable-income-for-2023/?sh=551cbd27ede3

I am interested in buying at least one property to live in periodically and then be a managed short-term rental the rest of the time. The reason being is I want the place to stay in. If I didn't, I'd just be looking for a REIT. The time spent managing taxes, repairs, admin, bills for one property is not worth it IMO. I guess parking spaces offer a lot less overhead though.

I think someone also mentioned it above that the next 1-3 years might be a great time to buy into a REIT, as they could end up in more of a bear market than they already are. If bought near the bottom of a bear market, they will probably end up giving you over 10% dividends and more in appreciation. A nice stable base for a portfolio.

@Cynllo
I didn't know what they are but your summary of them has me intrigued and tempted to try out. I need to research more though. From prelimary reading it just seems like real estate "stocks" if we're keeping things extremely simple. Im wondering how much money would be a good starting point for this type of investment for decent returns in the short term.

@magoo
Thank you for the REIT suggestion

 

[Laner]

I had a 10 year plan that will be up next year. Its the same time as when my mortgage needs renewing.

Currently my home would sell for $1.2 - $1.3m and I have $150k left on the mortgage. Once I renew at a higher rate next year, I am thinking I should pay this off quicker since the rate will likely be about 6%.

My wife doesn't want to sell, and I tend to agree. But I also want to use this property in other ways to start gathering more assets. We are in our mid 40s with a family and I don't think the kids stand a chance of home ownership in the future if this current trend remains. So having something that will help my wife and I in our older age as well as give opportunities for our son's future.

I am currently tied to the city for my business, but I am starting to lean towards getting it to a place to make a sale.

 

[SeekingTruth]

Residential rentals can be very passive. The key is finding a good property manager and to be sure you factor that into your returns. No way would I invest without a property mgr. I don't want a second job.

 

[magoo]

 

[cosine]

To secure this exceptional property, prospective buyers must qualify through APCHA (Aspen Pitkin County Housing Authority).

Qualify for an afforable housing program, and you too can become eligible for a $1.05M 2,000 sqft home built shoddily in 1980!

https://www.zillow.com/homedetails/...ssage&utm_medium=referral&utm_source=txtshare

 

[jaguarcat]

One has to be careful with REITs, their performace often doesn't reflect real estate market gains, and a lot of times the values behave more like general stock market, and are affected by rates much more than actual real estate

https://www.spglobal.com/spdji/en/indices/equity/dow-jones-us-real-estate-index/#overview

Also, it's a lot easier to confiscate REIT ownership versus actual home ownership, sort of like paper gold versus real.
Current average REIT dividend yield is 4%, below fed rate

 

[Thomas More]

One has to be careful with REITs, their performace often doesn't reflect real estate market gains, and a lot of times the values behave more like general stock market, and are affected by rates much more than actual real estate

https://www.spglobal.com/spdji/en/indices/equity/dow-jones-us-real-estate-index/#overview

Also, it's a lot easier to confiscate REIT ownership versus actual home ownership, sort of like paper gold versus real.
Current average REIT dividend yield is 4%, below fed rate

I figure REITs are subject to irrational exuberance when a real estate cycle is reaching its peak. Buying at the top of the market, dumping a ton of money into renovation, then seeing rents and occupancy rates plummet and coming out way underwater. I bet an REIT could do real good if you could buy into it at the bottom of a slump.

 

[jaguarcat]

I figure REITs are subject to irrational exuberance when a real estate cycle is reaching its peak. Buying at the top of the market, dumping a ton of money into renovation, then seeing rents and occupancy rates plummet and coming out way underwater. I bet an REIT could do real good if you could buy into it at the bottom of a slump.

Do you mean REITS buying properties at the top or one buying into a REIT at the top?
REIT shares didn't gain that much value compated to actual real estate, did not protect from inflation during the latest run up. And then, rising interest rates crash the REIT shares.

That chart link above shows that REITs as a whole, first, gained only something like 13% from 2019 pre corona top, after crashing hard in 2020 (while actual real estate did not crash), while US real estate gained much more since 2019, gained at least 50% matching new dollars printed. Then, REITs crashed again since interest rate hikes started, while real estate did not budge. And dividends aren't that big either, 3-4 on average over many years, 4% now but 2.5% in the past. The returns on price appreciation alone since 2014 were only 3.5% per year. It is more like stocks behavior.

Owning a rural house on land in many if not most places gave 2x, sometimes 3x appreciation since 2019. Rent went up a lot too, if one rents it out There are low property tax jurisdictions out there. REITs were crashing since the end if 2021 while home prices kept running up insane most of 2022. If someone was invested in REITs they could be priced out of real homes for good.

 

[Thomas More]

Do you mean REITS buying properties at the top or one buying into a REIT at the top?
REITs didn't gain that much value compated to actual real estate.
during the latest run up. And then, rising interest rates crush the REIT shares.

Both, really. I think professional real estate investors, the kind that run REITs, are likely to make bad decisions when the market is topping out and getting ready to plunge, and I think buying REITs around that time will probably be disappointing.

If you buy into an REIT at the top of the market, then I think you are paying top of the market prices for a share of the REIT's assets, and will be along for the ride when the REIT's investments hit the wall.

 

[jaguarcat]

Both, really. I think professional real estate investors, the kind that run REITs, are likely to make bad decisions when the market is topping out and getting ready to plunge, and I think buying REITs around that time will probably be disappointing.

If you buy into an REIT at the top of the market, then I think you are paying top of the market prices for a share of the REIT's assets, and will be along for the ride when the REIT's investments hit the wall.

Another thing is many REITs do not own real estate, they only own mortgage papers or plain MBS. These are often the ones that paid higher dividends. They are getting slaughtered now due to rates. There was also additional sell off due to banks crisis fears.

 

[cosine]

Another thing is many REITs do not own real estate, they only own mortgage papers or plain MBS. These are often the ones that paid higher dividends. They are getting slaughtered now due to rates. There was also additional sell off due to banks crisis fears.

Sounds like the money in REITs is in creating and selling them, not buying and holding.

Like Peter Schiff's funds. He talks about how well gold will do, then sells assets in the gold industry that go sideways at best, and collects a whopping 1.4% expense rate. The guy is worth many millions, but his offerings return nothing. He gets rich selling investment products, but you're a fool to buy them:

 

[Joost]

I bought Really Income stock when it was $46.2. That day it was down 7% because it acquired another REIT. Stock went lower even more to ~$45 and I kept calm thinking the 6.8% yearly dividend was worth that price. Specially for a Dividend Aristocrat.

Stock is now at almost $60 with a yield of only 5.3%. Same as a Money Market. I should sell it and put it in the MM but now that they’re talking about rate-cutting for this year…

 

[magoo]

One has to be careful with REITs, their performace often doesn't reflect real estate market gains, and a lot of times the values behave more like general stock market, and are affected by rates much more than actual real estate

https://www.spglobal.com/spdji/en/indices/equity/dow-jones-us-real-estate-index/#overview

Also, it's a lot easier to confiscate REIT ownership versus actual home ownership, sort of like paper gold versus real.
Current average REIT dividend yield is 4%, below fed rate

What metric are your using to say real estate market gains are superior to REITS as a whole?

 

[JCSteel]

Anyone ever try to invest in Tax Liens for delinquent property tax owners? I read that it's a relatively inexpensive way to begin in real estate investing.

 

[Get2choppaaa]

I'm just seeing this thread for some reason.

Lots of great stuff here gents!!!

 

[magoo]

Both, really. I think professional real estate investors, the kind that run REITs, are likely to make bad decisions when the market is topping out and getting ready to plunge, and I think buying REITs around that time will probably be disappointing.

If you buy into an REIT at the top of the market, then I think you are paying top of the market prices for a share of the REIT's assets, and will be along for the ride when the REIT's investments hit the wall.

The managers of a REIT like O normally will take decisions that guarantees them safeguard from investors scrutiny. It will not be the best decision for the investors. But the decision which cannot be challenged by them.

 

[jaguarcat]

All I know old smart folks, and I mean Phds too, who had moved to the states from other countries where they had seen economic collapse, hyperinflation, government confiscation, etc are all for holding multiple physical real estate and some gold for diversification, not REITs and don't care for any paper and electronic stuff much in general, these types did very well over time.
Just check out any Russian speaking Jew forum

 

[Pointy Elbows]

 

[Pointy Elbows]

Its not that I don't want to deal with legal issues. When you deal with any investment, whether it's physical or digital, there's always a degree of liability. With renting parking spaces or garages, I'd assume that getting permissions are much easier to get than constructing a physical building.

I'll also assume it's cheaper to demolish an existing property, put some asphalt/blacktop to smooth the area out, line it appropriately with some thermoplastic and construct a barrier as well as a locked entry/exit point. If we wanted to get fancier that's where the garages come in.

Obviously there are pros and cons that are dependent on a lot of variables including surrounding locations. What is the demand? Is it a large busy city or a more quiet area? How would you charge clients: using a payment system at the entry/exits or being more personal and knowing who exactly is using your property and charging a monthly fee/some other arrangement?

While buying a building and renting it out is the ideal way to make extra income over time it's not in my budget at this time unfortunately. But I still would like to dip my toes in something related on a smaller scale. I used parking as an example but I dont know much about this specific topic. Im not sure if there is something similar that exists but I'd figure I'd ask anyway.

Parking lots seem to be a great way to warehouse land. Buy in the way of progress, collect some passive revenue, have something to develop if demand gets high enough... Same goes for mobile home parks and small/contractor warehouses.

https://twitter.com/TrukParkingClub

A lot of states have very beneficial tax structures for agriculture properties. Some states only require two head of livestock to declare the property as ag. Texas is famous for ag tax breaks (otherwise, TX RE tax is high).

I have been in real estate for years, and own no residential property. Productive land where you can gain self sufficiency interests me.

Tough to say it better. With age, your desire for the big house/mcMansion will likely wane, especially once the kids leave home (see @Laner post above). That's when productive properties get attractive. It also opens up opportunities for various tax protections - cost segregation, 1031, etc.

High transaction cost and low liquidity helps prevent young inheritors from making a rash decision to destroy their wealth.

 

[Laner]

Parking lots seem to be a great way to warehouse land. Buy in the way of progress, collect some passive revenue, have something to develop if demand gets high enough... Same goes for mobile home parks and small/contractor warehouses.

https://twitter.com/TrukParkingClub

A lot of states have very beneficial tax structures for agriculture properties. Some states only require two head of livestock to declare the property as ag. Texas is famous for ag tax breaks (otherwise, TX RE tax is high).



Tough to say it better. With age, your desire for the big house/mcMansion will likely wane, especially once the kids leave home (see @Laner post above). That's when productive properties get attractive. It also opens up opportunities for various tax protections - cost segregation, 1031, etc.

High transaction cost and low liquidity helps prevent young inheritors from making a rash decision to destroy their wealth.

Excellent point on young inheritors. In my middle age I have seen guys collect big payouts in their 20s and spend it all. Then see guys inherit assets and make the assets work for long term stability. Even a small asset can give a young family the breathing room needed to be able to focus on other important aspects of life.

Financial stress is likely one of the biggest reasons for divorce.