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Said exactly like a true stock market "investor". Again investing in single properties is equivalent to investing in single equities. At least with stock traders their "property" is liquid.
You were in the Bay area, that in and of itself is "luck".
You knew for a fact that the Bay area itself would have the most expensive real estate market in the US years later? That's impressive. Do you know what the next Bay area will be with 100% confidence?
What if instead you had been in Cocoa, FL or Apopka, FL and purchased that property?
Hindsight is always 20/20.
I bought shares of FB at $26/share. Clearly it was my expert research and judgment that led the stock to go up over 600%.
Can't speak to stocks... I don't own any... I did have a few shares of Pizza Time Theater and that cured me.
I've been working paying into Social Security since age 12... had to go through the hoops to get a school work permit to do so.
Afterschool and weekends I worked for a shop that catered to classic car and met a lot of successful people only willing to offer advice to the "Kid" My parents had no connection nor did anyone I know with the shop prior to me working there... I would ride my bike just to see the classic and antique cars they had in the shop and the owner offered me a job at minimum wage stocking the shelves and sweeping up...
I could not peddle home fast enough with my news... parents were quite suspicious so Mom went down to check out the place... she said I would only be available Friday after school and Saturday and only if I kept up my school work and chores at home... so, you could say I was lucky finding a job at 12... continued working there into college.
Anyway... most of the owners of these cars were well to do... and I started building a repour and learned aside from Judges, Lawyers, Doctors and Politicians... most were business owners... like contractors.
Most owned Real Estate and said the earlier the better... some retired and ended up making more selling their business and renting out their commercial property than they did running plumbing and cabinet, appliance, etc. shops...
So I started planning to buy in the worst way... soon I learned there was NOTHING a kid could buy where I was looking... so I focused on the least expensive single family homes on the MLS... the bottom of the bottom and they were all in East Oakland CA...
The house I bought was a 1910 cottage of 600 square feet on a 25x100 city lot... it was real bad and told the agent I would have to pass... she sat me down and we spoke all the while she was fishing for an offer... I finally named the price I would be interested and she wrote it up and I gave her my check...
That night I said I had made an offer on a home... kind of shocked everyone...the next day the agent called and said congratulations... you got the house... the next few weeks was a mad scramble to get the money... I sold my lovingly restored show car 1968 Z28 Camaro to one of the guys that had long admired it... sold my coin collection and liquidated my Bank Account and asked my Boss for a month advance... everything I owned was tied up in this house... and I was in hock too. The day Escrow Closed I started cleaning the place up... neighbors thought the place was going to be torn down and I said I am moving in...
At that time I had no aspirations of rentals... just wanted to own my home... about a year later I had found another project... little bigger and newer and not so bad... I weighed selling vs getting a cash out loan on my free and clear home and renting it... people said renting is a hard business but again I did not listen...
To make a long story short every 12 to 18 months I repeated until I had 5 mortgages which is underwriting issue to get more... each problem property was bought as-is with cash or short term seller financing.
My fundamentals were sound.. the rent, allowing for maintenance, vacancy factor, etc would more than cover the property plus my free labor...
Nothing mysterious about it... my tenants all had better cars than I did and they took vacations, traveled, etc... I was laying the foundation for the future...
I do have one regret and that was 1031 exchanges into other properties... property I sold has done very well and has more than come back... great buys for those buying in 2009-12
Is it luck when you rebuild a home from the studs with your own labor... when you stripped off the roof to the sheathing after working a day job?
Is it luck keeping your costs low and your labor free?
As for your second question... yes... Western Washington has been very good to me... I looked at the Demographics and the appeal of the region and bought rentals there... and they have done very well.
In 2005 I sold one property for 255k... it sold a year later for 350k and in 2009 it was a foreclosure selling for 80k... yes, in 2009 it sold for 80k and I thought about buying it back but really don't like wood sided homes due to increased maintenance… in 2017 that 80k home sold for 420k...
Never been to Florida... too many bugs and heat/humidity is the reasons my neighbors left... Dad was there in the service and said no desire to return... it must be bad there???
Last edited by Ultrarunner; 03-08-2019 at 01:48 PM..
what you're referring to are the micro and macro forces.
You doing everything buy the book on your rentals and putting sweat equity is the micro force. The fact that you happened to buy in the right city and to a lesser extent in the right neighborhood is the macro force. Like I said my father-in-law bought several properties in Orlando, he was the same way. Did everything buy the book and did all the labor for updates, etc. himself. But it couldn't change the fact that the neighborhood he had his daughter's in that he later turned into a rental became a bad area of town. You can keep the costs as low as possible and swing a bit of a monthly positive return (assuming 90% occupancy) but you can't change the quality of the tenant willing to live in that area or the value of the land.
That is also why...like individual stocks, it is best to diversify and own a variety of properties in different areas.
As for Oakland location is was not by choice but the reality I could only look at the cheapest offerings in the region and then was still priced out.
I use to lament that had I been born earlier I could have bought one of the city owned homes going for $1...
Walked past a couple on my way to school as a kid... just like Detroit is the only thing I have seen similar... homes people walked away from with no hope of anyone paying back taxes...
City program offered title to these homes for $1 provided you moved in and occupied for 5 years and made 5k of improvements... which paint, roof and landscape would cover...
Even when I bought my starter fixer... people on the same street told me they had been trying to get the place razed... and I paid too much and these were folks in the trenches... being young with a vision... I simply did not know any better...
No one in the family in the trades... but those Reader's Digest Home Improvement books became my Bible... and owning a home outright at an early age gave me bragging rights... until I gave the location...
One thing I have learned is property is always in tansistion... and one of 3 things happens to the trouble makes... they die, go to prison or find Jesus... no other option... and my home was sprayed with bullets in a driveby... police said collateral damage and made it on the 10 o'clock news that day...
I've been working paying into Social Security since age 12... had to go through the hoops to get a school work permit to do so.house...
Does your SS statement actually credit you for those contributions? My understanding was(it may have all changed) credits earned before age 15 do not count, i.e you and your employer pay in (or you if alone) and you get nothing out of it. I was wondering if that is true. I do not see any reference to earning when I was 13 and 14 though I had w2 income.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,569,440 times
Reputation: 16698
Quote:
Originally Posted by mizzourah2006
Said exactly like a true stock market "investor". Again investing in single properties is equivalent to investing in single equities. At least with stock traders their "property" is liquid.
You were in the Bay area, that in and of itself is "luck".
You knew for a fact that the Bay area itself would have the most expensive real estate market in the US years later? That's impressive. Do you know what the next Bay area will be with 100% confidence?
What if instead you had been in Cocoa, FL or Apopka, FL and purchased that property?
Hindsight is always 20/20.
I bought shares of FB at $26/share. Clearly it was my expert research and judgment that led the stock to go up over 600%.
Here's the thing. The basic concepts of what Rich Dad are of value. Now how you do it is another thing.
The problem is you only think real estate will go up or down depending on the market. If you get out of that thought process you can see there are a lot more things you can control with real estate.
Sure your single equity is liquid in the market, you also have no control over how it performs. You either get lucky and it goes up or you don't. The bottom line is you as a stock market investor aren't investing, you are speculating.
A lot of people jump into real estate not understanding it or looking at it like you do.
If you bought it hoping it goes up, then it's like buying a stock-both are speculative.
Now if you buy the property right you should be fine. If it cash flows and goes down in value, it is still cash flowing throwing you money. The stock goes down, you just lost.
You also have control over real estate. You can improve it or change it's purpose to get more cash flow or raise it's value.
You also get tax deductions with real estate, I'm sure you do with the stock market . . . when it drops and you sell.
You can also make money by buying undervalued real estate and fixing it up. When its done it's value is more than what you bought it for and the money you paid into it.
I know, I've done it multiple times. My property is in the midwest, not the Bay area where appreciation is low.
Over the last 5 years I put about $650K into my real estate. The value on many of the properties went up within 2 months of buying them and fixing them up. The portfolio is worth about 1.3 million, most was not appreciation, but forced equity. Tell me how you will buy stocks and what you can do yourself to make the value of it go up.
I'd say my numbers easily match the market performance. I haven't even counted the 13+% cash return I get very year on what I invested. On that return I only pay taxes on about 75% of it because I use depreciation. My tax rate is also lower than a w2 worker because the income is unearned income so no FICA taxes are paid on it.
Sure some stocks pay dividends, but 13%? Tell me where.When they do, they are eating into the increased value of the stock if it goes up. The rental cash flow does nothing to the value of the real estate.
As I said, I have real estate investor friends that did real estate investing as a side hustle while working full time and in 5 years all quit their jobs. One was in Ca and the other two in the midwest. Show me someone that did market investing as a side gig for 5 years and quit their jobs.
The point is we learned working for someone else is trading time for money and you only have so much time. Also the money you earned is taxed at a high rate with little chances for tax breaks. Money you save in not paying taxes can be used to invest and get farther ahead.
So yeah, for me and some others, Rich Dad kicked everything into place for me and others. The idea is not to think like everyone else and accept it. Because I did this I no longer work either.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,569,440 times
Reputation: 16698
Quote:
Originally Posted by mizzourah2006
what you're referring to are the micro and macro forces.
You doing everything buy the book on your rentals and putting sweat equity is the micro force. The fact that you happened to buy in the right city and to a lesser extent in the right neighborhood is the macro force. Like I said my father-in-law bought several properties in Orlando, he was the same way. Did everything buy the book and did all the labor for updates, etc. himself. But it couldn't change the fact that the neighborhood he had his daughter's in that he later turned into a rental became a bad area of town. You can keep the costs as low as possible and swing a bit of a monthly positive return (assuming 90% occupancy) but you can't change the quality of the tenant willing to live in that area or the value of the land.
That is also why...like individual stocks, it is best to diversify and own a variety of properties in different areas.
Sounds like your Father in Law may have been penny wise and pound foolish. Also maybe didn't research the area enough if the area turned that bad. No different than not researching a stock before you buy it. Don't do your homework and you can be in jeopardy.
I have over 25 properties and many were rehabbed thus increasing their value about 50% within 1 to 2 months of taking possession. I never swung a hammer once to keep them going. I pay others to do that for me.
You can change the quality of the tenant and the property if you buy correctly, you just aren't aware of that.
Many areas that were once good fell into decline, but now are gentrifying.
I looked at a house in Atlanta for about $100k a few years back, The area had some issues and many years before that it was a decent area, but I could tell it was starting to go back up. People wanted to live in the city, the area was becoming quite walkable, people were starting to buy the run down houses and fix them up. Last I saw it was worth about $300K
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