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How to retire at 30 on $1 million

ryanwaggoner.com

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Re: How to retire at 30 on $1 million

#51

Post by skorgu »

ryanwaggoner wrote: post #9
smackfu wrote: post #7

Is this really retirement though? Or just using your retirement assets to fund a career change to apartment management?

You're definitely not managing the property in this scenario; part of the operating expense is hiring professional managers. REITs and other institutional investors own and operate properties like this from a distance all the time. EDIT: I should mention that I own several smaller properties in another state that are managed and I spend maybe an hour a month on them. I'd spend more on larger properties like this, but…

Would you consider expanding on some of the nuts and bolts of hiring and managing those professional managers? I can't name anyone who's had a good experience with a management company on either side of the transaction but of course that's likely confirmation bias.

A 'day in the life' of what kind of issues you run into with those properties would be fascinating (to me anyway).

Re: How to retire at 30 on $1 million

#52

Post by dedward »

jeffepp wrote: post #27

A better way to invest your money in real estate is to purchase a primary residence and (with some cosmetic improvements) sell the house (after 2 years) for a tax-free gain. You get the obvious mortgage deduction, while living there as well. I am on my 2nd house (I bought #1 in Metro Detroit in '08) with no experience fixing up houses, so it can be done. Have to be willing to be patient and study the market. Generall…

If you are in the right place at the right time, and willing to live there, that can work.....

Not everyone can handle that, though - people are unlikely in general to be able to treat their home impassionately as an investment.

The key is knowing that you've already won before you sign the papers.... as you said, doing the research, etc. Good investors always make their money on the "buy" - you buy something you KNOW is already undervalued - you never buy and then just hope.

Re: How to retire at 30 on $1 million

#54

Post by illumin8 »

Seriously? You want to get into real estate in the middle of the biggest depression we have ever seen? When property values are still way over-inflated?

This is only the start of the article's problems. The next thing he advocates is putting 20% down on a $6.5 million apartment complex, effectively leveraging 5 to 1.

Leverage has no place in any retirement account, period!

This entire article is a recipe for disaster.

Re: How to retire at 30 on $1 million

#57

Post by webwright »

I think Ryan's missing my point. When I talk about income %, I'm talking about across an entire portfolio (that real estate should certainly be a part of).

So you're putting 25% of your cash down on a $5m property for $110k per year. Nice! How many such properties do you think the banks are going to let you buy? With the future values of these properties a bit murky, I imagine that someone with 4-5m in the bank ISN'T going to get the green light to buy $21m in properties (4 difference loans to service).

People keep bringing up INDIVIDUAL investments that can net a great return (in this case, 9%). That's missing the point. With big piles of money, you have diversified holdings. You're not going to drop 90% of your cash in real estate down payments. Nor are you going to drop it all in stocks. You're going to (generally) do a reasonable asset allocation to minimize the risk. While I did mention the S&P500's performance for comparative purposes, I wasn't advocating for a pure stock portfolio (any more than you're advocating for a pure real estate portfolio).

As he says, real estate has plenty of risk. You're betting on a local economy, construction pace, population growth, etc. But anyone with millions ought to be playing in real estate.

Re: How to retire at 30 on $1 million

#58

Post by jaxn »

pchristensen wrote: post #46
MikeCapone wrote: post #38

I'd like to hear what people think about REIT ETFs to invest in real-estate more indirectly. Do they bring most of the same potential returns as owning a building yourself, with the added benefit of diversification, or are they a completely separate thing? What if that million was invested in a low cost REIT index?

They are indexes (RE I T) and funds (ET F ) so you get diversification at the loss of control. Kind of like buying an S&P Index or investing in a mutual fund as opposed to investing in specific company stocks.

An REIT is a Real Estate Investment Trust. Not an index.

I have a small investment in an REIT and while the trust owns multiple properties, it is far from an index. An REIT is more like buying an individual stock, you are investing in a company that will use your money to purchase, improve, and maintain real estate in exchange for a share of the company. (That may not be technically accurate, but it is essentially what is going on)

Re: How to retire at 30 on $1 million

#59

Post by ryanwaggoner »

jeffepp wrote: post #49
ryanwaggoner wrote: post #39

Earlier quoted context omitted.

True, though buying for appreciation is much more speculative, in my opinion, as opposed to buying for the return of a stream of cashflow.

This only scales if the value of the property appreciates and allows you to refi and purchase another property with the equity. If the value goes down, the cash flow will as well.

Actually, for income real estate, it works the other way around: value is determined almost entirely on the cashflow of the property. As a result, you can control the appreciation of the property by improving the income of the property.

Re: How to retire at 30 on $1 million

#60

Post by jaxn »

ryanwaggoner wrote: post #20
jaxn wrote: post #12

Ryan, would you need to "love" real estate for this to work? Going back to the initial article, don't do it if you don't love it because you may end up spending a lot of time on it and doing something you hate is a pretty crappy retirement. It sounds like you have a passion for real estate now, but maybe not when you started. The same is true for me and retail (I have a couple of franchises).

I'll have to reflect on this. It's true that I do love real estate, but I'm not sure you'd have to. My sense is that you'd have to enjoy it to some degree, perhaps more than the stock market, but less than a job. Acquiring properties is time-consuming, but holding them long-term just really isn't, both from my experience and from what I've seen from larger investors.

I guess that is a key difference in real-estate and retail. The margins in retail aren't high enough to hire a management company to handle all of the details. Sure, there are store managers, but they have to report to someone. And there is turnover.

I am going to keep the multi-family unit idea in mind for the future.

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