Gunfighter

A passive investment in an apartment community can yield 6-8% cash on cash returns. If there is a value add component to the acquisition, you may not see a distribution the first year. A hypothetical value add deal like this would plan a cash out refinance in year 3 where you get the bulk of your investment back and still receive distributions based on your original investment amount. It's like the BRRRR method for houses, except you are a passive owner of an apartment community. This type of investment involves picking both the horse and the jockey. If you find a few good jockeys, they are usually good at finding the right horse.

gliderguider

I spent 7 years in commercial property management. At first I thought I wanted to get involved in the ownership side of things. After a few years watching large cash expenditures on maintenance issues both expected and unexpected, I realized how much exposure there really is. I usually like reading your posts and they seem well thought out, but sometimes I feel like they paint a rosier picture than reality to the uninitiated in the real estate game. I had to fill many vacancies after the last recession and when vacancies start stacking up it really is a house of cards. When the economy is good, it’s easy and anyone can do it.

Gunfighter

Did you specialize in a particular asset class? I always like learning about different sectors of CRE. My friends and business associates are feeling lots of pressure in retail right now. Storage and housing have been relatively stable. The management side of income property is a huge component and can make or break a deal. I've seen some people run a property into the ground trying to save money, instead of trying to make money. Usually they are the owners who buy marginal deals with overly optimistic underwriting and/or inadequate capital reserves. That's all part of picking the right jockey.



Exposure varies greatly depending on the asset and financing. I do tend to have an optimistic outlook on income properties, probably because I've focused on value plays with large margin of safety. I've missed way more deals than I've actually closed on because I'm so afraid of making a mistake. I learned early on that you won't go bankrupt missing good deals while in search of great deals. I will filter through over a hundred, evaluate 20-50 and do underwriting on half a dozen properties to make 1 acquisition as an independent owner.

If I'm investing in a syndication, the person putting the deal together does all of that work and I'll invest in 1 out of 3. There is no recourse to the investors in the deals I participate in. The syndication returns are much less than what I own directly, because the syndicator takes a percentage of the profits and collects an asset management fee. As I get older and lazier, I'm shifting into syndicated apartments for about half of my new investments. As professional with a good career (some years), it is nice owning a portion of 10 communities and getting 80% of the returns. You have to vet syndicators very carefully, as some of them will stack the deals with loads of fees. I especially dislike acquisition, disposition and refinance fees, as they reward churning deals over making a profit. I gladly pay up to 20% of the profit and a management fee of 5% of revenue for doing the work.

RockyBoy

Its not advice for what is the best solution for return on investment. It is advice on how to remove potential financial burdens from your life and not having a mortgage is huge. Right now for every pilot on the list including those within a year of retirement and those just hired a few months ago, having no mortgage is a game changer when it comes to decision making. 3 months ago we were all worried about where to put DPSP Cash to maximize retirement savings, now some in our ranks are wondering if they will be able to pay for their house and send their kids to college next year. If we all followed Dave and had no debt including our house, things would be much different as far as the decisions we are making right now. Grabbing an extra couple percent off of invested money isn’t helping anyone right now. That’s just my opinion and I do realize lots of pilots do both. It is possible to have a massive pile of cash invested with the option of paying off a house tomorrow if you wanted. That really isn’t the audience Dave is selling to though. I would bet though that most pilots here aren’t in that position. Most of us love big mortgages, boat payments, airplane payments, 100K cars, and fine wine. 😂.

OldFlyGuy

Honestly I loved flying and the people but I haven’t missed work a bit. No complex strategies for me. Save early and a lot. I understand leverage and arbitrage but I hate debt and wouldn’t personally retire with any. Managed my own $ because advisors burned me early. At least I figured it out. IF you can define and attain “enough” plus a little GTH $ retirement is pretty nice. You will likely excel at it. Best. OFG.

Vincent Chase

I love other people's boats and planes and wine. Is that wrong?

badflaps

You left out wimmin'.

Fourpaw

I believe my kids are my biggest reduction of net income.

Is it just me or am I perpetually stuck in the “can’t have anything nice” stage.

DALMD88FO

Nope it's not just you but I wouldn't trade them for all the toys.

Turbo1

Yes, everybody needs somebody to wipe their ass when they get older