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> and additionally the total investment about doubles in roughly 5 years That is a big assumption. What happens during the next real estate bust and your real

> and additionally the total investment about doubles in roughly 5 years That is a big assumption. What happens during the next real estate bust and your real estate value goes down to 1/4 of its prior worth? You are now set back 10 years. I think residential real estate is a bad bet long term. As real estate gets more expensive and more and more young people cannot afford to buy there is going to be more political capital to change the situation. You are basically betting that the next generations are going to be fine with being priced out. I don’t believe we have seen the full repercussions of the housing affordability crisis, it hasn’t even been going on for that long. As gen Z comes to house buying age I think there are going to be changes.

SirMaster 2y ago
They have insurances for downturns built into the cost of the deal. Even if the value of the property doesn't increase as much as expected, you are still making a decent amount in income from the rent being paid. 6% maybe doesn't sound like much, but it's tax free income due to being able to deduct from that income the depreciation from the property and appliances and such which in my experience always is more than enough. It makes it pretty competitive with alternatives such as index funds long term IMO and again in my experience so far over the last 11 years. The worst case scenario is basically you hold onto that property longer and make about nothing on the sale which is more than can be said about the stock market in my experience. At least you still have what you made passively in the meantime. Sure, I can't predict the farther future, but I still make decisions to continue this or change my holdings based on policy changes like that. I'm not claiming this is some magic get rich quick scheme, but so far it has been working out well and definitely has given me income without me doing anything, which fits the definition of passive income here, so I just thought I'd share it.
- __turbobrew__ 2y ago
  I believe your account, and agree that this investment has turned out well for you. The last 11 years are not normal in my opinion, and I believe the time will come where policy changes will make this investment strategy much less desirable.
- throwaway2037 2y ago
  Have you looked at the return from S&P 500 in the last 10 years? 1,964 -> 5,823 is about 11.5% per annum, compounded. It is one of the biggest bull markets in 100 years. And you are telling us that your investment properties are sustaining the same returns? Unbelievable. Neither is sustainable.
  - SirMaster 2y ago
    Yes. I feel like you are not understanding anything about what these investments entail. A struggling apartment complex property in an up an coming area is purchased and I put money into that deal. I am only say 100 or 200K of an otherwise ~10 million investment. The complex is massively overhauled, new facilities are built, units are completely refurbished, the on-site staff are replaced, bad tenants not paying are evicted, and new vetted tenants are found. The whole place is re-branded and then after all this is complete is sold for a substantial profit. All while making income from rents during the time the property is held. It's a LOT of work. Not by me as I am just an investor, but by the managing partners who spent months or longer searching or and analyzing the area and working with the bank for the loan and then doing all that work to completely overhaul the place. When you find and invest with a management partner who has been doing this awhile and has a proven track record yes the returns are as good as I am saying.
lotsofpulp 2y ago
Real estate is special because of multiple federal government and state government policies limiting (subsidizing) borrowers’ risk, allowing borrowers to lever without commensurate increases in risk. The federal government taxpayers (especially future ones) provide enormous subsidies in the way of 30 year fixed rate loans with no prepayment penalty, and no risk of having the loan be called. Many state governments make home mortgages non recourse as well. And then there’s the federal 1031 tax exchange benefit. And there are county/state limits on property tax increases, like California’s famous prop 13.
- SirMaster 2y ago
  When I learned how a lot of the government policies worked it just kinda blew my mind. Yes you are effectively 4x leveraging your investment with a way lower risk than doing something like that in the stock market. You are certainly leveraging other people's money in a way. Plus the tax deductions on asset depreciation are wild. Maybe it won't last forever, but I'll pursue it while it works.
- __turbobrew__ 2y ago
  Yea I think that is the crux of it. You are using social programs designed to keep a roof over people’s head for financial gain.
  - lotsofpulp 2y ago
    If the social program was designed to keep a roof over people’s head, then it would simply give people cash, or a roof. The fact that the social program involves extending lines of credit means that the design was not to keep a roof over people’s head, but rather enrich existing asset owners and indebt future ones to get them chained to the treadmill. Similar to cutting funding for higher education and replacing it with student loans.
    - __turbobrew__ 2y ago
      Maybe I am wrong about the purpose of subsidized loans for housing but the result is the same — public costs, private profits. Will gen Z see they are at the bottom of a pyramid that ceases to exist with their generation?
immibis 2y ago
I see betting on residential real estate as a bet that power structures have ossified and the CURRENT (not future - that was 20 years ago!) generation will not be able to gain any significant power.

SirMaster 2y ago

They have insurances for downturns built into the cost of the deal. Even if the value of the property doesn't increase as much as expected, you are still making a decent amount in income from the rent being paid. 6% maybe doesn't sound like much, but it's tax free income due to being able to deduct from that income the depreciation from the property and appliances and such which in my experience always is more than enough. It makes it pretty competitive with alternatives such as index funds long term IMO and again in my experience so far over the last 11 years. The worst case scenario is basically you hold onto that property longer and make about nothing on the sale which is more than can be said about the stock market in my experience. At least you still have what you made passively in the meantime. Sure, I can't predict the farther future, but I still make decisions to continue this or change my holdings based on policy changes like that. I'm not claiming this is some magic get rich quick scheme, but so far it has been working out well and definitely has given me income without me doing anything, which fits the definition of passive income here, so I just thought I'd share it.

__turbobrew__ 2y ago
I believe your account, and agree that this investment has turned out well for you. The last 11 years are not normal in my opinion, and I believe the time will come where policy changes will make this investment strategy much less desirable.
throwaway2037 2y ago
Have you looked at the return from S&P 500 in the last 10 years? 1,964 -> 5,823 is about 11.5% per annum, compounded. It is one of the biggest bull markets in 100 years. And you are telling us that your investment properties are sustaining the same returns? Unbelievable. Neither is sustainable.
- SirMaster 2y ago
  Yes. I feel like you are not understanding anything about what these investments entail. A struggling apartment complex property in an up an coming area is purchased and I put money into that deal. I am only say 100 or 200K of an otherwise ~10 million investment. The complex is massively overhauled, new facilities are built, units are completely refurbished, the on-site staff are replaced, bad tenants not paying are evicted, and new vetted tenants are found. The whole place is re-branded and then after all this is complete is sold for a substantial profit. All while making income from rents during the time the property is held. It's a LOT of work. Not by me as I am just an investor, but by the managing partners who spent months or longer searching or and analyzing the area and working with the bank for the loan and then doing all that work to completely overhaul the place. When you find and invest with a management partner who has been doing this awhile and has a proven track record yes the returns are as good as I am saying.

lotsofpulp 2y ago

Real estate is special because of multiple federal government and state government policies limiting (subsidizing) borrowers’ risk, allowing borrowers to lever without commensurate increases in risk. The federal government taxpayers (especially future ones) provide enormous subsidies in the way of 30 year fixed rate loans with no prepayment penalty, and no risk of having the loan be called. Many state governments make home mortgages non recourse as well. And then there’s the federal 1031 tax exchange benefit. And there are county/state limits on property tax increases, like California’s famous prop 13.

SirMaster 2y ago
When I learned how a lot of the government policies worked it just kinda blew my mind. Yes you are effectively 4x leveraging your investment with a way lower risk than doing something like that in the stock market. You are certainly leveraging other people's money in a way. Plus the tax deductions on asset depreciation are wild. Maybe it won't last forever, but I'll pursue it while it works.
__turbobrew__ 2y ago
Yea I think that is the crux of it. You are using social programs designed to keep a roof over people’s head for financial gain.
- lotsofpulp 2y ago
  If the social program was designed to keep a roof over people’s head, then it would simply give people cash, or a roof. The fact that the social program involves extending lines of credit means that the design was not to keep a roof over people’s head, but rather enrich existing asset owners and indebt future ones to get them chained to the treadmill. Similar to cutting funding for higher education and replacing it with student loans.
  - __turbobrew__ 2y ago
    Maybe I am wrong about the purpose of subsidized loans for housing but the result is the same — public costs, private profits. Will gen Z see they are at the bottom of a pyramid that ceases to exist with their generation?

immibis 2y ago

I see betting on residential real estate as a bet that power structures have ossified and the CURRENT (not future - that was 20 years ago!) generation will not be able to gain any significant power.