Late 20's: It's time to make a choice! Help with Real Estate and well-being

All the different ways of solving the shelter problem. To be static or mobile? Roots, legs, or wheels?
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lillo9546
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Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by lillo9546 »

I found this from a blog post from Jacbob ERE blog, which was written by a guest, and I immediately related with!
...There are a few things I would do differently if I could do it all over again.

The first thing I would do different is buy an apartment building while I was young. I would get as big a property as I could convince the lenders to finance. I would live in the building, manage it, and do whatever maintenance was necessary to enjoy free rent and positive cash flow. Had I walked that talk in my 20’s instead of paying rent or buying my first house then I would own a rental property today that is fully paid for and cash flowing like a big dog...


I was inspired by this blog post! Btw, I'm 27, opened my eyes and adopted frugal living since 2020.
I'll try my best to keep the situation simple and clear. I'll explain in numbers and shapes :) :
Lot"a") 1 house 80m2 + 1 attic --- (I own 33%, the rest my 2 brothers) --- Actual Value = 200k --- Actual Rent Revenue = 6k/y.
Lot"b") 1 house 110m2 on 400m2 land + 700m2 land (can still build residential of 300m2) --- (I own 33%, the rest my 2 brothers) --- Actual Value = 250k+100k = 350k --- Actual Rent Revenue = No rent.

Right now I still live with my parents on Lot"b" 110m2 house, but It's time to make the choice.

Basically I have options to chose from:
1) I could build my residential part on the 700m2 land of the Lot"b".
This means a condo made of 3, 100m2 each apartments. 1 mine, 2 of my brothers.
Total cost 150k. (I will need a mortgage)
2) I could get 100% property on the existing 110m2 house on Lot"b", and exchange with entire Lot"a", and entire 700m2 land on Lot"b" to my brothers.
Then, I could split the exitisting 110m2 house into two 55m2 houses. 1 for me, 1 for my parents (to rent in the future).
Here I could DIY: Total cost 40k. (I will not need a mortgage).
3) Sell everything to my brothers for 150k.

This is just what it comes to my mind, I'm sure there could be more options. Please, enlighten me!
Basically what I'm doing here is calculating pros and cons:
1)
Cons : 30y Mortgage, sharing maintenance/issues with brothers,
Pros: New/Fresh build, Lower future value due to being a condo form factor
Facts: Future Inheritance 33% rent on 2 houses = 4k/y
2)
Cons : Smaller?, Old House? (built on 1990)
Pros: No mortgage No debt, I own house+land alone after my parents, Make easier individual decisions, Higher future value due to being a villa form factor
3)
Cons : I do not have anymore a place to live. I need to buy a house or a van.
Pros: I have the freedom to chose what to buy with 150k. Does this buy my freedom?

I could add more, but for now I'll leave it short. Sorry if I being too long with the post!
I will be so glad if we could discuss on this [/size]
Last edited by lillo9546 on Tue Jan 31, 2023 8:28 am, edited 2 times in total.

jacob
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Re: Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by jacob »

Just to be clear (again), this was not me but a guest post from Todd Tresidder.
https://earlyretirementextreme.com/when ... ge-35.html

lillo9546
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Re: Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by lillo9546 »

jacob wrote:
Tue Jan 31, 2023 8:21 am
Just to be clear (again), this was not me but a guest post from Todd Tresidder.
https://earlyretirementextreme.com/when ... ge-35.html
Missed that! Thanks Jacob! Updated the post

Dream of Freedom
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Re: Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by Dream of Freedom »

Are your brothers interested in selling their shares to you?

You should keep an eye out for houses neighbor's houses that are being sold. Maybe even tell them that if they ever want to sell to tell you first and you will make an offer. Say brokers aren't cheap you know.

WFJ
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Re: Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by WFJ »

Two cents: at 27, learning new skills and having labor flexibility is far more valuable than starting a RE investment that will tie you to a single location. My two most valuable professional traits/assets have been, the ability to learn new skills and the flexibility to financially capitalize on these skills. Any RE investment would have crippled/eliminated these valuable assets.

xmj
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Re: Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by xmj »

Agree with WFJ, tying yourself to a location while you're still in "launch" mode will hurt your career chances. But... if for some reason you are 100% sure you'll stay there for 20 years, go ahead.

To OP: Those options are fake. Create better ones!

Throw out option 3. - don't sell. Real estate is for holding onto, long term, across multiple generations. Not many investments have as many tax breaks.

Option 2 as described sounds like a bad deal as far as exchanging the share in the 700m2 grounds is concerned, such that I wouldn't do it: You're giving up the option to build something awesome with state of the art electrics&insulation on lots of land, in exchange for not much land and a depreciated, old, structure (which you part-own already).

But maybe that's just because the description is...lacking?

Option 1 starts to sound good but instead of legally separating ownership into "condos" why not build a triplex/quadplex with smaller units that you and your brothers rent out to acquaintances?

Combining DoF's thinking with #3 would help build it into more of a compound, four five houses all shared within family.

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Seppia
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Re: Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by Seppia »

Agree with WFJ: consider the value of flexibility and not locking yourself to a location at such a young age.
At 42, I make 6x what I was making at 27. Would not have gotten here without the flexibility of moving across countries freely.

Also would add: $200k property generating 6k/y means 3%. You get 4.5% on US bonds without and sitting on your ass :)

lillo9546
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Re: Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by lillo9546 »

xmj wrote:
Sat Feb 04, 2023 7:25 am
But maybe that's just because the description is...lacking?
Basically I would take this existing house and build electrical, insulation and any other technological trick to have it like a new one built from scratch.
If I can do this on an existing house, I can save 50% of total renovation amount thanks to govenrment bonus. This mean I can do this with the money I own yet.

Not only I will be out of debt, but thanks to it, I could have the freedom to play out my career, or better said, what I'd like to do in my life! I could even have the freedom to relocate elsewhere and renting my house side. Knowing that I could always come back home, it's a huge plus. Isnt'it?

Instead, building the condo with my brothers, would mean having a mortgage. Wouldn't this lock me to the place?

classical_Liberal
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Re: Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by classical_Liberal »

One of the worst decisions of my life was buying real estate as a primary residence too young. It tied me down and made me miserable. The biggest missed opportunity of my life was leveraging the biggest apartment complex the bank would lend for and quitting my job to manage and maintain. The skills learned would have been immeasurably greater than a 9-5, if I failed, I would have been young enough to start over and the bank carries much of the risk. These things have a high level of success though, so likely I'd be 100X more wealthy.

My advice, if you are going to invest in real estate, you are going to be stuck where you are for awhile. Better to go as big as humanly possible, rather than tip-toeing around and still having the negatives others have spoke about. IOW go big or go home(to your rented apartment :D ).

lillo9546
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Re: Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by lillo9546 »

classical_Liberal wrote:
Thu Feb 16, 2023 4:45 pm
The biggest missed opportunity of my life was leveraging the biggest apartment complex the bank would lend for and quitting my job to manage and maintain. The skills learned would have been immeasurably greater than a 9-5, if I failed, I would have been young enough to start over and the bank carries much of the risk.
interesting.
wdym? Could you explaim in detail? :)

classical_Liberal
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Re: Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by classical_Liberal »

Instead of looking to split one or two SFR with your family members, go all out. Pull all the capital together you can safely afford to and buy a large multi-unit property. 12+ units? Don't be afraid of the leverage as long as you are cash-flow positive enough (with vacancies, cap ex, etc) to live. Move into one of the units and manage/maintain and update the property as vacancies occur so you can slowly and fairly increase the rent.

In a situation like this you'd be totally self employed. Would learn a million skills. Likely, with a bank taking on 50-75% risk for you. As Cashflow improves you can hire a management company to take over and put it on autopilot, or just keep grinding and using the cash-flow for whatever you want. This is a relatively low risk way to take your shot at real wealth given sufficient time and energy. Something most people in their 20's still have to give. Better than wasting it trying to promote a career, IMO.

Edit: Do it in a location with landlord friendly laws. Gov't overstep is becoming a large issue in this field.

lillo9546
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Re: Late 20's: It's time to make a choice! Help with Real Estate and well-being

Post by lillo9546 »

classical_Liberal wrote:
Fri Feb 17, 2023 4:34 pm
Instead of looking to split one or two SFR with your family members, go all out. Pull all the capital together you can safely afford to and buy a large multi-unit property. 12+ units? Don't be afraid of the leverage as long as you are cash-flow positive enough (with vacancies, cap ex, etc) to live.

In a situation like this you'd be totally self employed. Would learn a million skills. Likely, with a bank taking on 50-75% risk for you.
This is what I'm planning about, but I have few doubts and things to think about.
Btw my country is pro-tenant, but nowadays there are also short rental opportunities, and if "diversification is the key", like they say, It would be good to have 50/50 long and short term rental setup.
Given this, Are you saying to buy an existing 12+ apt property, or to find a land to build it yourself? In both cases, this is very out of budget basing on the affordability of a bank mortgage, given my salary.
Also, are you making this assumption based on a mortgage right? In this case I would need to keep my job in order to keep the mortgage active, even if the cashflow will be more than positive.
Also, why not offices, commercial spaces, in the same condo, if the geographic position is good for shopping/restaurants etc?


But basically, I undestand the message: Build something to rent, and make cash flow positive. This is what i was thinking to do.
In this case, Is it wrong to think:
1) Why not just settle on something which would be enough to cover our cost of living?
2) Why should we get more debt, to increase our income from rent?

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