I think Land Investing is an amazing strategy with amazing returns but I also think it's ruined me! I'm pretty much "all in" on Land for my 5 to 10 year horizon but frankly I don't want to constantly chase new deals to make ends meet till I'm 90 (for 40, for that matter ;-)) so while offering owner financing can smooth the ride you don't control when it's paid off and it's far from evergreen.
I'm planning a retirement that will last (hopefully!) 50+ years so the more time I spend thinking about the right vehicle (or vehicles) to carry me there, the more refined my personal requirements become. Here is my current target criteria:
A liquidatable recession-resistant, operationally passive, or semi-passive, evergreen cash flow with a cap rate of 15% or more.
Yes, I know I'm aiming high ;-) What are you all looking at for your long term "retirement" investments? What vehicles are you using/going to use to carry you through those years?
I have rental houses, they are doing ok. My goal would be to maybe double what I have and have them all paid off.
Land and owner financed notes would be great to finance purchasing more sfr houses which I can sell with Lease Options. This seems to be a good space to me, with a business manager.
Also I would like to own tillable cash rent farmland. Food production is the future.
@jawollbrink SFRs are definitely a tempting option. A lot of great stuff about them. Just need to figure out how to get them to hit the yield I want! Same with Farmland. If I could get a decent yield I'd buy that stuff by the boatload!
@JT I am so with you on this. I think self storage, triple net and farmland would meet most of your criteria EXCEPT for the 15% cap rate, which is pretty hard to find right now.
SFR could possibly get there too, but if it's going to be passive, it would require a very good property manager, and you'd have to be okay with the added complexity of the MANY moving pieces of each rental property (tenants turning over, things breaking left and right, etc).
Part of what makes this hard is the market we're in right now... it's not easy to find even a reasonable deal, let alone a 'great' deal on these kinds of properties. That might change over the next year, but all the sellers I've talked to over the past couple of months have been in dreamland on what they think their properties are worth.
@retipsterseth The Cap Rate is indeed a doozy! I can't just help but believe that I should be able to create an opportunity that meets these criteria, Cap Rate and all.
Self Storage, NNN, and Farmland and all tempting niches and I love the idea of being able to hit these numbers with unleveraged SFR's but it seems like finding that kind of yield is a talllll order. I'm more than happy to work through property managers and deal with some complexity (although simplicity is preferred).
As you noted, the market is just not very favorable to hit this kind of objective just now. I'm more and more tempted to just put this aside for a year or two and then come back around to it when I've build more wealth through land. Some times thinking too far ahead is kind of a detriment I guess X-D
@JT - I totally get it. I've been in cash-hoarding mode for the past year or so. I don't want to be (believe me, I'd much rather buy an awesome, long-term, cash flowing property), but when the deals just aren't there - what are you gonna do?
I'm definitly not going to throw my money at a lackluster deal just because I'm feeling restless. If I've got to play the waiting game, I'm okay with that (even though it's not my preferred path right now).
@JT you might be able to find a 15 cap with a small apartment (5-35 units) in a rural area in the midwest.
It probably won't be in an appreciating market but places like Indiana have some really cool small towns with EXTREMELY cheap property - especially if you go direct-to-seller.
It'd be like finding a needle in a haystack but if I was looking for high cap rates like that, and I didn't want to be in a war zone, I'd go rural.
Anderson Indiana comes to mind as an example.
@retipsterseth The waiting game is indeed a painful necessity sometimes...
@Jarenb I have limited experience with rural property but I have seen much better deals in secondary and tertiary markets I've looked at in the past. The thing that always holds me back from pulling the trigger is longevity. What are some of the markers do you look for to ensure that house price isn't just going to drop to zero 10 years down the road? That kind of abrupt capital loss makes the IRR projections a little dicey! I'd be totally happy investing in a non-appreciating market if the cash flow was solid. Heck, if the yields were good enough you could just spread your bets over several markets to account for the potential losses.
Just a thought, but house prices never drop to zero.
I am closing on an sfr deal this week.. have consistently bought sfrs over the last couple years 30 percent or more under market.
I use auction (both live and online), tired landlords, and bank owned and I am not afraid of remodel work. Having been a contractor gave me the bravery to know what to look for.
Last year I bought several from estate auctions.. they require a 10 percent deposit on auction day in the form of a bank check, which eliminates first time homebuyer competition and newbie flippers.
@jawollbrink - when you buy at an online auction, is there a particular website(s) you commonly work through to accomplish this? If so, which one(s)?
I have bought off Hudson and Marshall, Williams and williams and auction.com
Auction.com has a lot of extra fees though and also advertises forclosures (to be sold at the courthouse and bought back by the bank) on their site as if it was a live auction which can be confusing.
I bought a flip house last year from a local auction company with only a sign in the front yard. Day of the auction there was a big snow and only like 3 bidders showed up.. that turned into a deal for me.
I got another great deal on a 3 bed 2 bath last year at an estate sale. The local auction company had only signs for advertising and posting on their website (no mls, facebook, zillow...nothing). I bought the place for 74k, put 10 percent down (at auction) and then the when I closed the bank appraised it at 130k and I gained a good piece of equity.
Within a couple weeks I had it rented for 1100 a month.
Moral of the story is to check your local real estate/ estate sale auction companies. Many do not advertise that great on social media, and you could get a deal.