Key Takeaways:
- Investing in rental properties can be a great way to generate cash flow and put capital to work (real estate generally appreciates over time)
- Many people are now investing out of state as there are new technologies that make it easier to manage properties remotely (like Hemlane)
- Now is a great time to invest in real estate due to low interest rates (cheap debt) and potential for continued inflation (rising property values)
Notes:
- 35% of the US households are renters - in California it's expected to be 50% by 2025 (due to affordability crisis)
- Covid changed things - people can live anywhere
- Mindset of landlords is changing (fewer people buying in backyard)
- New trend - living in a rental but owning rental properties elsewhere for cash flow
- Real estate generally outperforms stocks & bonds
- Millennials are driving a lot of the increase in rental property ownership
- In markets with high purchase to rent ratio it might make more sense to rent and then buy elsewhere
- One reason to buy is emotional - to have a place look and feel the way you want, not have a landlord, etc.
- House hacking: cool way to purchase investment properties (you purchase a property, live in one unit and rent out the other(s)) - great way to experience being an landlord before you go out of state or invest professionally
- Cap Rate = valuation compared to other properties you could purchase; net operating income / market value of the asset — compare to others in the market
- Why buy in a low cap rate market? Assumption is there will be appreciation
- Don't invest in an "alligator" property (one that eats all your money)
- Different ways to invest — turnkey providers (can be great but also can be risky) - reputation is important; also can do it yourself and have a thesis on the market