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How Landlords Can Create Teachable Moments For Their Kids

Updated: 03/15/2023 by Financial Samurai 26 Comments

I have a love-hate relationship with owning real estate because something always comes up. The more physical rental properties you own, the more problems you will have as a landlord.

In June 2022, I decided to rent out a fully remodeled single-family home I had purchased in 2019 to a second family. We had originally planned to live in the home once it was finished.

However, I severely miscalculated how long it would take to remodel the entire home. Instead of taking one year, it ultimately took two and a half years to complete partially thanks to the pandemic. So when a close by fully renovated home was for sale in mid-2020, we decided to pounce on it.

For our old home, we first got a family to rent the top two floors while the ground floor was remodeled. When the remodel was complete, a new family of three moved in at a higher rent.

So far, the tenants are solid and pay through electronic autopay each month. With only three of them and no pets, the wear and tear on the property are less than the previous family of four with a dog.



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Foreign Real Estate Investors Are Coming To Buy American Homes

Updated: 02/05/2023 by Financial Samurai 116 Comments

Although COVID has been bad for many of us in so many ways, the pandemic did one good thing. The pandemic helped protect American homebuyers from a resurgence in foreign real estate investors. In a big way, the pandemic has throttled the demand from foreign real estate investors to buy American homes.

Before the pandemic hit, 2020 was shaping up to be another solid year. There were growing talks that capital restrictions out of China would ease. Foreigners wanted U.S. assets, and they wanted them bad, partially thanks to a tremendous current account surplus.

Currently, mainland Chinese residents can convert up to US$50,000 per year on foreign currencies for travel, overseas study or work, but not for buying overseas property, securities or life insurance policies.

But before 2018, Chinese foreign buyers were buying United States property in droves. It was easier for citizens to pull resources to buy U.S. property. Then, the Chinese government started cracking down.

Once lockdowns and travel restrictions were in place in the United States and many foreign countries, it became very difficult for foreigners to transact. As a result, COVID gave U.S. buyers the opportunity to buy up our own real estate with less competition. And as a result, Americans who bought homes are much richer today!

With the Ukrainian Russian war, the demand by foreigners to buy American real estate has now increased even further. International capital from Eastern Europe is now also looking for a safe haven.



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How Long Will Rent Increases Last? Some Advice For Renters

Updated: 02/22/2023 by Financial Samurai 58 Comments

One of my biggest fears for renters has come true. Rents are surging due to rising home prices, increasing household formation, and not enough inventory. The main question now is: How long will rent increases last?

We shouldn’t feel bad for those who’ve been against homeownership for years. You can find plenty of them commenting in my posts:

  • Real Estate Vs Stocks: Which Is A Better Investment
  • Why Real Estate Will Always Be More Desirable Than Stocks.

All those against real estate have rationally saved and invested the difference in the stock market and other classes. And given most asset classes have done phenomenally well over the years, renters who invested have also done very well.

However, for those of you who wanted to buy real estate but couldn’t or want to buy real estate but can’t, this post is written mostly for you. This post should help you better figure out your future living situation.



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2023 Housing Price Forecasts: More Bears Than Bulls

Published: 12/18/2022 by Financial Samurai 37 Comments

2023 housing price forecasts from various institutions range from -22% to + 5.4%. There is no consensus as to which way house prices will go. However, the bias is towards the downside.

There is also the issue of forecasting the national median home price and the price of your local housing market. While we care about the national median home price forecast, we care way more about our local housing market forecast.

For background, I expected the median sales price in the United States to rise by 8% to 10% in 2022. My estimate was less bullish than the majority of firms expecting 12% – 18% price increases.

The 4Q2021 median home price was $423,600. The latest pricing data available, 3Q 2022, shows the median home price of $454,900, or a 7.4% increase. 4Q 2022 housing price data will be released in 1Q 2023.

Median sales price of houses sold in the United States


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A Love-Hate Relationship With Owning Rental Property Real Estate

Updated: 02/14/2023 by Financial Samurai 40 Comments

I have a love-hate relationship with owning rental property.

On the one hand, my rental properties are one of the main reason why I had the confidence to leave work behind. On the other hand, my rental properties are my main source of investment stress.

Whenever there is a tenant issue or a maintenance issue, my mood sours. Weird situations always arise that are hard to predict.

To counteract this change in mood, I’ve had to change the framing. Instead of seeing my rental properties as a source of passive income, I now view them as having a part-time job.

As a fake retiree, it took years for me to accept this mental shift because it felt like going in reverse. But the shift has made a positive mental health difference whenever I need to spend time dealing with rental property issues. Now when issues arise, I no longer feel as stressed because it’s just a part of the job.

Let me share an example of why I hate being a landlord and an example of why I love being a landlord. Then maybe you can better decide whether owning rental property is right for you.



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Losing $1 Million In Real Estate Never Felt Better

Published: 10/21/2022 by Financial Samurai 19 Comments

During a bear market, one of the things I like to do is embrace losing. The more you can embrace reality, the more you can accept reality. And the more you can accept reality, the easier you can move on with your life.

Recently, I ended up losing ~$1 million in real estate. It was a significant hit to my net worth. Years of gains, savings, and hard work vanished into thin air! How sad.

Thankfully, as a fake retiree focused on cash flow, the $1 million real estate loss didn’t negatively affect my rental income. If I can just keep the cash flow coming for the next 18-24 months, fingers crossed everything will be OK.

Let me share a situation about how losing so much money in real estate might actually be a net positive.



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Private Real Estate Investing: Seven Takeaways After Five Plus Years

Updated: 03/20/2023 by Financial Samurai 84 Comments

As someone who has been consistently invested in private real estate deals since late 2016, I’m now firmly in the window for receiving distributions. My investment thesis to invest in heartland real estate has turned out well, partially thanks to the bad luck of the pandemic.

Although a couple of my investments in one fund turned sour due to a lack of equity cushion, poor execution, and the shutdown of commercial offices, the vast majority of investments have provided positive returns.

One such investment was a multifamily investment that paid out $122,423.04 in distributions on July 6, 2022. The invested capital should be about $60,000 for a ~15.3% compound annual return over five years. I say should be because it is part of a fund that invested in over 10 properties.

Private real estate passive income


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Downgrade Your Property Statistics Online To Lower Your Property Taxes

Updated: 10/28/2022 by Financial Samurai 38 Comments

During the global financial crisis in 2008 – 2009, I expected the San Francisco Property Assessor Office to automatically lower my property tax bill. After all, home prices had topped out at the end of 2006 and had declined about 5% a year for three consecutive years.

Instead of receiving a property tax bill reduction, the city increased my assessed value, thereby increasing my property tax bill!

As millions of people were losing their jobs and seeing their net worths get crushed, San Francisco didn’t seem to care. It wanted its money, regardless of the economic circumstance.

During the financial crisis, I ended up spending hours of my time fighting my property tax bill. I was rejected the first year, but won my case for three subsequent years. It was a maddening process to have to fight against such an obvious wrong.

The government expects its denizens to meekly accept all punishments and like them too. There was no way I wasn’t going to stand up against tyranny and a department known for its corruption.

Sadly, you can’t trust the property assesor’s office to do the right thing in a recession. As a result, homeowners should be proactive and protect themselves from unfair property tax hikes. A storm may be coming.



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Why Market Timing Real Estate Is Easier Than Timing Stocks

Published: 09/19/2022 by Financial Samurai 13 Comments

Market timing is the strategy of making buying or selling decisions of financial assets by attempting to predict future market price movements. By timing the market, the hope is to make an eventual profitable decision.

Market timing gets a bad rap partially because it’s difficult to do consistently to profit. However, I mostly believe the act of marketing timing is misunderstood.

In reality, every investment decision you make is market timing. As rational human beings, we are always attempting to make the best decision possible based on the information we have and the situation we are in at the time.

A profitable decision generally means buying at a time before future prices go higher or selling at a time before future prices go lower. But a profitable decision can also mean buying or selling to help improve the quality of your life. After all, the ultimate goal of investing is to provide us returns to live a better life.

Here are some common examples you might not think of as market timing, but in reality, they are.



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The Perfect Time To Upgrade To Your Move-Up Home Is Coming

Updated: 12/01/2022 by Financial Samurai 60 Comments

If you want to upgrade your home, get excited! The perfect time to upgrade to your move-up home is coming. Meanwhile, be patient and build your cash reserves.

I really can’t believe the good fortune for move-up homebuyers. The supply of homes has stayed relatively steady (and still well below pre-pandemic levels), but the demand for homes has been dropping since the end of 1Q 2022 given mortgage rates have increased by ~2%.

For those of you with strong cash flow and large cash balances, you should appreciate this economic environment. Not only is the Fed helping you make nicer homes more affordable, you’re also getting a higher return on your risk-free cash.



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