Why stop at Ferraris? Anything can/can't be an investment. Boats, planes, vacation homes, vintage motorcycles, art etc. Who cares, if you want these things, there are ways to buy them right. QOL might be doing 200MPH only 6 inches from the ground or getting that place in the keys. You can invest in many things with varying risk and returns. I have yet to catch a 60lb fish with an electronic certificate of deposit. Does Vanguard build homebuilt jet kits like Sonex? People have cleared 20% in 2 years and the enjoyment of the build and test flying.

I’m going to die shortly after retirement anyways (based on law of averages). Might as well have fun now. My retirement fund is for my wife’s longevity. Not being cute, honestly believe this.

Exactly. I’m going to enjoy my life with my family and make sure the wife is well taken care of if I go first. If there’s something left for the kids, so be it. They get their first car and their college on me. After that it’s on them.

I know too many that lived like misers and then died early and did nothing but leave a pile for someone else to spend. Not that I’m going to be reckless but I will enjoy what I make.

Nobody said a Ferrari was an investment strategy. But people poopoo it as frivolous and a waste of money when that isn’t necessarily the case. I’m not a professional trader (as you state above) yet somehow I managed to enjoy Ferrari ownership for three years and end up better off financially than I would have had I not bought the car. I certainly didn’t flush 6 figures down the toilet as some of the nay-sayers would like to believe.

Insurance was around $150 a month with a clean record.

I don’t know what you mean by “normal” people or what that has anything to do with roads in the north. Maybe log on to Ferrarichat.com and ask someone who owns a Ferrari there.

My E39 has outperformed every one of my other financial instruments:-). I have a Hagaerty guaranteed value policy that is less than 1,000 / year. People are shocked to hear that it is not that expensive to insure an exotic (obviously my E39 is not an exotic) but generally an exotic is not a daily driver and is driven carefully by the owner. Doug DeMuro mentioned in one of his videos that his Ford GT (now worth about 350K) is less than 2k a year to insure.

Anyone who thinks cars can't be good investments clearly hasn't visited www.bringatrailer.com

​​​​​​ Ferraris are very popular up north. About 1/4 of the ones I've seen are from Montana. ;)

As far as indulgences go, a used Ferrari is not absurd. The biggest cost in most states is the sales tax.

that $930k bronco bid last week was a pretty good ROI

1. Depressing


2. Accurate. (and she's older than I am...with a bloody pension of her own. "The fairer sex" vs. "The patriarchy" - I choose the FS- apparently an option now; alas, not quite willing to transition.)

Not to be a complete D, but actual inflation is running par at that % .

(Have CD's, do ladder, older I get the more I'm convinced that real estate is only investment worth a darn. With the exception of "people who chose to live outdoors", everyone needs a place to live)

Not to hate on real estate, but just another perspective:

If you have a $400,000 property and net $2,000/month, that’s only a 6% return.

Seems like real estate money is made off leverage. Same risk is available with options in the market.

You’ve demonstrated the ability to do math while simultaneously demonstrating a misunderstanding of how one invests in real estate.

It is good to look at multiple perspectives. Your math is correct for one year of cash flow which is one component of real estate.

Other components for consideration:
-Depreciation deduction on residential property of that valuation would be $12,000 per year which defers the tax liability on half of the annual income.
-When the tax bill comes due in the form of depreciation recapture it is at a lower rate than income tax (25% vs 37%)
-Annual rent increases bump up cash flow. On the example property Year 2 should be $1,000 higher.
-Appreciation on real estate provides long term capital gains that compound tax deferred until sale.
-Exercising a 1031 exchange can defer the gains even longer.
-As part of an estate, the long term gains become tax free via stepped up basis.
-6% is a low net return on all cash real estate.

You are correct about leverage being a huge factor in real estate returns. Consider the following:
-Real estate leverage is typically for 5-30 years vs weeks or months in options. The long term risk is not the same.
-Typical 75% leverage on real estate turns 3% inflation into 12% capital gains.
-Cash on cash return for the hypothetical investment remains near 6%
-Loan amortization provides additional return in the form of principal reduction.
-Depreciation on the larger amount creates passive losses that more than offset income and in some cases can offset earned income.
-Refinancing after several years provides a tax free return of capital for portfolio expansion.

The first year or two of real estate investing isn't all that impressive. A few years of rent increases followed by a cash out refi, sale or 1031 exchange is eye opening. A third generation of the original capital starts to look like a snowball that was rolled to become the base of a snowman.

The below is typed in a non abrasive, inquisitive font.
I'm curious if the perspective is one of theory or experience. How much time have you spent investing in real estate and/or trading options?

I have 0 personal experience in real estate investing. I would make a terrible candidate for this type investment:

-In my personal residence, I am 3 out of 3 for just breaking even after expenses. HOA fees, real estate commissions, property tax, repair, yard maintenance, etc have all been a drag on the small paper gains. This doesn’t factor opportunity cost or cost of capital.
-Real estate has poor liquidity
-Emotionally I couldn’t handle tenants. This involves late night repair calls, tenant damage, and late or no payment. I have no desire to run the eviction process after relatives that have been landlords have shared their stories. This includes one tenant that poured concrete down the toilet. Another wouldn’t leave after 6 months of non-payment. Even though the water was shut off, they just used a bucket for a toilet. That same family was finally evicted and the family’s kid badmouthed the landlord’s family to all the kids in the shared high school. Property management helps, but erodes returns. Your state’s eviction process may vary, mine favors the tenants.
-2008 Great Recession is still fresh in my mind. Have too many friends that bought their rental property in Destin, Pensacola, Gulf Shores, etc that overpaid for a dream condo that had over-extended neighbors not pay their HOA and leave the solvent few with giant assessments. The non-payers walk away, the payers burden the 6-figure roof repair.
-I also recall 2008 investors defaulting on strip mall after strip mall due to lack of tenants or non-payment by tenants. Had acquaintances that had it all and lost it all.

YMMV- In the nicest, most non-judgmental font, real estate is not for me. Love hearing about how it works for others! I have been satisfied with my brokerage account and extra time devoted to the occasional green slip. For those that make it
work, I hope I can get a ride in your Ferrari!

My experience echos yours. Tenants, finding competent trades, getting caught in a tax squeeze with local property tax/regulations, wild swings in insurance, unexpected expenses...the list goes on.

That said, in GF's defense, there are essentially three ways you can handle real estate:

Go all in with personal management. If you try to do one or two rental properties, or try to hold a property for investment value, there is a high probability you could get clobbered. Non-homsteaded property taxes have spiraled upward along with property values, making it very hard to raise rents in conjunction. Random changes in local laws can burn you. For example, a municipality where I had a property randomly instituted VERY punitive fees for "non-long term rentals" (AKA AirBNB, etc) because it was eating into the local hotel revenue. Almost no warning. Everyone who was into property for that reason got clobbered or got very ugly legal letters when they didn't pay (or weren't paying attention).

You really need a critical mass of properties to amortize the rental costs, taxes and insurance. You also need a critical mass of properties to have a good relationship with trades with wholesale costs. If you are on a "call as you need them" basis with trades and paying retail rates, you WILL get creamed with expenses and spend all your free time dealing with them or the tenant(s). There are also random liability concerns. This can be mitigated, but thats $$ as well.

Go with a property manager. Removes the tenant hassle, removes "off the top" revenue, mitigates SOME of the MX costs if you have a quality manager, but again, you need a critical mass of properties to make it worth the bother. 1 or 2 properties makes it a cash flow/break even proposition for tax purposes or to mitigate costs of holding as an investment. A variation of this is to "just get big", and hire professional staff to run your properties. That might as well be a second job

Go with the "real estate syndicate". Buy into scheme that invests solely in RE. You really need to do your DYODD and results vary.

For the less-that-experienced, RE can be a quagmire even in good times. If the market turns, it could be a really bad deal. You really need to make it a primary focus, second job level of involvement over the course of several years to make it a reliable investment.

Three words: Commercial Real Estate

It’s a business, it takes some work and effort. It’s not passive income. BUT…it certainly doesn’t have to be a full time job. A couple hours a week. The benefits are all the things Gunfighter says. It really is amazing…if you do your due diligence.

I had zero experience in real estate investing. Four years ago while I was not getting used on reserve, I was bored and started watching YouTube videos on commercial real estate investing. I had about $70k to invest. Four years later I own an office building worth $1.2M. This is after just one generation of the process (see Gunfighter’s comments). And it wasn’t that I got lucky, I bought an office building 4 months before Covid! The first year was dicey. But I did my due diligence and am happy with the results. I just put the property back on the market this week. I expect to net close to 7 times my original investment in just 3-4 years. And if the property doesn’t sell right away, it’s cash flowing $5k a month (that’s cash in my pocket before taxes). YMMV, but it really is incredible to see how it works. I would encourage everyone to at least read a book or watch a video about the basics.

Very happy for you! Genuinely curious about your specifics because it sounds too good to be true:

You paid $70k for an office building and 4 years later it’s worth $1.2M?
Or you used $70k as a down payment and the bank still owns it?

Is that $5k/mo gross before expenses?
Or do you have to subtract out loan payment, property tax, utilities, repairs? How much per month is property tax and utilities?
Who pays for when the roof leaks or air conditioning breaks? You or tenant?

#1 Learn how to value property. This is where books and videos come in.

#2 Formulate a plan. How do you intend to make your money? Stabilize a distressed property and sell it? Cash flow for years? Have an exit strategy.

#3 Be patient and wait for the right property that fits your plan. Don’t buy on emotion or out of impatience.

#4 Figure out how to close the deal. Don’t be afraid to get creative here. Put financing together. There are a million ways to acquire a property. It’s not what you’re familiar if you’ve only bought houses.

I’m happy to share the details of my experience with this particular property. I bought it for 575k with 70k down. I got financing through a big bank but they wanted 35% down. So I had to seek private financing for the rest of the bank’s requirement (see #4 above). I paid that off as soon as I could because it was costly. But I needed it because I knew this was the right property.

The property has 6 offices and was about 35% vacant by square footage…which is a lot. This affects the NOI (see #1 above), which in turn affects property value. So I got a good property, albeit financial distressed, for a low price. My game plan was to make some small cosmetic improvements and patiently wait for the vacant spaces to get leased, all the while bending over backwards for the existing tenants to make sure they stayed. Once I got the spaces lease up…it took more than two years…and with rent increases, the NOI has almost tripled, which results in a current value of around $1.2M, of which I owe $340k to the bank.


The $5k a month is cash flow. This is after all expenses (utilities, repairs, property taxes, insurance, etc) and debt service (loans). Like I said, money in my pocket, before income taxes…different subject. But I will say in addition to depreciation, your own children under 18 as employees are gold mines.

Property taxes are $14k a year. I challenged the assessor’s value last year and won. Most property owners pay an attorney to do this, but I did it myself. It was easy. Utilities around $1k a month, depending on season. I pay for almost all exterior repairs. But you can structure new or re-negotiated leases however you want. For example, this property went through a rash of broken windows (vandalism) that I kept paying for. So the next time I negotiated a new lease I made sure it had the tenant responsible for windows. The world is your oyster when it comes to leases…as long as you can get a tenant to sign it.

It’s not necessarily easy money, there have been plenty of frustrations. But I have learned a ton, it’s been moderately enjoyable, and the return is unreal. Seriously, look into it and don’t be afraid of the unknown.

Awesome write up. For those first two years while you were being patient trying to get it leased, were you making a loss? Did you find the property online or through a real estate agent or something? (I haven't done a ton of research on this topic aside from casually browsing loopnet occasionally, so I apologize for my ignorance :D)

It was cash flowing, but just barely. Around 1k a month, which I saved in the property’s own bank account (it’s an LLC, always put an investment property in an LLC). I was a little worried that when I did get new tenants to fill the vacancies, they would want tenant improvements (TI), which I wouldn’t have the cash to pay for. But like I mentioned, everything is negotiable.

I found this particular property on LoopNet, which is kind of like Zillow but for commercial real estate. However in the CRE realm most deals are made off-market, which means by the time a property gets advertised on LoopNet, it’s already been passed over by those in the know. I did luck out with this one, every once in a while you’ll find a good deal on there. But it’s a great way to see properties in your market at a glance. I would highly recommend building relationships with as many people as you can in the industry. Befriend property brokers, lenders, insurance brokers, etc. I’m a total introvert, so this was difficult for me, but I try. This is how you find those off-market deals. You want to be at the top of their list (or as high as you can get) when they hear about a property that might be for sale. I have also just driven around neighborhoods looking for apartment buildings that looked like they weren’t being taken care of. I look up the owner on the county assessors website and cold call them. Haven’t had success with this approach yet, but it’s just a matter of time. This is the way to really find those good deals. You want to figure out how to solve the owner’s problem. Maybe they’re old and not interested in owning property anymore. Maybe they moved out of state and are trying to manage it long distance. Make it an easy decision for them to sell you their property. Good luck!

I started with single family rentals in 2008, but quickly moved to CRE. My experience resembles FMH's.
I developed my CRE plan while.on reserve in 2010. I went so far as to write a business plan with financials that I took to the bank once I filled in the property specific numbers. Using a $100k down payment and 900k of SBA 504 financing I bought a 270 unit self storage facility from a disinterested owner. It was listed by a "non storage" broker and was languishing on Loopnet The existing manager stayed with the property, but retired a few months after acquisition when work expectations were made clear. With proper management, facility improvements and $250k of expansion (on borrowed money) the facility was valued at 2.5M within three years. The increased cash flow supported a 900k cash out refinance that funded subsequent acquisition and development.

This exceeds typical leverage and gains available in the market today. It also took hours of direct involvement. Today, a similar property requires 20-35% equity and would take 3-5 years before refinancing the initial investment back out. It still beats most other investments.

At the opposite end of my investing spectrum, are apartment syndications where I've never even seen the properties. I've lost money on one and made double digit IRR on others. Returns are dependant on the syndicator and the property. DYODD. Learning multifamily valuation and financing is critical. Bad financing terms can sink a well run property. I learned the downside of bridge loans and Fannie floaters and rate caps over the last year. Properties with long term agency debt are providing good distributions.

In the middle sits a STNL (single tenant net leased) property. It was purchased in 2021 with cash in a 1031 exchange. I visited the property once after it was under contract. The real inspection was from an inspector I hired. Since then I've been inside the property twice and driven by two other times. Rent comes from a national brand tenant on the 1st of every month. At some point I can get loan and use the capital for another investment, until then the net rental income is 7% of the purchase price.

Most real estate horror stories include one or more of the following:
-Unscreened tenants-Government subsidized rent
-Condos
-Coastal ie cyclical markets
-Anti business sentiment (blue states)
-Lack of DD in the property or syndicator
-Speculation on appreciation
-Ignoring the importance of cash flow.
​​​​​​

Y’all take this to the side hustle……

Excellent info, both to FH and Gunfighter, much appreciated.

Question - did you search within the local area (ie, within a hour) or did you look further afield? Also, I'm assuming that a property with existing tenants or mostly filled with tenants is much better than a vacant property?

Moving the real estate conversation to the Side Hustle thread.

Great info and nice write up! Glad it’s working out well for you.

getting the thread back on track
 

Hey all - can anyone excerpt what first year pay & min guarantees are with the new contract? Profile not updated yet...

Actually, digging around I found this link which provides answers if correct (65 and $108/hr):
https://d2r1lrrqctgamh.cloudfront.net/delta/TA/TA%20Reference%20Guide.pdf

[QUOTE=Continuingappch;3606120]Hey all - can anyone excerpt what first year pay & min guarantees are with the new contract? Profile not updated yet...

Actually, digging around I found this link which provides answers if correct (65 and $108/hr):
https://d2r1lrrqctgamh.cloudfront.ne...pdf[/QUOTE]

http://contract2019.org has what you are seeking.

Really enjoying the investment discussion. Truly. Buuuttttt... does anyone know when crew meals are going to start showing up? Im talking actual, planned on crew meals, not just the "hey I have a couple meals left over if you guys are hungry" deals. The Implementation MOU just says "no later than" August. I've got a couple 5:10-5:20 domestic legs coming up this month and just wondering what to plan for.

Plan for August 1.

Crew Meals, and all other deferred items are listed in MOU 23-01 "Deferred Implementation"

I read it as new hire (i.e. indoc/training/OE) pay is now 2.5hrs/day at min rate ($108.34/hr). That equates to 75hrs per 30 days until completion of OE, then regular line/reserve guarantees thereafter.

Yeah, i read that. A lot of items are "no later than". Was just wondering how many of those items the company was going to wait as long as possible on vs implement the low hanging fruit early.

Does it cost the company money to implement? Low hanging fruit is stuff that is advantageous to the company.

The Alan Lee paintings really are fantastic. Well worth it, although it’s sold out now. Get one of the later editions on India paper for your travel needs, though those are eBay only at this point as well and several hundred dollars. Considering the folio editions are already around 3k on eBay, just tell your wife it’s a good ROI:D

Which ones are those? Be specific.

They will be self evident when they occur.

I don't really care enough to indulge this for you. But if you believe the company will a) implement things that cost money ahead of the agreed deferral time, or b) defer things that save them money, I have a bridge for sale that you might be interested in.

The request was for you to say what items save them money. I'm interested to know as well because I can't think of any.

He has no clue. He just wants the ability to say I told you so.

Yeah. You got me. This is my first contract, so I was just guessing at how this will probably go.

Why can’t you answer his question? Just curious