Yes very true but that is incredibly high risk

 

​​​So is flying, yet hear we are.

 

This exchange reminded me so much of this King of the Hill bit

 

"guns and gun accessories"

 

The biggest problem with any of this is you really need to be into it, or it becomes a huge PITA, you start to slack off or never fully engage. 90% of the result comes from the last 10% of effort.

That means if you're doing it solo, you have to be all in on your days off, and probably your SO's days off as well. Answering phone calls from angry tenants, dealing with retail contractors, insurance companies, banks, government paperwork, lawyers, etc. Fallen tree on the roof, tenant twists an ankle on the steps, those sorts of things absorb a huge amount of time. It's going to take some real effort until get to be where it's on autopilot, or earning enough where you can shunt it off to a management company (or start your own, which is another set of headaches). It is a LONG term play.

If you're really into it, it's not really work. If you're not, it's one big headache after another, and you're probably better sticking to the index funds, and flying on days off if you want.

 

Airline pilot travel schedules make hands on landlording a difficult task and poor choice in most cases. When you consider the hourly/daily pay rate in our profession the opportunity cost of working "in" your business instead of "on" your business is too high. It is far better to hire/delegate the hourly tasks. This can be problematic in the SFR space, although not impossible. I've met several out of state investors who BRRRR their SF properties. It takes education, networking and a fair amount of trust.

Understanding the value of your time both quantitatively and qualitatively is a key factor in successful real estate investing while working a full time job. Over the last few years, I've put considerable effort into separating which tasks I should do, which tasks I should hire and which things shouldn't get done. Going through that exercise will shape your investing approach. The only SFR I've done in the last decade was a hands on training exercise for my daughter. The ROI on money was high, but the ROI on time was insignificant. The value was in working with my daughter.

SFR is the domain of middle class workers aspiring to me millionaires. It is a great place to start and a good option for early career airline pilots. 30yr fixed rate financing contributes to the low risk nature of this asset class. Mid career pilots well into six figure incomes should consider being LPs in larger commercial deals or direct owners of larger properties like storage facilities, RV parks, apartments or NNN commercial property. Financing on larger properties generally isn't as safe as the 30yr fixed rate mortgages available in the SF space, so you need to learn and DYODD far more than SF. My personal RE portfolio looks nothing like it did as a new hire because as income and net worth increase the ROI on time becomes more of a factor than ROI on money.

I agree with almost all of NuGuy's assessment. Even though RE is a LONG game, it's a much shorter game than index funds in a 401K. You can build a retirement income in 10 years vs 30.

 

While this timeline can be true, it requires more time and education to perform the due dillegence bercause the consequences are high if you don't. The index fund is reliable and completely free from time and effort consumption. Once I got to the realization that my SFR investments would never yield anywhere near the value of my time, I was at an inflection point. While there are opportunities for commercial deals and larger properties the learning curve can be steep and costly. You really have to be all in at that point and operate as a business. Lack of knowledge and failure to comprehend all aspects of a deal have cost me. I got burned and realized my education was lacking, and the time and effort to gain that knowledge was a greater commitment than I was willing to make. This isn't an argument with your RE investing but a warning to those who might consider the next level from SFR when their time becomes the trigger point. The 10 year investment timeline still requires a great deal of time commitment but it centers around learning the business and deal structures. Admittedly, it was too much for me. The SFR world was a great start but transitioning to a passive investor took me back to equities. DYODD indeed and know that it will be time consuming.

 

These are two nuggets of wisdom worth highlighting. The % return on money can be great in SFR, the return on time depends on what your alternatives are. When the tradeoff is a 3 day trip (even at straight pay) the calculus changes. As income grows, Return on Time becomes a bigger factor. SFR is very forgiving and the 30 year fixed rate mortgage is a life perserver if you jumped into the deep end of the pool. It is rare to find an equivalent financial tool in the commercial space, so conservative underwriting is a must. One huge plus side on the commercial space excluding apartments is that you don't have judges, politicians and attorneys advocating free rent for deadbeats. Your tenants are mature adults that don't have a government babysitter playing Robin Hood.

 

IMHO as high income airline pilots with access to even more earning power on our days off, SFR and heck even property less than 10 doors is not worth out time. As accredited investors being a limited partner on a large apartment complex or self storage unit is far more efficient use of time and resources.

Only caveat I would add is if you have a spouse that is either a real estate agent and/or willing to manage the property then SFR or AirBnB could yield substantial tax savings as a pilot could write off the depreciation against pilot W2 income if you can prove "material participation". DYODD/Consult with a tax professional

 

Pair the real estate professional with combined activity grouping for maximum tax benefit. DYODD and consult with a CPA who knows and preferrably invests in RE. This can be a huge windfall for high W2 earners. SFR is the most common way to qualify as a "Real Estate Professional" but there are other avenues including direct ownership or GP on larger properties. Cost segregation and bonus depreciation can make a huge difference when you are in a high marginal tax bracket.


I'm curious about the calculations for a pilot to qualify. Is the 50% of work based on credit hours, block hours, duty hours, TAFB hours, hours spent on reserve? If I am managing contractors while on LC or SC does that count as RE hours, pilot hours, both, neither? Can a single pilot get a RE license to qualify without meeting the 50% or 750 hour requirement?


How to increase your net worth in real estate:
1-Equity capture or value add
2-Cash flow
3-Loan amortization
4-Property appreciation
5-Tax savings