[willholloway]

I took a break from coding/ops for other people for money a couple years ago to pursue a startup idea I had. It was a cool project but I decided it wasn't a great business idea due to regulatory issues with the field.

After that I had a choice to go back or do something else. I saw an opportunity to do a real estate development deal and I went for that.

I liked doing the first real estate project so much, I put together a group of investors and am pursuing a larger deal right now.

I do more interesting programming now than when I was working for others and keep my skills fresh. I really like real estate development for a number of reasons.

1) Much better tax treatment of income. Rents are not subject to self-employment taxes, a 15.3% discount.

2) Real estate benefits from access to the fountain of all money, the federal reserve. It's national policy to support RE prices.

3) The ability to do a project, put in a lot of work, and at the end own something valuable in perpetuity.

After a year of a very large ops contracting project the checks just stopped. I really didn't like that.

4) Real estate is a market that is very local, with a lot of opportunities for advantage through information asymmetry. It is also something that resists reaching global scale and the race to the bottom competition that induces, and resists automation.

5) I really like the physical quality of the work. I physically feel better due to all the running around and not sitting in front of a computer for 8 hours a day.

All of my software and hardware experience benefits me. I see all kinds of possibilities to save time/money with these projects with software. One day I will probably create a startup in the RE space.

Most importantly there is a zen like nature to the work I do now, and I do a lot of the work on these houses myself, as the going rate for skilled craftsmen is not far off from a remote dev contractor in a lot of cases, and its easy to do many more hours than many employers would be willing to pay for.

Very importantly, the value created is put into the property which is only realized through higher rents (taxed as passive income) and/or a capital gain if the property is sold. This probably means that in the long run I take home more money rehabbing a house than I would coding for cash, due to appreciation and better tax treatment.

My only regret in all of this is that I didn't do it sooner. In America real estate investing is a pretty reliable path to wealth for the right kind of person with the right kind of eye.

[cfitz]

I am in a similar place but - very gratefully - at an earlier point in my life. For a young person looking to funnel "tech profits" into real estate, what educational resources do you recommend (if any) for mastering this field? The tangibility of real estate and the ability to get your hands dirty with property improvements engages me in a way that software cannot.

[willholloway]

Well there is Bigger Pockets, and some of their video podcasts on Youtube are quite good when they interview a knowledgeable guest.

They are pretty honest about things, but I feel like there's kind of a similarity with their messaging and the passive income/get rich quick world, although they will definitely tell you it's a get rich slow method, but it sometimes has that kind of feel to me.

But they cater to a lot of newbies. I come from a different perspective because my father was a landlord of a decent number of properties and I grew up in it.

I would say the biggest predictor of success is going into the right market and finding a good deal. Your profit or loss is determined by the deal you make.

There are a lot of people that buy houses far away from themselves and get property managers to operate for them for a fee. I personally would never buy a lot of properties far away from my home, and I feel like a lot of the people that do, do it from a kind of Dunning-Kruger false confidence, or maybe just a way lower anxiety level about what could go wrong than me.

You want to walk the property, you want to keep an eye on things, you want to make sure things are taken care of because you have a lot of liability as a landlord, and that's why I would only buy fairly close to where I lived.

Also at the level of buying and renting single family homes, duplexes, triplexes and so on, if you start paying contractors to do work every time something breaks it's going to eat into profit margins or possibly destroy them, at least until you've owned the property for a long time and rents have risen.

At that level of investing your profits are going to come from the work you put in yourself, or the price appreciation of a rising market over the long term. It's different if you can do bigger deals, larger buildings with more units.

If people are interested I might start blogging about real estate investing for developers.

[mod]

I'm interested.

Also, I'm curious how far you think is too far. And/or how often you run by a property you own.

[zavulon]

What exactly do you do in real estate, if you don't mind me asking? Do you buy/renovate/sell, build from scratch, do you do residential/commercial, etc? And how did you get into it?

[willholloway]

Buy, rehab, rent, refinance distressed residential property. I also manage two commercial properties.

I was born into it, but then didn't want to do it after college. I got back into it because I saw an opportunity that was too good to miss and I took it, now I'm hooked and expanding.

Some of the reasons I stayed away have changed. Just one example, paints used to be fairly heavily laden with VOCs and breathing that stuff is terrible for you for a number o reasons. Now zero/low-voc paint is really good and cheap. I wouldn't have wanted to paint an entire interior of a house with that stuff back then, now I am like Michaelangelo and the house I am working on is like my Sistine Chapel :)

[kilroy123]

I would also be interested in getting into real estate. The part really his home for me: "The ability to do a project, put in a lot of work, and at the end own something valuable in perpetuity."

[willholloway]

It's definitely worth looking into, look for good deals and the money is there if you can find a good enough deal, if you have some wealthy contacts looking for an opportunity. High income earners are in need of three things:

1) Opportunities for their money to make money 2) Diversification 3) Tax deductions and going into a partnership that owns RE can do this for them.

The thing about real estate is its not passive like investing in equities is. You can get property managers and maybe if you find a really good one it will work out ok, but no one will care about your property the way you do. So if you can find good deals, and have the skillset to work them productively and can show that, you can find the money to buy them even if you can't qualify for bank financing. It's not going to be as cheap as bank financing, but it's possible.

Software developers with a good W-2 income can get really good mortgage rates from banks right now however. If you can do that, do that as much as you can. But you will find that doesn't scale as fast as you might like. That's where private money makes sense.

Internet startups are really cool and can mean big growth, billion dollar growth is possible, but that's a winner take all market with high failure rates.

I shot for the stars with internet business and had some success but never had the huge exit I really wanted in the time frame I wanted it in. I had really wanted to make big FU money by the time I was 27 or so, so I could live the big, free life I always thought I wanted.

But then I realized I was very free when I was growing up, and that freedom came from the rental properties my father built and managed, and I wanted to recreate that life for my children, and I couldn't take big chances like I used to. I needed something that would definitely work if I worked hard at it.

And a foundation of rents will let me take big chances again in the future, but then there really won't be a chance of failure, because the default mode will be some comfortable life collecting rents.

It's pretty cool when people just constantly owe you, and pay you just for owning something.