Investor · Boulder, CO · Member since 2015 · 118 posts · 16 votes
I am currently setting up my goals and would like to be realistic in my projected returns, because a couple of percentage points make such a huge difference.
My goal is to use $60K of my own cash from income or to use equity in my properties to buy 1-2 properties per year using leverage. If I use a 15% (in cash flow only) annual return on my new investments, at age 40 (11 years from now), I would have $1.68 Million, and at age 50, over $8 Million. These numbers are not adjusted for inflation and also don't include appreciation and loan pay down.
Has anyone been able to consistently average a 15% return long term on their cash using leverage?
The short answer Brian is "yes, but, results may vary", and one BIG variable your not accounting for is that NO real estate has absolute static numbers; there is vacancy to consider, general maintenance but most importantly to never ever forget when doing longer term projections is Deferred Maintenance, those things that DO wear out over time such as roofs, exterior paint/ siding, maybe asphalt, these are some big expenses that if not accounted for can really hit hard.
I consulted for a private REIT whom had similar goals, so we focused on buys that had newly replaced and upgraded systems like roofs, hvac and so on, so that we had some considerable time of stable numbers without that impact.
Next item is how about rent increases? your COC ROI should improve over time, not remain static and especially not decline, in theory (finger crossed).
Remember the 3 commandments; we make $ when we buy, we retain $ when we renovate, and we reap it when we capitalize it (sell/ rent). It's all about the buy, everything else is adjustments to that.
@Curt Davis I have seen people use a number for Capex and a separate expense for maintenance. Not sure if 5% on each is a good general rule of thumb. Anyone?
Hey guys, I'm sure I'm WAY off topic for this forum but everyone who's posted here really knows their stuff. So with that being said can anyone give me some advice on how to analyze properties? I've been using the BP rental calculator and it ask to input ARV and Estimated Repair Cost. Is there a base line number or % I can use that won't screw up the analysis? I'm not new to realestate, just new to doing it the right way. Thanks in advance. @Jeff B.
Hey @Adam Bird, how about contributing some real knowledge or information to the community, instead of soliciting your wares again and again on every single Detroit thread on BP?
The Harvard Endowment Fund I think does better than 15% and Buffet too. Havard has around 12% in RE and about half of that is land/resources. Their 2nd largest stock holding is in cemeteries/furneral homes. A couple billion in that I think. The tenants are long term.
@Joseph M. BPs calculator can enter those factors.
@Richard Dunlop So one might think for Harvard after doing RE for 300 years+ figured out some of the best tenants are actually dead tenants. They don't complain very often and the turnover is very low.
Hey guys, I'm sure I'm WAY off topic for this forum but everyone who's posted here really knows their stuff. So with that being said can anyone give me some advice on how to analyze properties? I've been using the BP rental calculator and it ask to input ARV and Estimated Repair Cost. Is there a base line number or % I can use that won't screw up the analysis? I'm not new to realestate, just new to doing it the right way. Thanks in advance. @Jeff B.
Ramon, are you trying to analyze property for rent or to flip? It sounds like you are using the flipping calculator. Is that what you are trying to do?