Newbie Post w/ a question on properties in populated cities

[Jonah Kubath]

Exciting new year and new opportunities. In 2022, I am looking to buy my first rental property. I have just passed the one-year mark on owning my first house (which I live in and rent out spare bedrooms). I am looking to buy in the Arlington, VA (near Washington DC) area. From what I have seen so far, a lot of the houses don't have the CoC ROI (cash on cash) that Brandon talks about (%10-12).

QUESTION: Do you have a different CoC ROI expectation for properties in very populated areas?

I definitely have more questions, but I will start with one for now.  Thanks for any tips / thoughts you have!

[Russell Brazil]

Yield in an asset, including real eatate, is a function of the markets perceived view of risk in the asset and market.

DC, and Arlington, are amongst the lowest risk markets in the entire country, and thus will have incredibly low yields on purchase.

Part of that risk profile though is how much future appreciation and rent growth are anticipated in said markets. Astute investors are not just buying todays cash flow.....they are buying the futures cash flow. On average for instance much of DCs rents have doubled in the last decade. 

Take a typical rowhose in Petworth for instance that rented for $2,000 in 2010/2011....today it rents for $4,000. So if yoy bought in 2010, it was cash flow neutral. Today it cash flows immensely.

Try to start thinking 4 dimensionally....focusing on how the asset performs over the course of time.