Advice on searching for/acquiring a cash flowing rental property

Jewel B.Pro Member

New to Real Estate · Lehigh Valley, PA · Member since 2021 · 352 posts · 120 votes

3y

Are you looking for turnkey properties only?

1 Reply

Account Closed

OP

Rental Property Investor · Raleigh · Member since 2022 · 18 posts · 18 votes

3y

Quote from @Jewel B.:

Are you looking for turnkey properties only?

No, I'm potentially open to properties that need a little bit of work too. As long as the numbers make sense as an LTR after renovations/repairs.

2 Reply

Joseph Crunkilton

Rental Property Investor · Oregon City, OR · Member since 2020 · 324 posts · 780 votes

3y

Finding deals is the toughest part about real estate. I spent a long time driving for dollars, cold calling etc and found very few opportunities.

I connected with @Zach Lemaster and was able to purchase a couple cash flowing rentals with his team. I didn't have to source any deals and have been making much more than I would've on the open market.

Have you ever considered purchasing a turnkey?

3 Reply

V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

3y

Quote from @Account Closed:

So a little bit about my background before I dive in: I previously have owned rental properties before (back in 2018 - 2019). Those properties we all bought in cash (no leverage) they were lower end properties that cash flowed and already had tenants. My business partner bought me out near the end of 2019 or so and we parted ways amicably. Then Covid happened, and I wasn't involved in the space for a few years. My main job is working in tech as a project manager. I have capital, but most of it is already fully invested at this point. The area we had been buying in has since appreciated and the properties no longer cash flow, he has since exited real estate altogether (and moved out of state as well).

I'm getting "re"-started now again. I have my LLC set up, bank account, liability insurance, etc. and I've been doing research and analyzing properties. I want cash flow, preferably through SFH. But it seems impossible to find anything at the moment. Which means I'm probably either A. Not searching the right way, or B. Not searching in the right markets. So I'm open to advice on what to change. Below, is what I have been doing so far over the past few weeks:

I live in Raleigh, and I know it's extremely unlikely I'm going to find any kind of cash flowing LTR properties here (I'm not open whatsoever to STR or MTR that is a non-starter for me). For me, appreciation would be a nice inadvertent bonus, but I care far more about cash flow and am prioritizing that. So I've only been looking outside of the Raleigh area, trying to stay in state for now, and looking in Greensboro, Fayetteville, Rocky Mount, Winston-Salem, and Greenville. I've been primarily looking through Zillow, REIA, and realtors so far.

I've been debating about "driving for dollars" on the weekends an hour or two outside of Raleigh, but wouldn't be able to do it during the week because of work. Price wise I want to aim for properties that are below 290K and that could still net me $200 /mo with no more than 10% down. But so far, those criteria seem to be unrealistic. I have the money to put more down, but I'm trying hard not to in order to preserve the money for expenses or more down payments for other properties.

I'm open to changing my searching strategy or property type (going to condos or multifamily instead of SFH, etc.) or partnering if I need to after vetting the potential partner(s). Not sure what else I should be considering changing at this point. Open to suggestions though if anyone has advice.

In terms of what the "numbers" are: I typically assume:

5% for maintenance and repairs

5% for vacancy (sometimes more in certain markets)

5% for capital expenses

8% for property management

Then additional amounts for whatever rates are for property taxes, insurance, HOAs, etc.

Rental income I typically pull from either bigger pockets, Zillow, or from a local property management company's estimates, and from what similar properties are renting out for.

You're explaining pretty much what all of us have found out. With the market escalating post covid and the interest rates escalating this calendar year, it's been very hard to find anything. I'm sure some are available, you just have to keep digging.

0 Reply

Steven Taylor

Member since 2021 · 24 posts · 14 votes

3y

@Account Closed I am in the same boat, looking for properties (multifamily) that cash flow from day one with specific criteria, and not much is out there. I', a buyer in any market, however..... my 2 Cents and high-level opinion:

I believe patience is key right now. Maintain capital preservation and keep some dry powder given where I see the market (entering Phase 3, hyper-supply). We are already seeing more price reductions, rent increase slowdown, and increasing vacancies. There is usually a 12-18 month lag in housing drops vs wall street paper. I think in the fall of next year there will be some tremendous deals on the market! In the meantime, you can find some places to park your money and get ~3-4%. I always remember the profit is made on the purchase. Right now there are a lot of sellers in denial about the reality of the market (Hint it's past its peak!).

S

3 Reply

V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

3y

Quote from @Steven Taylor:

@Account Closed I am in the same boat, looking for properties (multifamily) that cash flow from day one with specific criteria, and not much is out there. I', a buyer in any market, however..... my 2 Cents and high-level opinion:

I believe patience is key right now. Maintain capital preservation and keep some dry powder given where I see the market (entering Phase 3, hyper-supply). We are already seeing more price reductions, rent increase slowdown, and increasing vacancies. There is usually a 12-18 month lag in housing drops vs wall street paper. I think in the fall of next year there will be some tremendous deals on the market! In the meantime, you can find some places to park your money and get ~3-4%. I always remember the profit is made on the purchase. Right now there are a lot of sellers in denial about the reality of the market (Hint it's past its peak!).

S

Obviously it's all market specific, but there's still a fundamental short amount of supply. I don't think we'll see a nation wide crash, I just feel we'll see super low turnover of homes. In some markets, the domino effect can happen(I suspect STR markets and other markets with high % of new builds coming online q4 22-q3 23). Some markets are not past their peak at all, they still will sell higher YoY. And next year, will still be worth more.

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OP

Rental Property Investor · Raleigh · Member since 2022 · 18 posts · 18 votes

3y

Quote from @V.G Jason:

Quote from @Steven Taylor:

@Account Closed I am in the same boat, looking for properties (multifamily) that cash flow from day one with specific criteria, and not much is out there. I', a buyer in any market, however..... my 2 Cents and high-level opinion:

I believe patience is key right now. Maintain capital preservation and keep some dry powder given where I see the market (entering Phase 3, hyper-supply). We are already seeing more price reductions, rent increase slowdown, and increasing vacancies. There is usually a 12-18 month lag in housing drops vs wall street paper. I think in the fall of next year there will be some tremendous deals on the market! In the meantime, you can find some places to park your money and get ~3-4%. I always remember the profit is made on the purchase. Right now there are a lot of sellers in denial about the reality of the market (Hint it's past its peak!).

S

Obviously it's all market specific, but there's still a fundamental short amount of supply. I don't think we'll see a nation wide crash, I just feel we'll see super low turnover of homes. In some markets, the domino effect can happen(I suspect STR markets and other markets with high % of new builds coming online q4 22-q3 23). Some markets are not past their peak at all, they still will sell higher YoY. And next year, will still be worth more.

^ Yep I agree. Raleigh is definitely going to continue to appreciate for instance (no end in sight atm). Also, I agree with your earlier post as well, I figured I'd already found out what is likely to be a common experience, but I just wanted to sanity check my approach and see if there was a major problem with my approach. Good to know I need to keep plugging away (and I will). I'll keep networking, put together a lead generation campaign, etc.

1 Reply

Account Closed

OP

Rental Property Investor · Raleigh · Member since 2022 · 18 posts · 18 votes

3y

Quote from @Steven Taylor:

@Account Closed I am in the same boat, looking for properties (multifamily) that cash flow from day one with specific criteria, and not much is out there. I', a buyer in any market, however..... my 2 Cents and high-level opinion:

I believe patience is key right now. Maintain capital preservation and keep some dry powder given where I see the market (entering Phase 3, hyper-supply). We are already seeing more price reductions, rent increase slowdown, and increasing vacancies. There is usually a 12-18 month lag in housing drops vs wall street paper. I think in the fall of next year there will be some tremendous deals on the market! In the meantime, you can find some places to park your money and get ~3-4%. I always remember the profit is made on the purchase. Right now there are a lot of sellers in denial about the reality of the market (Hint it's past its peak!).

S

Yep, I do think Raleigh will continue to appreciate, but I have to say, I have seen slight price declines already in my neighborhood over the past few weeks/months. Around 5K price declines so far on average. Listings are also taking slightly longer to sell. I do think we'll see some more moderation next year, but I also think we won't see a crash. Most of the folks that have bought houses (unlike 08) have pretty good credit, some savings, and then locked in long term low interest rates. But at the same time, builders that are doing new construction are offering pretty great deals atm as well. It's kind of weird at the moment I guess. The opportunities will definitely come, just got to keep plodding along and looking I guess.

1 Reply

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OP

Rental Property Investor · Raleigh · Member since 2022 · 18 posts · 18 votes

3y

Quote from @Joseph Crunkilton:

Finding deals is the toughest part about real estate. I spent a long time driving for dollars, cold calling etc and found very few opportunities.

I connected with @Zach Lemaster and was able to purchase a couple cash flowing rentals with his team. I didn't have to source any deals and have been making much more than I would've on the open market.

Have you ever considered purchasing a turnkey?

Yes, I'm open to buying anything that makes sense financially and can be sustained. Turnkeys I've bought and owned before, so definitely open to it if it cash flows. Thanks for the recommendation, I'm checking Zach out now, appreciate the advice/pointers!

2 Reply

Cory J ThorntonBusiness Member

Real Estate Agent · Raleigh, NC · Member since 2021 · 240 posts · 281 votes

3y

@Account Closed - There are still cash flowing opportunities out there but none that I have found on the MLS. Everything I know of that checks the cashflow boxes has been coming through relationships and off market leads.

Around the time you backed out of real estate my wife and I really started to focus on building our own portfolio. So far we have picked up six SFH, a small office building and a building lot all off market. We did this is Franklin County which is north of Raleigh, but I am sure this can be repeated in other counties adjacent to Wake County.

As part of our dive into real estate we have also purchased a small Property Management company and brokerage office in Louisburg NC.

Here are some of off market strategies we have been trying ... some of these have worked, and some of them just lead to having a larger network.

- Get on the cash buyer list for every wholesaler in and around Raleigh.

- Spend time driving for dollars. If you see an empty or rough looking house, talk to the neighbors on both sides and across the street. Eventually someone will have the story on the house and want to see it cleaned up enough to give you the owner's contact info.

- Schedule meetings with the town planner or town administrator in every small town that you define as a target for investment. They know who the landlords are that don't take care of their property. They also have an inventive to help you get in touch with them. All of these leads will come with heavy renovation costs and tenant issues, but those get priced into the buy price (to the extent possible).

- Do you have any family or fiends who have owned rentals for long periods of time? If you do, see if they would sell you their worst property to help you get started. If not, then see if they know of anyone looking to sell. People who own rental properties know people who own rental properties.

It takes work, it takes patience, but you can still find cashflow opportunities.

Best of luck on your hunt for cashflow!

If there is ever anything I can do to help, or if you are house shopping north of Raleigh, feel free to give me a shout.

7 Reply

Jared HottleBusiness Member

Real Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes

3y

I think drive for dollars is a good plan. Go try it and see what it comes up with. Has been my best ROI.

[email protected]319-288-5382

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Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

3y

You can find wholesalers on Biggerpockets and through networking. Let them do the leg work and bring you the deals. It can be well worth the money if you find a good one. Make sure you give them a good idea of what you're looking for so they don't waste time bringing you fourplexes when you only want single-family.

I think you are walking a dangerous line with your calculations. The average cost of maintenace around the country is 10% of the annual rent income. 5% is probably OK, but depends on your skills and the market. 5% capex depends on the age of home and systems. 8% for PM will buy you a discount agent that gives you discount service. Quality PM charges what they are worth and they can often pay for themselves through reduced vacancy, longer stays, higher rent rates, etc.

When it comes to calculating returns, I prefer to err on the side of caution.

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Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

3y

TK absentee investments are for people looking for capital preservation, not cash-flow.

Double your PM cost estimate. You'll burn through your 8% with 1 fill-fee.

Want cash-flow? Buy below market value in your backyard and take care of it yourself.

1 Reply

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OP

Rental Property Investor · Raleigh · Member since 2022 · 18 posts · 18 votes

3y

Thanks everyone for the advice. @Cory J Thornton: Really great advice, I definitely appreciate it. I think my focus (aside from continuing to research/analyze properties) definitely needs to shift a little to getting better lead generation for off market opportunities. All the pointers you put down are spot on and I'm going to start doing those and tracking metrics against the time I spend on this.

@Jared Hottle: Yep, agreed on driving for dollars, I'll need to make a plan for the areas I'm targeting and try to visit those on a regular cadence, even if I'm only able to do it when I'm not working.

@Nathan Gesner: Thanks, I'll definitely incorporate this into my lead generation activities and start seeking folks out who are wholesalers. I'm sure you're correct about the lack of conservatism in my calculations. I'll keep this in mind and try to stick to more conservative numbers. I think I was subconsciously putting in low numbers just to struggle to get potential opportunities to work, but of course, that's wishful thinking. Part of why I posted my assumptions/numbers down in my first post was to get exactly this kind of feedback (thank you!) for if I was being either overly conservative, or low balling things. This is very good feedback. Thanks.

@Steve Vaughan: I definitely understand your point, but I guess it depends on what "turn key" means. I've bought turn key properties that definitely cash flowed. They needed a slight amount of work but had tenants in place who paid on time in full. But we still analyzed the properties, still negotiated, still visited the properties in person, did due diligence, etc. We were also employing a property manager that we had personally independently vetted that was not linked to the seller, and we made sure we were "managing the manager" persistently afterwards. I think Chad Carson has a pretty good video on the pros/cons of this: here. In the end, there are no shortcuts. I also agree with you that buying below market nearby (in my view it's too difficult for me to do in Raleigh given my current time constraints, but I could do it an hour or two out) and trying to take care of as much as possible in house is the ideal goal.

1 Reply

Chris Martin

Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes

3y

My general observations only.

I'd suggest people 'don't fight the tape'. Or better, 'don't fight the fed'. In other words, don't force a deal where it isn't. There is a reason all the iBuyers except OpenDoor (and they are in trouble) have left the local (Raleigh/Durham) market. They can't make money. I see too many motivated buyers, wanting to 'do a deal' when conditions are not ideal. IMO this leads to mistakes, like over optimistic projections of rents or expenses just to self-convince that a prospect is 'a deal'. See the last paragraph.

Zillow Homes bought about 408 homes in Wake County from 3/22/21 to 1/27/22. I say "about 408" because some deed transfers were intra-company (like via Zillow Homes, Inc., Zillow Homes Property Trust, Zillow Homes Property Trust /by Admr, Zillow Group, Inc., etc.) and I didn't want to walk through all the records by hand. They have zero (none) now. Offerpad bought about 166 homes in WC from 3/29/21 to 12/1/22, and only six (6) in 2022Q4, down from 11 in 2022Q3. They still have 12 houses. One (REID 0171391) sold yesterday for $295,000 that they bought on 6/14/22 for $244,000. If anything, the OP should take a look at the inventory of this seller who may be a motivated seller, which is what a buyer wants, to close out their remaining properties in their failing/failed iBuyer campaign.

BTW, like 2009-2011 in the Raleigh area, new rents are under pressure. This is according to the new Zillow Observed Rent Index (ZORI.) I would expect this trend to continue because the local market (and arguably most of the US) got ahead of itself. From ZORI, "Rents are falling fastest month-over-month in Raleigh (-1.3%), Austin (-1.2%), Seattle (-1.1%), San Jose (-1.1%) and New York City (-1.0%)."

6 Reply

Tiffany Alexy

Real Estate Broker · Durham, NC · Member since 2014 · 236 posts · 168 votes

3y

You've gotten some great info here! Cash flow is pretty much non existent in Raleigh. Are you open to other submarkets? I've found some decent opportunities in Johnston County. I've found that while the two (cash flow and appreciation) are not mutually exclusive per se, usually a property leans in favor of one or the other. Raleigh is a better appreciation play at this point (though I would caution with a long time horizon). Gone are the days of 19% YoY growth, at least for now.

Also, 10% down is going to make it even tougher. Do you already have a lender lined up that will do that? The lowest I've seen is 15% and that's a rarity.

2 Reply

Account Closed

OP

Rental Property Investor · Raleigh · Member since 2022 · 18 posts · 18 votes

3y

Quote from @Tiffany Alexy:

You've gotten some great info here! Cash flow is pretty much non existent in Raleigh. Are you open to other submarkets? I've found some decent opportunities in Johnston County. I've found that while the two (cash flow and appreciation) are not mutually exclusive per se, usually a property leans in favor of one or the other. Raleigh is a better appreciation play at this point (though I would caution with a long time horizon). Gone are the days of 19% YoY growth, at least for now.

Also, 10% down is going to make it even tougher. Do you already have a lender lined up that will do that? The lowest I've seen is 15% and that's a rarity.

Thanks! I agree. I am, I started to look at other areas (I didn't even bother to really look much in Raleigh since the types of properties I'd want to own don't really exist here in terms of cash flow). Also agreed that properties tend to veer towards one or the other (cash flow or appreciation). So the 10% down applies to if I use a VA loan, live in the property for a year, then move and rent it out. I've considered doing this, but if I just buy a straight rental, I'll be using a conventional mortgage with 20% down.

1 Reply

Sam McCormackBusiness Member

Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes

3y

Quote from @Account Closed:

So a little bit about my background before I dive in: I previously have owned rental properties before (back in 2018 - 2019). Those properties we all bought in cash (no leverage) they were lower end properties that cash flowed and already had tenants. My business partner bought me out near the end of 2019 or so and we parted ways amicably. Then Covid happened, and I wasn't involved in the space for a few years. My main job is working in tech as a project manager. I have capital, but most of it is already fully invested at this point. The area we had been buying in has since appreciated and the properties no longer cash flow, he has since exited real estate altogether (and moved out of state as well).

I'm getting "re"-started now again. I have my LLC set up, bank account, liability insurance, etc. and I've been doing research and analyzing properties. I want cash flow, preferably through SFH. But it seems impossible to find anything at the moment. Which means I'm probably either A. Not searching the right way, or B. Not searching in the right markets. So I'm open to advice on what to change. Below, is what I have been doing so far over the past few weeks:

I live in Raleigh, and I know it's extremely unlikely I'm going to find any kind of cash flowing LTR properties here (I'm not open whatsoever to STR or MTR that is a non-starter for me). For me, appreciation would be a nice inadvertent bonus, but I care far more about cash flow and am prioritizing that. So I've only been looking outside of the Raleigh area, trying to stay in state for now, and looking in Greensboro, Fayetteville, Rocky Mount, Winston-Salem, and Greenville. I've been primarily looking through Zillow, REIA, and realtors so far.

I've been debating about "driving for dollars" on the weekends an hour or two outside of Raleigh, but wouldn't be able to do it during the week because of work. Price wise I want to aim for properties that are below 290K and that could still net me $200 /mo with no more than 10% down. But so far, those criteria seem to be unrealistic. I have the money to put more down, but I'm trying hard not to in order to preserve the money for expenses or more down payments for other properties.

I'm open to changing my searching strategy or property type (going to condos or multifamily instead of SFH, etc.) or partnering if I need to after vetting the potential partner(s). Not sure what else I should be considering changing at this point. Open to suggestions though if anyone has advice.

In terms of what the "numbers" are: I typically assume:

5% for maintenance and repairs

5% for vacancy (sometimes more in certain markets)

5% for capital expenses

8% for property management

Then additional amounts for whatever rates are for property taxes, insurance, HOAs, etc.

Rental income I typically pull from either bigger pockets, Zillow, or from a local property management company's estimates, and from what similar properties are renting out for.

@Account Closed

Hey Skipper, I am in Cincinnati, a prime city for cash flow. There are definitely so SFH for you here to look at! And MFH is you get into that as well. I may be biased, but highly recommend it for cash flow!

[email protected]859-443-4952

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Pat LulewiczBusiness Member

Realtor · Raleigh NC and Greensboro, NC · Member since 2019 · 394 posts · 392 votes

3y

There are some HMLs who will lend to you base on appraised value, not purchase price, so you may be able to get under the 20% DP amount, but you'll have to get some killer deals and hunt down a lot of lenders. Looking in secondary markets (Greensboro, Winston, Fayetteville) and tertiary markets (Wilmington, High Point, Burlington MSA) in NC are great cash flow havens and have done very well on the appreciation front lately as well, as people move from primary markets to secondary/tertiary markets to save money.

I wouldn't discount the Triangle or Raleigh for cash flow, but of course that all depends on what your desired returns are. NE and SE Raleigh has very reasonable price points and the rents are high and still rising. I speak to this often but Y2 cash flow will almost always be higher than Y1 cash flow given rent increases, so you can't just play on a 12 month horizon.

Everyone said Raleigh doesn't cash flow well last year but we bought my client a $240K SFH, we put a $1,600/m tenant in, and it was throwing off $200/m (on paper) for ~4.0% return. I'll also add that they had $3K of principal paydown and $7k of depreciation which completely ate up any tax they would have had to pay on the rental income. Fast forward to 2022, rent went up to $1,800/m and it'll be spitting off $400/m (on paper, but more like $460/m w/o vacancy period) for ~7.6% return. House has also appreciated by at least 10%. Let's not forget another $3k of principal paydown and another $7k of depreciation to offset the entire (higher) cash flow. Without considering the extra tax effects on his W2 income (I'm not a CPA [anymore] and don't want to speak to specific situations), that's almost $14k of tangible net worth over 2 years in the way of cash flow and equity paydown and another $25k of appreciation on the home.

4 Reply

Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

3y

@Account Closed

Beginning investors need to STOP believing all the fluff about rental investing, especially with the overheated real estate market trending to historic norms.

Historically:

Class A takes 3-5 year to positive cashflow, but you get highest relative rent & value appreciation

Class B gives decent amount of relative rent & value appreciation

Class C is mostly cashflow and at the lower end of relative rent & value appreciation

Class D is all cashflow with zero or negative relative rent & value appreciation

So, make sure you understand the Class of properties you are looking at and the corresponding results to expect.

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Simon Ashbaugh

Realtor · Columbus Ohio, Cleveland Ohio · Member since 2022 · 849 posts · 830 votes

3y

Quote from @Drew Sygit:

@Account Closed

Beginning investors need to STOP believing all the fluff about rental investing, especially with the overheated real estate market trending to historic norms.

Historically:

Class A takes 3-5 year to positive cashflow, but you get highest relative rent & value appreciation

Class B gives decent amount of relative rent & value appreciation

Class C is mostly cashflow and at the lower end of relative rent & value appreciation

Class D is all cashflow with zero or negative relative rent & value appreciation

So, make sure you understand the Class of properties you are looking at and the corresponding results to expect.

This is good. I have so many people come to me asking for $1000+ cashflow in an A-B location and their max budget is 100k. You will almost always trade some cashflow for appreciation and vice versa. Lots of podcast syndrome out there lol

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OP

Rental Property Investor · Raleigh · Member since 2022 · 18 posts · 18 votes

3y

Quote from @Simon Ashbaugh:

Quote from @Drew Sygit:

@Account Closed

Beginning investors need to STOP believing all the fluff about rental investing, especially with the overheated real estate market trending to historic norms.

Historically:

Class A takes 3-5 year to positive cashflow, but you get highest relative rent & value appreciation

Class B gives decent amount of relative rent & value appreciation

Class C is mostly cashflow and at the lower end of relative rent & value appreciation

Class D is all cashflow with zero or negative relative rent & value appreciation

So, make sure you understand the Class of properties you are looking at and the corresponding results to expect.

This is good. I have so many people come to me asking for $1000+ cashflow in an A-B location and their max budget is 100k. You will almost always trade some cashflow for appreciation and vice versa. Lots of podcast syndrome out there lol

Agreed, I'm well aware of this dynamic, since I've been doing this for a couple of years. Cashflow is what I'm focused on. I appreciate everyone's advice. I'm getting ready to close on a property in Akron that met my requirements. I'm steering clear of the Raleigh market for the reasons I outlined in the original post. Although my personal home is in Raleigh and it would work as a rental if I move out someday, but only because I financed it at ridiculous once in a lifetime type rates and put 20% down and I've since paid down the mortgage a little bit. But those criteria are very much the exception. Straight LTRs don't really work in Raleigh unless you have some kind of unusual circumstances.

1 Reply

Claude Diamond

Professional · Rancho Santa Fe, CA · Member since 2015 · 49 posts · 39 votes

3y

Quote from @Account Closed:

So a little bit about my background before I dive in: I previously have owned rental properties before (back in 2018 - 2019). Those properties we all bought in cash (no leverage) they were lower end properties that cash flowed and already had tenants. My business partner bought me out near the end of 2019 or so and we parted ways amicably. Then Covid happened, and I wasn't involved in the space for a few years. My main job is working in tech as a project manager. I have capital, but most of it is already fully invested at this point. The area we had been buying in has since appreciated and the properties no longer cash flow, he has since exited real estate altogether (and moved out of state as well).

I'm getting "re"-started now again. I have my LLC set up, bank account, liability insurance, etc. and I've been doing research and analyzing properties. I want cash flow, preferably through SFH. But it seems impossible to find anything at the moment. Which means I'm probably either A. Not searching the right way, or B. Not searching in the right markets. So I'm open to advice on what to change. Below, is what I have been doing so far over the past few weeks:

I live in Raleigh, and I know it's extremely unlikely I'm going to find any kind of cash flowing LTR properties here (I'm not open whatsoever to STR or MTR that is a non-starter for me). For me, appreciation would be a nice inadvertent bonus, but I care far more about cash flow and am prioritizing that. So I've only been looking outside of the Raleigh area, trying to stay in state for now, and looking in Greensboro, Fayetteville, Rocky Mount, Winston-Salem, and Greenville. I've been primarily looking through Zillow, REIA, and realtors so far.

I've been debating about "driving for dollars" on the weekends an hour or two outside of Raleigh, but wouldn't be able to do it during the week because of work. Price wise I want to aim for properties that are below 290K and that could still net me $200 /mo with no more than 10% down. But so far, those criteria seem to be unrealistic. I have the money to put more down, but I'm trying hard not to in order to preserve the money for expenses or more down payments for other properties.

I'm open to changing my searching strategy or property type (going to condos or multifamily instead of SFH, etc.) or partnering if I need to after vetting the potential partner(s). Not sure what else I should be considering changing at this point. Open to suggestions though if anyone has advice.

In terms of what the "numbers" are: I typically assume:

5% for maintenance and repairs

5% for vacancy (sometimes more in certain markets)

5% for capital expenses

8% for property management

Then additional amounts for whatever rates are for property taxes, insurance, HOAs, etc.

Rental income I typically pull from either bigger pockets, Zillow, or from a local property management company's estimates, and from what similar properties are renting out for.

Interesting topic Skipper; The way I find consistent good deals is to budget time everyday.

I just found a great deal on Zillow in Pinehurst NC. a 25K under market developed residential lot in a very upscale Neighborhood. I spend about 30 to 60 minutes a day checking online real estate webpages and formatting them to notify me when new listings appear. I also contact realtors even week outlining the type of homes and terms I am looking for. I make many offers with my special "Letter of Intent" that I designed just to get into good conversations with sellers and make offers.

Driving for dollars to me is not the best use of my time. I get more deals online and with the phone.

I also have developed a follow up system with all my notes and research. The seller that says no today might change their mind tomorrow.

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Andy RouschPro Member

Investor · Mt. Arlington NJ · Member since 2018 · 251 posts · 143 votes

3y

Hey @Account Closed !

Although STR and MTR can be great investments, I love that you know what you want and LTR is definitely a safe and proven path if you can find the cashflow. I have trouble finding that in my area often times too right now so I tend to go long distance. I am in NJ, Missouri, and PA. I also have a great realtor out in Cincinnati/Dayton area of Ohio who helped get a few people I know into cashflowing properties out there if you were interested I could connect you

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V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

3y

Quote from @Drew Sygit:

@Account Closed

Beginning investors need to STOP believing all the fluff about rental investing, especially with the overheated real estate market trending to historic norms.

Historically:

Class A takes 3-5 year to positive cashflow, but you get highest relative rent & value appreciation

Class B gives decent amount of relative rent & value appreciation

Class C is mostly cashflow and at the lower end of relative rent & value appreciation

Class D is all cashflow with zero or negative relative rent & value appreciation

So, make sure you understand the Class of properties you are looking at and the corresponding results to expect.

This might be the hard truth of it all.

Does that mean we take deals day 0 that are not intrinsic and how much red is worth it? I think hitting appreciation at the against of cash flow is inherently precarious because that cash flow can be wiped out very quickly. The equity would require a much more different cause. It's much more illiquid though.

I think 2023 and the next 7-12 years of investing will not look like the last 7-12. This is also why I really hate when historian real estate pundits claim the past will prove the future. It's just an example, it's not the future. Great to know, but it's not going to create the path. If anything the issues of the past is why the future problems are created. Always remember, fast solutions have slow problems.

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Advice on searching for/acquiring a cash flowing rental property

Advice on searching for/acquiring a cash flowing rental property

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