ROI

15 Replies

what does anyone think about 6% to 8% ROI for single family homes for buy and hold property

That is really low esp. if you are levered. I am looking at 15% min. This is even more true when you consider that things eventually go wrong so if you plan on 6 - 8% you might get a much lower return.  Of course, if you are using all cash it can be tough to go above 10% - 12%.

all cash keep looking then?

Originally posted by @Charles Worth :

That is really low esp. if you are levered. I am looking at 15% min. This is even more true when you consider that things eventually go wrong so if you plan on 6 - 8% you might get a much lower return.  Of course, if you are using all cash it can be tough to go above 10% - 12%.

 All cash. Keep looking then

Leverage your cash position? Also you should make money when you buy, aka, equity. The rest call it "reward" for doing a good job at holding them.

Your question will get a lot of responses and are subject to what your market will offer...

I don't worry about ROI. But, I also invest for an income stream. I buy based on cash flow after all expenses. If my numbers work I buy. Once my monthly rental income target is hit I'll pay off the mortgages. I don't care about all the numbers. My number is $X amount per month in income to supplement my retirement plan.

Originally posted by @Bryan N. :

Your question will get a lot of responses and are subject to what your market will offer...

I don't worry about ROI. But, I also invest for an income stream. I buy based on cash flow after all expenses. If my numbers work I buy. Once my monthly rental income target is hit I'll pay off the mortgages. I don't care about all the numbers. My number is $X amount per month in income to supplement my retirement plan.

 Thanks cashflow is always better. And having something tangle as an asset makes me feel better than paper stock.nice talking to you.

@Jerry Budzinski  it really all depend on your comfort level and hoe hands on you want to be with your investments. 

There are much better returns out there than that. If your area isn't offering higher returns than are the value of your properties increasing? Are you planning to manage yourself or hire someone? 

Have you considered out of state investing? It is a passive return on your investment, but can be risky if you aren't working with the right turnkey company, or seeing the properties yourself. 

Jerry Padilla, Lender in NY (#NMLS 1084877)
585-204-6923

@Jerry Padilla  

I agree with others, that is a low cap rate.  Then again, it can be fine if you are looking at an area that is likely to have high appreciation, such as SF or NYC.  If you are looking for cash flow, I'd consider leveraging.  I invest in turnkey properties out of my area and look for a minimum of 10-12% cash on cash returns, and I allow for 12% soft costs (maintenance and vacancy).

Larry Fried, Real Estate Agent in OR (#201211636)

Larry

It sounds like you have experiences with out of state turn key property managers. What are some strategies you use to find them and vet them? Thanks in advance 

Brian

@Jerry Budzinski My rentals in Seattle were cash flowing each with 600-800 a month but it was because I bought at the right time. However you need to look at the Return of deployable equity. Cashflow as a measure I was good but I was making like 5 percent on my equity. I tell you it drives me crazy when unsophisticated investors say "the Cashflow is good". NO What are the numbers and metrics.

Now each rental I get typical cash flows by 400 but I think of it like 250 to be conservative and more importantly my money is not being lazy. I think if your making less than 8 percent your better off in the stock market because of the risk with liability and cap ex.

Originally posted by @Brian Lee :

Larry

It sounds like you have experiences with out of state turn key property managers. What are some strategies you use to find them and vet them? Thanks in advance 

Brian

 Hey Brian, first so you know when you want to mention a BP member and give them notice of your post use the @ sign, then start typing in the name until it appears in a box, then select.  As to your question, I have been doing turnkey investing for quite awhile and I locate the ones I work with a number of ways.  To vet, there are a lot of questions asked, and eventually a site visit to meet the team, view neighborhoods, and tour properties. I do this for myself and for other investors I might assist in their turnkey investment goals.

Larry Fried, Real Estate Agent in OR (#201211636)

@Larry Fried

Thanks for the tip! I have always been wary of those that "sell or deal" turn key investments. I have trouble wrapping my mind around the concept of someone wanting to sell something that provides a good ROI/IRR... the question I have is, "why are you selling".

Any comments?

Thanks. 

Brian

@Brian Lee That question comes up a lot, and the answer is really quite simple.  It isn't that the turnkey operator isn't keeping properties in their own portfolio as well.  They usually are.  But the turnkey model is nothing more then an additional way for them to make money in real estate.  They can't generally keep all those properties via financing limitations etc.  They can be seen as flippers, they make money on a quick turnaround, by acquiring distressed properties, rehabbing, and selling to investors when all done at a profit.  The investors is paying for the service of having a complete service.

Larry Fried, Real Estate Agent in OR (#201211636)

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