@Michaela G.
We both agree.
You are correct, Stuart may need deeper pockets. The way I like to say it is that he just needs a Partner if House 2 is a better deal using a more longer term metric like a 10 year pro-forma projection.
I think people put barriers up when it comes to partnering. I can understand that, but if you don't have people in your circle to mutually help each other where the investment is unreachable alone, I have to ask why haven't that person built up a network of trustworthy potential partners? After all, part of being a good Investor is building your team. Partners can certainly enhance that.
I've also known Cash Flow investors to fail fantastically too. Sometimes in surprising ways.
One in particular, let's call him Bob (not his real name).
Bob lived in NYC but invested in Bristol, CT. in 2004. He was making around $1k per month cash flow.
Bob rented an apt here in NYC where his rent in 2004 was around $2k per month.
What Bob didn't realize was that the future of the apt he rented was going to eventually go up to $4,600 today.
However, his investments in Bristol remained the same cash flow.
Unfortunately for Bob, he couldn't afford to continue renting at $4,600.... despite making $1k in Cash Flow in Bristol.
It wasn't until now that he realized that had he actually bought the apt he lived in and rented in 2004 for about $1 Million, he would have actually made about a $ Million more in appreciation and limited his rent to a fixed rate mortgage where the Mortgage Balance would be about 60% of what it was back in 2004.
Bob had to move to a lower priced area in NJ. He became priced out of NYC, a City that he really loved.
Bob's story is real. In fact, it's a story I know well from relatives that did similarly. I would say around 30% of my family who sold their property and moved to Florida in 2003 cannot now move back because the house they sold went up much higher than their current property in Florida.
Every time my family comes back to visit Brooklyn, they come to see the property they sold, for sentimental value, but they really regret it. The neighborhood had changed dramatically for the better like a lot of NYC neighborhoods. They didn't really know. But part of that was not understanding or attempting to understand the future.
Back then, when I was asking them to let me manage their property instead of selling it, they never anticipated that the price of their home would move up from $230k to over $1 Million.
When the hurricanes kept coming and they realized that one day they may want to move back, they asked me to price their former home. When they found out the current price, they were in sticker shock.
They also realized that they had become priced out.
BTW, the property my family sold was not a luxury home. Far from it. It was a tiny home, just 1500 sqft and needed some repairs and cosmetic work.
I think people see how much homes rise in NYC and SF and some other cities and they think it's speculation. From my experience, I would say it's more of protecting your future if you wanted to live in a particular location that can rise dramatically over decades.
I've also known people to who bought cash flowing properties prior to the Financial Crisis that went into foreclosure. One Investor, Sam, had properties in Sarasota County, FL. He had renters, but his rental was a bit dated, around 10 years old. His tenants found another house that was brand new and cheaper rent as the Market Crashed and some new construction were forced to lower asking rents.
Sam lost his tenants and just couldn't find another to replace them. After 6 months, he couldn't afford to carry several of his properties and went into foreclosure.
I think what we have to remember is that in the Financial Crisis, not all high priced homes failed as well as not all cash flowing properties survived.
Due to extremely high demand for my properties in Brooklyn... I survived without even much of a bump.
Just something to think about.