What do you consider a good net profit or home run?

Buying & Selling Real Estate
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What do you consider a good net profit or home run?

Terry Lao
Professional · Anaheim, CA · Member since 2017 · 1k+ posts · 686 votes

What do you consider a good net profit or " home run" ? I'm thinking of selling. I know that there are many variables such as ROI, COC, time/duration, percentage, CAP Rate, etc.

Looking for a number dollar figure. I would say that $100k is a good round number. 

Terry

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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
7y

No good way to answer this question. In my current situation or ideal one? In someone else's situation? In general? I wouldn't consider making $100k a home run if it was a $100 million deal. 

Me, personally, I consider anything a home run that wildly exceeds my expectations for the property, assuming my expectations were reasonable to begin with. That might mean making $10k on a property that was an expected loss based on market timing, unexpected costs, etc. 

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  • Alexander FelicePro Member
    Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
    7y
    Originally posted by @Terry Lao:

    @Alexander Felice

    The final numbers will be net 200k. Purchased Apr'16 for $170k, financed 4.125% 15 year loan, 25% down. Sold for $360k. Net in bank $15k. Reduction in principal/loan payments $20k. 

    I will pay the taxes since not looking to do 1031. Open to larger commercial if opportunity comes up.

    Your client who switches between Missouri and Las Vegas has an interesting strategy. Missouri must not have huge swings like Las Vegas. Switch from cashflow to appreciation cycle.

    The Las Vegas April median home price should be coming out soon. Last Mar'19 was $300k and not change much for last 3-4 months. I'm thinking April will hit $305k. Interest rates have been going lower and a lot of activity talk from realtors.

    Terry

    yeah after posting final numbers I'd say the only reason not to sell is if you have no better use for the money.

    I just don't see prices going up by that same margin in the future, sure it'll go up but the rate is decelerating. So if you sell now you're missing out on SOME, but you've captured MOST. rates are down, it's summer time, the mania is still hot....how greedy do you want to get?  

    OR  

    sit on it forever....

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  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    7y

    I try to sell when market value = cost to re-buid per insurance or when market cap rates on my commercial assets reach historic lows.

    Or when my state has a bunch of new tenant-friendly laws and is proposing a cap gain tax on commercial property sales. 

    All are fast approaching. An arbitrary profit number is something I apply only to equity trades and is usually 30%.

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  • Prashant Sheth
    Rental Property Investor · Member since 2017 · 75 posts · 19 votes
    7y

    @Terry Lao easy in Texas

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  • Alpesh Parmar
    Investor · Dublin, CA · Member since 2016 · 344 posts · 228 votes
    7y

    @Terry Lao I don’t think you can put $ figure for a home run. Would you consider a property which someone bought for $50K and sold for $200K after a year or is it a home run when someone bought a property for $500K and sold for $1M?

    I would think of it from %. If I got 100% return then it may be home run for me. Again, time is of value too. I know someone who sold their house in Sunnyvale, CA after 20 yrs. Bought for $500K and sold for $2M. Is that home run for you?

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  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    7y

    It was all depends on the type of deal. Cash flow - better than the 50% rule.  Standard flip - better than 30% profit.  Wholesale - 50k+

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  • Mike Stohler
    Specialist · Scottsdale, AZ · Member since 2011 · 32 posts · 15 votes
    7y

    Is this your only investment?  My definition of a home run is probably different than yours.  Are you interested in doing a 1031 into a new investment?  Then I would consider it a good sell if I can get enough money to do an exchange in order to grow.

    In 2012 I bought my first 4-plex, I now own a dozen SFR and a hotel and just did another LOI for another hotel. It all started by doing a 1031 when I sold the 4-plex.

    So, What is a home run to you? cash out or grow to an 8 figure portfolio?

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