Where is the Cashflow?!

Nashville · Member since 2019 · 56 posts · 21 votes

Hello BP! I've been on the hunt actively for 7 weeks. I'm an impatient person (super high D if you're a DISC person) so I know I just need to keep looking. I've been outbid on 5 houses and most by a significant margin. Most of those houses weren't "home runs" but the numbers worked for BRRRR. Most cashflowing around $200/mo and leaving at most a years of cashflow in the deal after refi.

Over the last 3 days I've evaluated 3 houses and came up with the same issue. The houses have been well below market value. Comps are good and are able to pull out cash and reno costs after refi. However, they aren't cash flowing! They are basically breaking even. What am I missing? Is the market rent too low? Are my lenders numbers too high? Any advice would be helpful!

Below is a property I evaluated this morning for reference.

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

@Matt Hudson my friend your drinking the BRRRR cool aid.. that's a very slow way to scale lets run the math.

you have 250k that buys you two properties.. you look and you look it takes you months to find them maybe more ergo your frustration.

you finally find the two pearls.. takes you about 30 days for a normal cash escrow.. now it takes you 30 to 90 days to do the rehab.. and then another 3 months to season in MOST cases to refi.. then your refi takes another month.. and of course your refi appraisal comes in low and you end up leaving money in the deal anyway ( this is quite common but not talked about.) so your going to grow at 2 homes per 7 to 8 months..

now lets say you put 20% down or 25k on each house and financing them you can buy 10 in a matter of 6 months..

your going to be 3 to 4 years getting to the same scale.. and if you saved 250k then while you making money on rentals and saving again you probably buy 1 to 2 a year after your first slug of 10... ???? so in my mind BRRR should have another R for RISK.. risk that the rehab goes wonky and way over budget. Risk that refi does not work he way you think or hope it will.. and of course 2 to 5 years from now maybe you don't get the great rates you get now if you just go out and buy 10 homes in the next 90 days at historic low rates and lock those in for 30 years.. your risking rates being 50% higher and cash flow not as good.

So that's the other side of the coin.. think about it.. and maybe you really want to buy a 750k mutli family and bunch the whole SFR idea.. if its rental income you want.

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Account Closed
Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes
7y
Originally posted by @Jay Hinrichs:
Originally posted by @Matt Hudson:
@Jay Hinrichs

You may very well be correct on the BRRRR kool aid! I like the idea of keeping my hard earned cash if possible. You're timeline seems about what I have budgeted outside of I have 3 lenders willing to refi with no seasoning...assuming I have a lease agreement. I am very nervous about appraisal and subsequently am very conservative on comps. This is likely another reason I'm getting outbid or the numbers aren't working.

I see what you're saying and though with much less experience and knowledge, I went down this path as well. I hit roadblocks from lenders in regards to DTI on the initial purchases. Being self-employed banks do not like my books! HA! With the cash out refi they can use the lease agreement as income and it is essentially a wash on my DTI. I also hate to part with my cash. I've cashed it all out in ones and sleep on it.

Rental income is exactly my goal. My plan was to eventually graduate to multi-family but am not opposed to jumping in the deep end either. Again, financing would be the hurdle.
actually loans on 5 units or more will be much easier for you . as they are not fannie freedie guide lines.. maybe do some shopping around and see. Also if you have cash and in a decent market U may want to consider flipping can be some good money partnering with the right contractors .. will make more money most likely than you will in rental income by a long shot.

I’m in agreement with @Jay Hinrichs about the commercial loan, much easier in my opinion to get, especially for a self employed person.
Also, if you've saved 250k, you are in the realm of commercial property. SFR's are cute and all but that's not where the money is Long term.
You roughly have enough for a 1 million dollar commercial property. (Give or take closing and reserve cost). So why would you want to try to compete with people trying to get 100-200 a month in cash flow.

4 Reply
Collin Schwartz
Rental Property Investor · Papillion, NE · Member since 2017 · 398 posts · 1k+ votes
7y
@Jay Hinrichs I currently live and invest in Omaha. Would we be able to setup a discussion on the software you created?
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Collin Schwartz:
@Jay Hinrichs I currently live and invest in Omaha. Would we be able to setup a discussion on the software you created?
send me a pm if you don't mind.. not suppose to talk about this stuff on the open forum I don't want to get in trouble.

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Alan Grobmeier
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
7y
@Account Closed, don't commercial loans come with higher interest rates? I would think it would be less expensive to max out your Freddie/Fanny allotment first.
0 Reply
Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
7y
Try 30-40 year loan with more down. Investment interest rate has been as low as 3.5% with points with greater down payments.
If RE is all cash flow and requiring little down, little risk every investor would have jumped on the opportunity by now.
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Michael Ealy
Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
7y
Originally posted by @Jay Hinrichs:
Originally posted by @Matt Hudson:
@Alan Grobmeier
I've heard many have reservations about BRRRR and I'm open to any methodology that help me accomplish my RE, personal and financial goals. I'll keep studying and will take your advice to heart.
I suppose why I was looking in smaller submarket outside of Nashville and in C neighborhoods was for economies of scale. I don't like the idea of having all my eggs in the basket of one property. With my current funds I can buy 2x properties in a C neighborhood or one in a B. However, if I can't find deals in the C neighborhoods and it may cause me more headache/money down the road then I should start looking elsewhere.
I am 100% not "excuse guy" but very much live in reality. I'm fully aware of what my capacity is and am self aware enough to say it's pretty high. With that said, I'm currently a small business owner of 2 businesses, an Airbnb owner, a dad of a 5 & 7 year old, a husband, a dog owner and a person that has more over-ambitious side projects and hustles that I care to share. HA! So the thought of taking calls about a leaking toilet doesn't sound like something I'm feasibly able to do at this point in my life. It's not beneath me it's literally a time problem. In addition, the market I'm looking at is 45min-1 hour from Nashville so it would make self managing even more difficult.
so with all this ambition and a desire to move at warp speed why real estate rentals.. that's a very slow wealth builder.. you want action take your funds and do value add flips or new construction.. or buy any number of small business that will make far more cash flow than rental houses.. FAR more.. real estate on the rental side is great for long term wealth accumulation but to have it fast and now there are many other ways to make better money.

I totally agree with you Jay. You' da man!
Jay, you should write a real estate investing book :)
Maybe the title is "Cashflow is Peanuts. Here's a Faster Way to Wealth" (hahaha)
What I do is buy an apartment building with rents under value, do cosmetic improvements (better interior finishes for example), increase the rents then sell or refi with HUGE cash gain. I am talking about pulling out $400,000 in one deal and I sometimes still own the property and making that in just 1 year.
How many BRRRRs or house flips will I have to do to make $400K? With value-add apartments, I do that with one deal.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Michael Ealy:
Originally posted by @Jay Hinrichs:
Originally posted by @Matt Hudson:
@Alan Grobmeier
I've heard many have reservations about BRRRR and I'm open to any methodology that help me accomplish my RE, personal and financial goals. I'll keep studying and will take your advice to heart.
I suppose why I was looking in smaller submarket outside of Nashville and in C neighborhoods was for economies of scale. I don't like the idea of having all my eggs in the basket of one property. With my current funds I can buy 2x properties in a C neighborhood or one in a B. However, if I can't find deals in the C neighborhoods and it may cause me more headache/money down the road then I should start looking elsewhere.
I am 100% not "excuse guy" but very much live in reality. I'm fully aware of what my capacity is and am self aware enough to say it's pretty high. With that said, I'm currently a small business owner of 2 businesses, an Airbnb owner, a dad of a 5 & 7 year old, a husband, a dog owner and a person that has more over-ambitious side projects and hustles that I care to share. HA! So the thought of taking calls about a leaking toilet doesn't sound like something I'm feasibly able to do at this point in my life. It's not beneath me it's literally a time problem. In addition, the market I'm looking at is 45min-1 hour from Nashville so it would make self managing even more difficult.
so with all this ambition and a desire to move at warp speed why real estate rentals.. that's a very slow wealth builder.. you want action take your funds and do value add flips or new construction.. or buy any number of small business that will make far more cash flow than rental houses.. FAR more.. real estate on the rental side is great for long term wealth accumulation but to have it fast and now there are many other ways to make better money.

I totally agree with you Jay. You' da man!
Jay, you should write a real estate investing book :)
Maybe the title is "Cashflow is Peanuts. Here's a Faster Way to Wealth" (hahaha)
What I do is buy an apartment building with rents under value, do cosmetic improvements (better interior finishes for example), increase the rents then sell or refi with HUGE cash gain. I am talking about pulling out $400,000 in one deal and I sometimes still own the property and making that in just 1 year.
How many BRRRRs or house flips will I have to do to make $400K? With value-add apartments, I do that with one deal.

To be fair and balanced like Fox News most folks on BP simply does not have the off shore connections you do.. that's a big part of OUR success.. IE deep investor base.. My biggest investor is out of Singapore.. for instance.

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Account Closed
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
7y
@Matt Hudson so happy @Jay Hinrichs mentioned the "BRRR Koolaid".
I have no idea why anyone would ever go through the trouble of finding a deal at way below market to basically flip it, but rather than sell it to realize that lovely chunk of equity gain... keep it just to cash flow minimally? It's a highly idealistic method that doesn't scale.
You're digging in the wrong mine my friend. Go flip 10 of these great equity properties, make half a mill, and go throw that at 2m+ worth of high yielding rental property that doesn't come with a fat project associated.
Nashville is hot market! Hot markets don't really cash flow in 2019. Watch our for the D class "paper tigers" Jay speaks of... but not every cash cow is going to underperform in reality. There are still markets with properties that offer high cash flow which are actually viable.
Just please please please don't be one of the BRRR people

2 Reply
Anthony Wick
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
7y
I've purchased two duplexes in the last 8 months. And I've been outbid about 25 times. And I don't even do this full time. This is more like a "hobby". BP is great, but man does it raise people expectations sometimes. I'm glad I don't have the "pressure" to flip, 1031, BRRRR, buy the world, like some people apparently do.
Anyway, if the numbers don't work, they don't work. You can be the person that makes the numbers work, make a lot of "deals", and go broke quickly, or you can be the person that buys when the numbers work and make this a long and profitable career/life.
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John WilliamsBusiness Member
Property Manager · Clarksville, TN · Member since 2018 · 443 posts · 210 votes
7y
@Matt Hudson
Check out Clarksville, TN!
I live, work, and invest here!
[email protected]931-272-3065
Rent My Home - Property Management4.8209 Reviews
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Bob Prisco
Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
7y
@Matt Hudson find another market,,, 1.5 2% rule is to be had if you know where to look

All the best.. BTW I was in Nashville last week, stay at the Hutton, wow fun place, I had no idea.. Also seems as though its going through a big positive change, 17 cranes in the city,,,, I am actually looking in Hermitage and Columbia. Who knows I met " set up shop " there as well. Ran into an old buddy from more then 30 years ago from LI that moved to Nashville, what are the odds of that !!
1 Reply
Lee S.
Northern, CA · Member since 2014 · 674 posts · 444 votes
7y
Originally posted by @Jay Hinrichs:
@Matt Hudson my friend your drinking the BRRRR cool aid.. that's a very slow way to scale lets run the math.

you have 250k that buys you two properties.. you look and you look it takes you months to find them maybe more ergo your frustration.

you finally find the two pearls.. takes you about 30 days for a normal cash escrow.. now it takes you 30 to 90 days to do the rehab.. and then another 3 months to season in MOST cases to refi.. then your refi takes another month.. and of course your refi appraisal comes in low and you end up leaving money in the deal anyway ( this is quite common but not talked about.) so your going to grow at 2 homes per 7 to 8 months..

now lets say you put 20% down or 25k on each house and financing them you can buy 10 in a matter of 6 months..

your going to be 3 to 4 years getting to the same scale.. and if you saved 250k then while you making money on rentals and saving again you probably buy 1 to 2 a year after your first slug of 10... ???? so in my mind BRRR should have another R for RISK.. risk that the rehab goes wonky and way over budget. Risk that refi does not work he way you think or hope it will.. and of course 2 to 5 years from now maybe you don't get the great rates you get now if you just go out and buy 10 homes in the next 90 days at historic low rates and lock those in for 30 years.. your risking rates being 50% higher and cash flow not as good.

So that's the other side of the coin.. think about it.. and maybe you really want to buy a 750k mutli family and bunch the whole SFR idea.. if its rental income you want.

You're one of my favorites on BP, much respect. I haven't crunched the numbers on your idea here but I've done a couple of BRRRR's and did very well. In the above example, buying 10 homes and making $200 a month cash flow gets you 24k return on your 250k. Not bad. However, if I can snag a couple good deals and do a BRRRR with them, I come out with 50k equity, plus all my original cash in my pocket. I also get the opportunity to rehab the house right. I've got a 25k margin of error on the rehab/ARV to compare to a straight purchase as well. The downside is more time involved vs buying turnkey.
Personally I like the BRRRR better, but I've got 250k in equity in the two I did 2-3 years ago that I've considered pulling out to buy more properties. I need to do the math on that.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Lee S.:
Originally posted by @Jay Hinrichs:
@Matt Hudson my friend your drinking the BRRRR cool aid.. that's a very slow way to scale lets run the math.

you have 250k that buys you two properties.. you look and you look it takes you months to find them maybe more ergo your frustration.

you finally find the two pearls.. takes you about 30 days for a normal cash escrow.. now it takes you 30 to 90 days to do the rehab.. and then another 3 months to season in MOST cases to refi.. then your refi takes another month.. and of course your refi appraisal comes in low and you end up leaving money in the deal anyway ( this is quite common but not talked about.) so your going to grow at 2 homes per 7 to 8 months..

now lets say you put 20% down or 25k on each house and financing them you can buy 10 in a matter of 6 months..

your going to be 3 to 4 years getting to the same scale.. and if you saved 250k then while you making money on rentals and saving again you probably buy 1 to 2 a year after your first slug of 10... ???? so in my mind BRRR should have another R for RISK.. risk that the rehab goes wonky and way over budget. Risk that refi does not work he way you think or hope it will.. and of course 2 to 5 years from now maybe you don't get the great rates you get now if you just go out and buy 10 homes in the next 90 days at historic low rates and lock those in for 30 years.. your risking rates being 50% higher and cash flow not as good.

So that's the other side of the coin.. think about it.. and maybe you really want to buy a 750k mutli family and bunch the whole SFR idea.. if its rental income you want.

You're one of my favorites on BP, much respect. I haven't crunched the numbers on your idea here but I've done a couple of BRRRR's and did very well. In the above example, buying 10 homes and making $200 a month cash flow gets you 24k return on your 250k. Not bad. However, if I can snag a couple good deals and do a BRRRR with them, I come out with 50k equity, plus all my original cash in my pocket. I also get the opportunity to rehab the house right. I've got a 25k margin of error on the rehab/ARV to compare to a straight purchase as well. The downside is more time involved vs buying turnkey.
Personally I like the BRRRR better, but I've got 250k in equity in the two I did 2-3 years ago that I've considered pulling out to buy more properties. I need to do the math on that.

one thing to remember we are dealing with today not 3 years ago.. things are different as well as markets are different.. I was simply pointing out that the bRRR while it works no doubt its not a fast process for most.. and if someone is really gunning to get things done quickly that might not be the fastest.. I mean I get the value add we are new construction home builders as well so I fully understand equity at the end of the build job..

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3 Reply
Lee S.
Northern, CA · Member since 2014 · 674 posts · 444 votes
7y
Originally posted by @Jay Hinrichs:
Originally posted by @Lee S.:
Originally posted by @Jay Hinrichs:
@Matt Hudson my friend your drinking the BRRRR cool aid.. that's a very slow way to scale lets run the math.

you have 250k that buys you two properties.. you look and you look it takes you months to find them maybe more ergo your frustration.

you finally find the two pearls.. takes you about 30 days for a normal cash escrow.. now it takes you 30 to 90 days to do the rehab.. and then another 3 months to season in MOST cases to refi.. then your refi takes another month.. and of course your refi appraisal comes in low and you end up leaving money in the deal anyway ( this is quite common but not talked about.) so your going to grow at 2 homes per 7 to 8 months..

now lets say you put 20% down or 25k on each house and financing them you can buy 10 in a matter of 6 months..

your going to be 3 to 4 years getting to the same scale.. and if you saved 250k then while you making money on rentals and saving again you probably buy 1 to 2 a year after your first slug of 10... ???? so in my mind BRRR should have another R for RISK.. risk that the rehab goes wonky and way over budget. Risk that refi does not work he way you think or hope it will.. and of course 2 to 5 years from now maybe you don't get the great rates you get now if you just go out and buy 10 homes in the next 90 days at historic low rates and lock those in for 30 years.. your risking rates being 50% higher and cash flow not as good.

So that's the other side of the coin.. think about it.. and maybe you really want to buy a 750k mutli family and bunch the whole SFR idea.. if its rental income you want.

You're one of my favorites on BP, much respect. I haven't crunched the numbers on your idea here but I've done a couple of BRRRR's and did very well. In the above example, buying 10 homes and making $200 a month cash flow gets you 24k return on your 250k. Not bad. However, if I can snag a couple good deals and do a BRRRR with them, I come out with 50k equity, plus all my original cash in my pocket. I also get the opportunity to rehab the house right. I've got a 25k margin of error on the rehab/ARV to compare to a straight purchase as well. The downside is more time involved vs buying turnkey.
Personally I like the BRRRR better, but I've got 250k in equity in the two I did 2-3 years ago that I've considered pulling out to buy more properties. I need to do the math on that.

one thing to remember we are dealing with today not 3 years ago.. things are different as well as markets are different.. I was simply pointing out that the bRRR while it works no doubt its not a fast process for most.. and if someone is really gunning to get things done quickly that might not be the fastest.. I mean I get the value add we are new construction home builders as well so I fully understand equity at the end of the build job..

Good point, every market is different also. I think my market is starting to cool off a little now.

0 Reply
Tal Tamir
Real Estate Agent · Cleveland, OH · Member since 2019 · 57 posts · 82 votes
7y
@Matt Hudson my brother!!! You should come take a look at what’s going on here in Cleveland. Holy CASH FLOW :)
Wishing you the best of luck on your real estate investing journey! The fact that you have 250k saved up means a lot, if I was you, I would go and buy a 20-25 unit ~1mm dollar Multifamily building here in Cleveland and drop that 250k as a down payment!
That’s just me :) I may be biased because that’s what we’re doing!
1 Reply
Mike Elaridi
Rental Property Investor · Houston, TX · Member since 2018 · 12 posts · 4 votes
7y
@Matt Hudson
I’m in the same boat. I’ve been looking for cashflow strategies for my own portfolio and have finally settled on commercial real estate, skipping single fam all together. It just doesn’t scale fast enough. Currently have a small apartment building and a neighborhood strip center under Contract in B areas. Both have lots of opportunity to value add as well. My suggestion is keep looking at all asset classes for the one that makes the most sense to deploy your cash.
1 Reply
Bob Prisco
Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
7y
There are markets that will provide 10 -15% NET caps per year with equity if you know where to look and have a good team on the ground,
Good luck to all
1 Reply
Ola Dantis
Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
7y
Hey @Matt Hudson, welcome to BP and I guess the joys of REI! 🤗
A couple of things here I comment on here:
1. Real Estate Investing requires patience: I've worked with Ds [D = Dominance in DISC], and they are very interesting people. That said, investing is a "steady wins the race" game and not necessarily trying to just start for start sake.
2. Take a hint from mortgages, it is usually stretch out for 30 years. Remember, patience is a prerequisite to success in REI because without it you'll just quit soon or later, like many others before and after us.
3. So, prepare for the long ride, so when you can cashflow 200 or 2,000 you understand the game and having a clearer picture of the ups and downs.
4. Be open to pivot: So, I'm presuming that you're looking at SFRs in Nashville, so that train may have left and that is fine. Jump on the next train or look out of town for juicier deals OR look for another strategy (different asset class).
To conclude, I think your market is telling you something, so pay close attention before jumping in too hot.
3 Reply
Jeremy Elcox
Newport News, VA · Member since 2016 · 28 posts · 12 votes
7y
@Matt Hudson, Matt...I am totally with Jay here. Take your liquid capital and either expand your businesses or buy a new one. I learned the hard way on now my 2nd house that this BRRR stuff is REALLY slow and the numbers they love to brag are almost impossible in the DC market. Go for an actual biz that makes it's own way or go BIG and get into multi with that 250k. Congrats and best of luck. Jeremy
1 Reply
Jim D.
Member since 2019 · 65 posts · 68 votes
7y
And @Matt Hudson, unless I missed something (always possible!) there are no property taxes in your calculation? It certainly isn't in the monthly P&I as I just recalculated the $140k at 5% for 25 years and came up the the $819.
So, I think you're actually looking at negative cash flow. Yes, I think there are better deals.
0 Reply
Travis Brizendine
Omaha, NE · Member since 2014 · 57 posts · 15 votes
7y
Are you saying Omaha is a special market, or is it just one of, say, 50 of good ones? @Jay Hinrichs

Originally posted by @Jay Hinrichs:
Originally posted by @Anthony Gayden:
@Jay Hinrichs
I agree with your assessment on the BRRRR process. I did it one time and it was difficult to make work and it was slow. I honestly would rather skip the rehab and refinance part.
Anthony we have identified Omaha as a Market for our new patented software that finds hidden pearls.. IE Omaha land use mirrors Portland Or were we have been very successful with this custom software we created.. please PM me so we can discuss Omaha opportunities that are there to be plucked and 99% of investors will have no clue..

0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Travis Brizendine:
Are you saying Omaha is a special market, or is it just one of, say, 50 of good ones? @Jay Hinrichs

Originally posted by @Jay Hinrichs:
Originally posted by @Anthony Gayden:
@Jay Hinrichs
I agree with your assessment on the BRRRR process. I did it one time and it was difficult to make work and it was slow. I honestly would rather skip the rehab and refinance part.
Anthony we have identified Omaha as a Market for our new patented software that finds hidden pearls.. IE Omaha land use mirrors Portland Or were we have been very successful with this custom software we created.. please PM me so we can discuss Omaha opportunities that are there to be plucked and 99% of investors will have no clue..

Its a market that land use laws mirror Portland OR.. and it appears we can do what we do here there.. which is how we find our inventory right under everyone else's noses :)

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Account Closed
Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes
7y
Originally posted by @Alan Grobmeier:
@Eric C., don't commercial loans come with higher interest rates? I would think it would be less expensive to max out your Freddie/Fanny allotment first.

That is true. It is about 1-1.5% more in interest, but I can get as many of them as I want. I run it as a business, so I only take loans out in my LLC, I don't want people knowing what I do and do not own.

There’s tons of ways to get to the end result, I was merely pointing out that with his cash saved he would be better to spend that doing a larger multi family deal then doing a bunch of tiny single family homes. I’m in the works right now for a medium sized multi family that will cash flow much higher then the single family realm and cost me just 20% down and even at 6% mortgage rate it will give me 18.3% cash on cash return. But only time will tell, buy and hold for me is long term, I don’t plan on touching any of the cash flow for at least 5 years. No reason I have an amazing W2 job.

1 Reply
Daniel Krueger
Rental Property Investor · Minneapolis, MN · Member since 2015 · 30 posts · 19 votes
7y
First off, I love apartments. So, I will skip the usual comment that suggests you should focus on multi-family, even though that's how I feel. :) With that said, it's a tight market since we've been in a strong up market for many years. I typically need to underwrite about 50 deals before I find one that is worth making an offer on. Real estate is hot, and everyone wants in. That means, the competition is willing to take a lower return. Other investors make be putting more down, lowering their debt service, and making cash flow that way. Finding those really good deals takes work. But, it's a numbers game. I would recommend spending your time networking with more brokers, as well as hitting the pavement to contact sellers directly. If you fill up your pipeline with potential deal leads, it's only a matter of time before you find solid deals. Stay consistent and you'll be successful.
0 Reply
Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
7y
A lot of people miss the actual profit drivers on investments it's not just cash flow.
1) With 25% down and a 2.5% appreciation per year is a 10% return.
2) Depending on your rate mortgage paydown is at least another 5% return
Your now at 15% return not counting cash flow and with leaving 25% down. If you can refi out even half and still cash flow in a safe nice area it's a home run. With 50% refi out you are at a 30% return with zero cash flow.
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