10 years ago people said this about real estate
Investor · Indianapolis, IN · Member since 2018 · 1k+ posts · 756 votes
10 years ago people said:
"There's no good deals out there."
2024: "There's no good deals out there."
My prediction for what people will say 10 years from now:
"There's no good deals out there."
Great deals are tough to find in any market cycle.
Multifamily is a competitive asset class for a reason!
✅ Investors understand how stable, consistent, and lucrative apartments can be.
Stay patient and disciplined in your search.
Here's how 👇
1. Only buy in high growth markets.
2. Underwrite with realistic projections.
3. Only buy stable, cash flowing deals.
4. Choose smart debt terms.
What would you add to this list?
Become intimately familiar with the numbers of REI. Learn to know the difference between a deal and a dog!
Hi Justin,
Good points! I would add the following:
- Real estate is a long term game. When analyzing a property, don't get caught up in how it does in the first year, but what potential it can have in the future, especially with what you are willing to put into it.
- Real estate appreciates. To your point, if appreciation is important to you, search for those fast growing markets.
- Choose your market based on your goals. If your goal is appreciation, it might be harder to buy into that market. If it's cash flow, appreciation might not be as impressive, but it may be a more affordable market to get started. And those may be two different markets. If it's both you are looking for, you need to be ready with capital and willing to dig deep and work hard to develop partnerships and find investors.
- Patience is the name of the game, but don't let analysis paralysis hold you back from taking a step forward.
Looking forward to see what other people say!
I always say investors don't spend nearly enough actually looking for deals and developing creative strategies for getting good deals. Many focus too much attention on marketing themselves, raising money from investors and squeezing management and then their strategy for finding deals is "waiting for brokers to send them good deals".
Become intimately familiar with the numbers of REI. Learn to know the difference between a deal and a dog!
Justin,
I would add look past years 1 & 2 on the spreadsheet & see the growth potential in a deal on a 10 -15 year timeline.
I always say investors don't spend nearly enough actually looking for deals and developing creative strategies for getting good deals. Many focus too much attention on marketing themselves, raising money from investors and squeezing management and then their strategy for finding deals is "waiting for brokers to send them good deals".
Do you have any recommendations on strategies other than brokers?
@Justin Goodin
5. Have/build adequate reserves.
True example:
I had an apartment fire that took out several garages on New Years and additional damage to two adjacent apartments from the Fire Department putting it out. Then, 7 heaters at a different apartment needed replacement in the span of a few weeks. On top of that, a drunk driver plowed into a separate apartment, taking out the gas meter with it, one day before a tenant move-in. All this while carrying an eviction and several vacancies.
Everything was repaired/replaced out of pocket, without insurance getting involved (this is CA). Eviction went to trial last week and that person just started making repayments for missing rent and attorney fees. But their unit will need some rehab. I have 2-3 more evictions planned next week. In total, about $100K of reserves was spent as of January 1, 2024. For the sake of argument /causation,if I carry the vacancies for the year (which I will not), that's another $100K.
This is an outlier scenario, but it just happened. It can happen to anyone in any class area. The fire was from the rear neighbor kids playing with fireworks. The heaters were getting old and it has been abnormal colder this year. The drunk driver was unpredictable. Insurance is dicey and it's better for me to spend $100K than saving that by using insurance but risking no renewal... Or worse ...
As you grow your business, so should you grow your reserves. It will keep you competitive in this business.
I always say investors don't spend nearly enough actually looking for deals and developing creative strategies for getting good deals. Many focus too much attention on marketing themselves, raising money from investors and squeezing management and then their strategy for finding deals is "waiting for brokers to send them good deals".
Do you have any recommendations on strategies other than brokers?
Yes, but they're not easy. Cold calling building owners, mailer campaigns, text campaigns, online community groups, lender referrals, live auctions. Most of these approaches take considerable time, effort and money which most people are not willing to do. If it were easy, every one would do it.
I like to remind myself that I am an investor not an observer. What makes an investor an investor? They actually invest.
The deals are tough to find but they are out there.
It helps to love the hunt as part of the experience - if you don't actually enjoy searching then I understand how it would be difficult to stick with it.
Oh, the allure of the "good deal."
I'm not arguing that you don't drive the best bargain you can. But the mythos around the "good deal" prevents so many first-time investors from buying at all because they're scared of looking dumb.
The real money in real estate is in the long-term buy-and-hold. If you overpay by $10k up front but make $200k in 15 years, are you really that pissed off?
This great NY Times article about the myth of timing the stock market makes the case that the smartest investing choice is to go for the simple, boring and average returns. It ain't sexy, but thems the facts.
@James Carlson Great point which is often overlooked. Reminds me of Blackstone's founder Stephen A. Schwarzman who said that when making acquisitions that have long term appreciation (should be all deals), he would often leave money on the table and give the seller a higher price than he could otherwise have gotten. He's less likely to lose deals to competitors and also for future deals sellers know he comes in with fair prices and are more likely going to want to do business with him over others.
I'm not one to upvote an argument based on the thinking of Blackstone (I think corporate's amassing of real estate is a real problem for America), but the idea is nonetheless a good one.
My most successful clients are ones that didn't overthink it. Ran the numbers, thought it was a solid enough deal and bought. And then they did that again in a year or so. And again and again. Meanwhile, the deal hunter has barely bought their first one.
@James Carlson - love what you wrote. I agree, the myth of the great deal is the biggest roadblock to prospective investors. The only better time to buy real estate than yesterday is today.
@James Carlson
Total agree. People overlook some REI fundamentals in search of that great deal up front.
I paid $40K over appraisal on my first small commercial multi... 8 unit that appraised for $660K. It was a fixer with rough tenants on top of that. I did it knowing it was my way to break into the commercial market. Everyone thought that was a stupid mistake. My wife thought I was crazy and was pissed.
I held it for 2 years. Stabilized the rents. Put in about $25k of improvements, to include 2 unit rehabs, new roof (mostly covered by insurance) new paint, and eliminated one unit. Sold it for $200k profit, 1031x to a $2M deal with 14 homes and vacant land... Which will likely trade for $2.5M+ once rents stabilize.
The kicker is I really spent zero out of pocket for this. The seed money started as an SFR that I put $30K (hard earned savings) as a down payment. Lived in it and fixed it up for 2 years. Rented it for almost 3 years at zero cash flow and 1031x into that small multi. While holding the multi, I cash flowed $30k first year and $50k second year. The current asset cash flows slightly less, but will be stabilized to cash flow more than where I left the last one.
Staying patient is KEY, great list Justin! Other tips I might consider could be Expanding your search area: Look beyond immediate local markets and explore options in up-and-coming areas or cities with diverse economies. Network with other investors. Attend real estate events, join online communities, and connect with experienced investors to find off-market deals or gain insights. Consider value-add opportunities. Look for properties that require minor renovations or improvements to increase rental income and property value. Develop strong negotiation skills. Be prepared to negotiate on price, terms, and repairs to secure a favorable deal. Lastly, build a team of experts. Partner with a qualified real estate agent, property manager, and legal professional to assist you throughout the investment process.
By considering these points alongside the existing list and seeking professional guidance, you can increase your chances of finding a suitable multifamily investment even in a competitive market.
Hello Everyone,
Reading through this string of comments, thought I'd jump in. I agree completely with James' comment about not overthinking it. Always do your due diligence, and if the numbers work then go after it. We "studied" real estate investing for waaaaay too long before finally jumping in back in 2017 with our first flip. This business is not for the weak of heart, but we love it. Focus for the last few years was buying and holding single family and duplexes, and that has worked well. Starting this past year, we are focused on larger multi-family. We are having to analyze many-many opportunities to find a deal that makes sense, but they are out there. In the past year we acquired a 11 unit property, and a 10 unit property. Working now to sell off some of the existing single-family and duplexes.
Ten years ago, 2014, was actually a great time for finding deals in real estate. I recall closing on several small multifamily deals that year and joking with my broker that "the time to make money in real estate is when you buy it." Prices were low and inventory was abundant. 1% rule? No problem. Might even do better than that.
The last time attitudes were like they are today was 2006, 2007, beginning of 2008.
Hi Justin,
Good points! I would add the following:
- Real estate is a long term game. When analyzing a property, don't get caught up in how it does in the first year, but what potential it can have in the future, especially with what you are willing to put into it.
- Real estate appreciates. To your point, if appreciation is important to you, search for those fast growing markets.
- Choose your market based on your goals. If your goal is appreciation, it might be harder to buy into that market. If it's cash flow, appreciation might not be as impressive, but it may be a more affordable market to get started. And those may be two different markets. If it's both you are looking for, you need to be ready with capital and willing to dig deep and work hard to develop partnerships and find investors.
- Patience is the name of the game, but don't let analysis paralysis hold you back from taking a step forward.
Looking forward to see what other people say!
Hi Justin,
Good points! I would add the following:
- Real estate is a long term game. When analyzing a property, don't get caught up in how it does in the first year, but what potential it can have in the future, especially with what you are willing to put into it.
- Real estate appreciates. To your point, if appreciation is important to you, search for those fast growing markets.
- Choose your market based on your goals. If your goal is appreciation, it might be harder to buy into that market. If it's cash flow, appreciation might not be as impressive, but it may be a more affordable market to get started. And those may be two different markets. If it's both you are looking for, you need to be ready with capital and willing to dig deep and work hard to develop partnerships and find investors.
- Patience is the name of the game, but don't let analysis paralysis hold you back from taking a step forward.
Looking forward to see what other people say!
What sort of money do you think you'd put into your real estate investments during that time (not including money generated by the real estate itself?
Hi Justin,
Good points! I would add the following:
- Real estate is a long term game. When analyzing a property, don't get caught up in how it does in the first year, but what potential it can have in the future, especially with what you are willing to put into it.
- Real estate appreciates. To your point, if appreciation is important to you, search for those fast growing markets.
- Choose your market based on your goals. If your goal is appreciation, it might be harder to buy into that market. If it's cash flow, appreciation might not be as impressive, but it may be a more affordable market to get started. And those may be two different markets. If it's both you are looking for, you need to be ready with capital and willing to dig deep and work hard to develop partnerships and find investors.
- Patience is the name of the game, but don't let analysis paralysis hold you back from taking a step forward.
Looking forward to see what other people say!
What sort of money do you think you'd put into your real estate investments during that time (not including money generated by the real estate itself?
I'm honestly not sure. If I were to invest in the stock market, I'd contribute about $200k annually. I'd say that's probably my upper limit of cash for REI as well but considering I can loan money my actual investment could be more.
Thanks, that makes sense. I generally understand what my expenses are each year and am able to keep that liquid, and invest the rest. The gist of my plan was to buy a property or two a year for the next 15 years and maybe flip a property or two throughout each year as well, retire, and let this income coast me until I'm ready to really retire and sell it all, where I'll live on whatever this nets, 401k, and SS, assuming it still exists.
Hi Justin,
Good points! I would add the following:
- Real estate is a long term game. When analyzing a property, don't get caught up in how it does in the first year, but what potential it can have in the future, especially with what you are willing to put into it.
- Real estate appreciates. To your point, if appreciation is important to you, search for those fast growing markets.
- Choose your market based on your goals. If your goal is appreciation, it might be harder to buy into that market. If it's cash flow, appreciation might not be as impressive, but it may be a more affordable market to get started. And those may be two different markets. If it's both you are looking for, you need to be ready with capital and willing to dig deep and work hard to develop partnerships and find investors.
- Patience is the name of the game, but don't let analysis paralysis hold you back from taking a step forward.
Looking forward to see what other people say!
What sort of money do you think you'd put into your real estate investments during that time (not including money generated by the real estate itself?
I'm honestly not sure. If I were to invest in the stock market, I'd contribute about $200k annually. I'd say that's probably my upper limit of cash for REI as well but considering I can loan money my actual investment could be more.
Based on my own family's experience if you did $200k consistently for the next 10 years, put in $200k plus took on $300k of mortgage debt you would have $5 million capital and debt invested at year 10. By year 15 the mortgages should all be paid off and the properties will be worth $15 - $25 million or more and gross monthly rent receipts $80,000 - $100,000 per month or more. You'll be strong cash flow positive year three and major cash flow positive year 5 or 6. Don't be afraid to pay off the debt. The business is so much easier once you get rid of the debt.
Other people may think it's more or less but that is what happened in our portfolio (adjusted to your figures and excluding commercial) over 2 15 year periods from 1990 - 2005 and 2008-2024. The number one thing we learned over the years is once you have a market and strategy figured out keep replicating - it's not necessary to be nationwide chasing a few more points of yield - those misadventures were a waste of time and capital.