Investor · Miami, FL · Member since 2023 · 120 posts · 46 votes
Hey everyone,
Looking to buy LTR in the US. Cash in hand and also pre-approved if I go financing route.
Please keep in mind, anything that is sent to me will go through extensive checks via different resources I have, so please let's be practical and realistic about everything.
Let me know if the below exists today:
Dos
Must be ~A neighborhood, and I hope to be one of the less expensive houses in the neighborhood
Open to renovation - Rather have turn key
Minimum 1M, ideally 1.25-1.5M
Must be off market deal under inflated market
Do nots
No STR / AirBNB based asset - Don't tell me that the asset will make 7% if I AirBNB it
Not in vacation markets!
Not in a market that has appreciated 50% in the last 24 months
Not Multi-Family or Condo
Please do not BS me with comps of different neighborhoods and hypothetical rental yield that based on what the mansion on the beach rented for 2 years ago or what it has been doing on AirBNB.
Only things that can easily be compd to long term rentals
Ready to pull the trigger on a deal, please don't waste my time and I promise I won't waste yours
Below are examples of price to rent I am looking for:
Looking to buy LTR in the US. Cash in hand and also pre-approved if I go financing route.
Please keep in mind, anything that is sent to me will go through extensive checks via different resources I have, so please let's be practical and realistic about everything.
Try to understand cap rate. Your understanding of market is deeply flawed (or skewed).
There's distribution of rent that at certain rent price (les say 5K rent) it is making more sense for the renter to buy their own house. The rent distribution are not linear progressive.
Once the rent is above 4k, this is the situation where renter is very qualified to get mortgage and quite well versed in their financial situation that they may just choose to rent for a house of 4k or less rather than spending 7k a month for rental; or get mortgage and paying only 4-5K per month for one mil house.
A $10000 monthly tenant wants a seven million dollar house. To reach rents above $7000 a month you have to be near tech hubs or pray that your remote tenant isn't forced back to office soon.
In California, Arizona, Washington, Oregon a one million dollar house with a view and amenities can rent for $6000.
HOA fees will crash your model, so you are right in excluding them BUT MOST luxury single family real estate is in a HOA, so there's that.
To cash flow you need to put 30 -40% down payment with today's interest rates.
A $1200000 house in Laguna Niguel the PITI with 20% down is $8840 plus HOA of $200- $500 Rents for this house, as has ocean view is $7200.
I know a house that is not on the market and owner could rent back BUT you will not make the return on investment you plan with 8% 30 year rates.
A preapproval letter that assumes the rents you state will not close when the appraiser does a rental survey and it results much lower. Then lender is going to say- put more down payment.
Im willing to put 30-35% down payment and I have 6.15% 30 year mortgage available. Show me where I can be cash flow positive.
Sorry youll need to maybe look to a different country to find what you are looking for. Cities with single family homes in these proce ranges will have substantially lower yields than what you're looking for.
So there is no way to be cash flow positive in the US on 1M+ homes today? Is that what you're saying?
All properties that are rented are cash flow positive. They just dont have the yield you are looking for. In markets where there are single family homes at these prices, DC, Boston, NYC, LA, typical cap rates are 3-5%. 8% cap rates or yields are high risk, and thus will be found higher risk markets and properties, at cheap price points.
Cash flow positive with 30-35% down payment in today's market. Not cash flow on cash.
I don't get what your trying to say in this reply here Daniel.
Look, short-short version is your expectations are COMPLETELY unrealistic, out of touch with market realities. The yields your expecting have never been a realistic thing in Luxury Rentals. Yes, certain times there has been certain windows of opportunities yes, limited opportunities in both time and volume. Those are the exceptional exceptions.
If one has in there control a property meeting your listed criteria, they-don't-need-you. They can pick and choose any 10, 20, 50+ interested buyers. And of course they'd list it in some form or fashion, driving up price and with it yield down.
If I have a class-A off-market property reliably driving $9kmnth in revenues, there is not a snowballs chance in he-double-hockey-sticks that I'd let you have it for $1.2m. More like $1.7m.
I'm willing to renovate and take advantage of a more complex deal.
To get close to 1%/mo gross from nicer smalls, I'd have to get good equity capture from a motivated seller and repurpose/ expand the unit count and or square footage.
A house on the golf course has been lagging on the market a few doors down from me. 3500sqft vacant, unstaged, 20% price drop to $500k 150 DOM. As-is rent $2600/mo. Maybe $2800 in June.
If you were to convert the walk-out 'basement' to rental = $2400/mo x2. 30 day $30k reno if I DIY. $80k 90 day if remote. I still won't do it. Too happy earning 5.5% risk and effort-free.
The yields you seek would involve specific market immersion and hands-on work. Sitting in your underwear half a globe or 3 states away will not be effective.
The law of diminishing returns still applies. Without adding a unit(s), income is definitely not a linear function of price, as mentioned. I wouldn't hold to your 'no multi' qualification. Not all multi's are plex-ville.
Here's the walk-out 'basement' I'd make a separate rental if I wasn't retired.
To get close to 1%/mo gross from nicer smalls, I'd have to get good equity capture from a motivated seller and repurpose/ expand the unit count and or square footage.
A house on the golf course has been lagging on the market a few doors down from me. 3500sqft vacant, unstaged, 20% price drop to $500k 150 DOM. As-is rent $2600/mo. Maybe $2800 in June.
If you were to convert the walk-out 'basement' to rental = $2400/mo x2. 30 day $30k reno if I DIY. $80k 90 day if remote. I still won't do it. Too happy earning 5.5% risk and effort-free.
The yields you seek would involve specific market immersion and hands-on work. Sitting in your underwear half a globe or 3 states away will not be effective.
The law of diminishing returns still applies. Without adding a unit(s), income is definitely not a linear function of price, as mentioned. I wouldn't hold to your 'no multi' qualification. Not all multi's are plex-ville.
Here's the walk-out 'basement' I'd make a separate rental if I wasn't retired.
Yea, if we want to try to understand this in greater detail, think the market cap rate distribution is going lower, the higher the price. Airbnb's cap rate distribution is showing this phenomenan very accurately.
For example, the higher the price of an asset, the lower the cap rate would be. In local market where Airbnb 1 BR is producing 5.0% cap rate, the 3BR Airbnb is always and always having 3.5% cap rate.
In other word, the higher the asset class would be, the lesser profitability one would have. In chart the relationship is something like this pattern "\_"
What OP wants is linear progressive chart, where every increases of asset price, the rent/market cap rate would be the same/parallel. Also, the cap rate on the same asset , but in differet class, would have at least 0.50 to 0.75% standard deviation. For example, a Class C is always having 5-5.5% cap rate, while class A is always having 4.0-4.5% cap rate.
The same is also applicable to residential.There's no such thing as linear progression in rental yield when asset price increases.
There are however, a hack that we as creative developer can do, which is like you said, divide the structure,or create structure (something like ADU for example), literally it's converting SF to MF.
Sorry youll need to maybe look to a different country to find what you are looking for. Cities with single family homes in these proce ranges will have substantially lower yields than what you're looking for.
So there is no way to be cash flow positive in the US on 1M+ homes today? Is that what you're saying?
All properties that are rented are cash flow positive. They just dont have the yield you are looking for. In markets where there are single family homes at these prices, DC, Boston, NYC, LA, typical cap rates are 3-5%. 8% cap rates or yields are high risk, and thus will be found higher risk markets and properties, at cheap price points.
Cash flow positive with 30-35% down payment in today's market. Not cash flow on cash.
I don't get what your trying to say in this reply here Daniel.
Look, short-short version is your expectations are COMPLETELY unrealistic, out of touch with market realities. The yields your expecting have never been a realistic thing in Luxury Rentals. Yes, certain times there has been certain windows of opportunities yes, limited opportunities in both time and volume. Those are the exceptional exceptions.
If one has in there control a property meeting your listed criteria, they-don't-need-you. They can pick and choose any 10, 20, 50+ interested buyers. And of course they'd list it in some form or fashion, driving up price and with it yield down.
If I have a class-A off-market property reliably driving $9kmnth in revenues, there is not a snowballs chance in he-double-hockey-sticks that I'd let you have it for $1.2m. More like $1.7m.
I'm willing to renovate and take advantage of a more complex deal.
Than I have to ask, because it's confusing, if capital capable and looking at $1m+, ready and willing to do reno and more complexity, why on earth would you not be looking at doing MFH Value-Add deals? That is actually possible, including to hit your detailed yield desires, or get remotely close to such.
A well positioned, older complex, out-dated, current owners have held 20/30-odd years and "checked-out" on the business years back, with deferred maintenance snowballing. Thus in current day condition of poor tenant class, leading to poor revenue performance, high inputs, high stress, all lending to a good potential acquisition pricing. And with renovations, ability to re-class tenancy base, vastly changing the entire landscape of tenant class, revenues AND operational expenses. And with all that, market value vastly improved. Or as said, a "value-add MFH" deal.
As tough as these can be to find, it's easily 10X more likely to land upon if not 100X/1,000X more probable and plentiful than this Luxury SFR theory your targeting.
In our market, greater Boston up through southern NH this is achievable if you're doing a multi-family but the rents just wont meet your expectations on SFH in this price range.
I can find you class A 4 unit buildings that costs 1.1 million and rent $8-9k a month all day in northside Chicago. Single family will be lower yields and I have found the high end rent range single families to have higher vacancy also.
Kind of sad, when I post a "dumb investor" post about it I'm flooded with deals of things I easily ruled out as inflated numbers that don't check out when I do my own comps, but when I post ahead that I will be doing my due diligence all the brokers are quiet. Ha!
Very difficult market to find a tenant for a 7, 8, 9 k lease. Why not just buy 10 or so with 10k ish net income, much easier.
Buying 10 houses is easier? No thanks.
Much easier, all you need to do is connect with those that provide props, easy. I picked up 7 just this past week, ALL with 15% NET caps. Finding a tenant for 10k a month, VERY difficult. Also buying a 1 mill dollar property that WILL be overpriced, not a good move. Hey but what do I know, I have only done about 500 deals and owned 100s, . I am not just posting nonsense, ALL from extensive experience. All the best
I feel like the more high end will be less exposed to the upcoming crash.
Well sorry but that is 100% incorrect, you can't get hurt jumping out of a basement window :)
I picked up 7, all about 80k each, all with values of about 115- 125k, all with 1100- 1400 in rent, MUCH safer than paying a mill for a house that two years ago was 600k,,,,,,,,,,,
AGAIN, I am not just writing nonsense. I would NEVER buy a mill house now. Not a chance in hell. Homes in my area were 800k, two years ago, now selling for 3mill, tell me the people paying 3 mill are not going to get crushed,,,,,, they will.
Good luck
If you're buying things 30% under current market value you will win every time, 100K or 100M.
Not interested in this sort of products though.
Well, I am not sure who you are speaking with buy you are not buying a deal all in 1 mill, and getting a tenant for 10 11k a month. That is not an easy undertaking, and IMO will not end well for you. You do not know where to buy how much to pay. You do not have contractors you can trust etc.
Kind of sad, when I post a "dumb investor" post about it I'm flooded with deals of things I easily ruled out as inflated numbers that don't check out when I do my own comps, but when I post ahead that I will be doing my due diligence all the brokers are quiet. Ha!
Very difficult market to find a tenant for a 7, 8, 9 k lease. Why not just buy 10 or so with 10k ish net income, much easier.
Buying 10 houses is easier? No thanks.
Much easier, all you need to do is connect with those that provide props, easy. I picked up 7 just this past week, ALL with 15% NET caps. Finding a tenant for 10k a month, VERY difficult. Also buying a 1 mill dollar property that WILL be overpriced, not a good move. Hey but what do I know, I have only done about 500 deals and owned 100s, . I am not just posting nonsense, ALL from extensive experience. All the best
I feel like the more high end will be less exposed to the upcoming crash.
Well sorry but that is 100% incorrect, you can't get hurt jumping out of a basement window :)
I picked up 7, all about 80k each, all with values of about 115- 125k, all with 1100- 1400 in rent, MUCH safer than paying a mill for a house that two years ago was 600k,,,,,,,,,,,
AGAIN, I am not just writing nonsense. I would NEVER buy a mill house now. Not a chance in hell. Homes in my area were 800k, two years ago, now selling for 3mill, tell me the people paying 3 mill are not going to get crushed,,,,,, they will.
Good luck
If you're buying things 30% under current market value you will win every time, 100K or 100M.
Not interested in this sort of products though.
Well, I am not sure who you are speaking with buy you are not buying a deal all in 1 mill, and getting a tenant for 10 11k a month. That is not an easy undertaking, and IMO will not end well for you. You do not know where to buy how much to pay. You do not have contractors you can trust etc.
Well good luck to you
since the OP has cash. the way to acheive this is to follow 1 mil dollar foreclosure sales. the competition at the court house drops a ton when the dollar amounts get that high.. I suspect if you put in a lot of work you can find 2 mil to 1.5 million house going to sale for 1 mil and probably will rent for 7 to 8k a month. I know in Vegas you can also Atlanta would be a prime target at those price points.
I'm sure you are aware, in typical free markets with typical outside influences, returns move inline with risk and inverse to demand. The higher risk deal - the higher the potential returns and vice-versa. The more demand - the lower the potential returns and vice-versa. So, the higher the return potential, the higher the relative risk and the lower demand, which does not typically equal an "A-Market" ("A-neighborhood"). So, what you are asking for, goes against typical market forces and results - a higher than typical return (7-8%), in a higher demand/lower relative risk area (A-neighborhood). So, what you are seeking is challenging to find. I never say never, because I do believe unicorns eixist. :) But, it is more likely you may need to find an animal with a similar body type and attach a custom horn and paint it purple, pink, rainbow or whatever color/s you choose. Point being, you have a better chance creating the conditions for your preferred returns in a deal, than stumbling upon the unicorn or someone willing to share the unicorn with you.
Additional Brain Droppings:
* SFRs in A-neighborhoods are typically higher priced, with lower returns, since more people want to live there (i.e. higher demand) and are therefore, willing to pay more money (i.e. lower returns), because they value more then cashflow returns in those neighborhoods. These neighborhoods are typically made up of more owner occupied properties, reflecting motivations other than strictly financial returns. So, you'd be competing with those owner-occupant buyers.
* Less owner occupants are typically interested in multi-unit properties, and therefore, there is less outside motivations (emotions, etc) and more emphasis on financial returns (investor motivations). This causes returns to be more inline with risk. Example would be someone who could put cash in a money market account @ 5%, would probably want to have more than a 5% return on a multi-unit property with the potential of more risk.
* The better returns may be found in B/C areas in the path of growth and gentrification. Smartly researched B areas can become A areas over time.
* You point out you don't want to be in a market which has appreciated 50% in the past 24 months, but those are most likely A-neighborhoods, because demand pushed the appreciation in those areas. I personally would be concerned about investing in an area that didn't have a fair amount of recent appreciation, or at least I would try and understand why it didn't and be aware of my goals when investing in those areas. I mean, why would you want to be in an area that nobody else wanted to be in, when they could've purchased with a 3% mortgage? I have owned those properties in those areas and was happy to "dump" them years ago.
* Generally , for what you are looking for, you would have to "create" it, either by moderate to major value-adds, build from ground-up, add additional units (a lot of areas are encouraging adu's now), etc.
* You may be more interested in looking at other investment vehicles instead of real estate, if you need to have those returns you desire. Like syndications or other investment opportunity funds. I know of 2 opportunities right now where they are conservatively projecting 8% cashflow returns (and realistically expecting much higher), with very trustworthy smart people.
* Or, why not do hard money lending or other lending, you could easily get 8%+ on low ltv loans right now, with reduced, controlled risk. I have a client that just got two 12% loans from a lender, with a low ltv, she would've been happy to pay 10% elsewhere.
Better put 1 million into TSLY, return is ~50% annualized or ~4% monthly minus the NAV if the stock went down, if stock goes up it's even better. With 1 mil OP would generate $40,000 every month.
Looking to buy LTR in the US. Cash in hand and also pre-approved if I go financing route.
Please keep in mind, anything that is sent to me will go through extensive checks via different resources I have, so please let's be practical and realistic about everything.
Let me know if the below exists today:
Dos
Must be ~A neighborhood, and I hope to be one of the less expensive houses in the neighborhood
Open to renovation - Rather have turn key
Minimum 1M, ideally 1.25-1.5M
Must be off market deal under inflated market
Do nots
No STR / AirBNB based asset - Don't tell me that the asset will make 7% if I AirBNB it
Not in vacation markets!
Not in a market that has appreciated 50% in the last 24 months
Not Multi-Family or Condo
Please do not BS me with comps of different neighborhoods and hypothetical rental yield that based on what the mansion on the beach rented for 2 years ago or what it has been doing on AirBNB.
Only things that can easily be compd to long term rentals
Ready to pull the trigger on a deal, please don't waste my time and I promise I won't waste yours
Below are examples of price to rent I am looking for:
Home price - Rental price
1M - $7,000 / month
1.1M - $8,000 / month
1.2M - $9,000 / month
1.35M - $10,000 / month
1.45M - $10,500 / month
1.55M - $11,000 / month
Hi Daniel. My gut and my experience tell me that to push your cash flow on a LTR to this point, you need a high-risk multifamily property in a bad area that likely has significant deferred maintenance. But if you aren't worried about that, I think it's doable. It may be doable for a SFH - again, with a lot of problems. Likely you will need to purchase 10-15 cheap SFH's to get to $1M, and the problems will keep you up at night. If you want to do this, check Flint, Michigan, bad parts of Detroit, Mobile, Alabama and various other comparable parts of the country that have high crime rates. They tend to have higher returns for your dollar. But please don't take this as advice, as it's incredibly risky and usually ends poorly.
I use to go cheap on things. I'm stubborn, so it took me a long time to truly learn the high cost of doing so. I don't mean this as condescension. Just a friendly warning from one investor (and an agent) to another investor. I use to get high LTR returns in bad areas. I know many other investors that lean toward low cost, high return, high risk. Eventually, I realized I prefer lower risk, low to moderate returns and moderate to higher cost.
The white elephant- the rare solution to this, where you don't lose sleep and get a great return like you are seeking, is when you "luck" into a situation where you make a once in a life time purchase with a crazy low price, because a seller is desperate, stupid or both, and lets a property go at 1/3 of its value. This doesn't happen with active properties on the MLS, so you have to nurture this behind the scenes, on your own.
I hope you prove us all wrong. Seriously- good luck. Please tell us if you crack the code on this and are able to put something together. I'm rooting for you.
