Buy and Hold. What do you look for?

13 Replies

If you are looking for buy and hold, what criteria are you looking for? I just came across an investor who said anything less than 100$/sqft, he would be interested in. I have a few for him. (I am an agent)

What are you looking for in Buy and Hold? Also, if you are thinking of investing in Sacramento area, I have a few to show you.

I look for something that will cash flow after a 75% LTV mortgage 20 year mortgage. I also look to make 15% or greater cash on cash with an additional 5% or so coming from principal paid down.

It has to be stable or growing area.  Someplace that I wouldn't be afraid to walk around during the day.  

It needs to have some potential for appreciation.  

It doesn't have anything that would turn a renter off.  Such as a RR track in the backyard (I have one of those already).  

That is just a broad brush. 

Thanks. I wonder what others who live in Northern California think.

Cash flow now, nice in the future but I want it when I purchase.  When I have followed this rule I have done fine but when It was basically flat or small negative to start I have been burned usually by unseen property issues or an increase in taxes (on out of state properties).  Room for rents to increase so area must be on the way up not down.

Price per square foot is kind of silly unless you are talking about the same neighborhood.  Lot size blows price per square foot out of the water as a measure.  PPSF in a given subdivision is useful otherwise.

I  agree with @Cal C. that I want to be able to walk  the neighborhood.  I have owned inner city SF multi family and my tenants were constantly hassled by people on the street.

- Look for multi family houses/small apartment buildings where value (cash flow) can be created

- Buy them upfront with hard money

- Fix them up and rent them out

-refinance on the back end with a portfolio lender (minimum 75% LTV)

- Rinse & repeat

@Bahman Ghashghaei  Beyond what @Cal C.   and @Martin Scherer  stated above (which I agree with), I'd be looking for early signs of catalysts that could cause material levels of appreciation to that specific market within my proposed holding period. It behooves investors to be extremely well-read on their markets, and perhaps to know people with meaningful influence in their communities.

More efficient modes of transportation is a good one, saving businesses and/or consumers time and/or money. It could be an airline planning to make a new hub or route structure around a city you're evaluating. It could be even bigger - for example, there's a project ongoing to expand the Panama canal by 2015 which should greatly expand the size of the ships (and hence more product) that can pass through. A former professor of mine is invested there in a nightclub.

It could be as simple as an attractive retail tenant moving into the neighborhood. Do you know Whole Foods is carefully looking to test the waters in markets you wouldn't expect to see them in? I'm talking about Newark, NJ and Detroit, MI. I'm personally unsure of whether these ventures will be successful, but investors in those markets should be keenly aware of such developments IMHO.

@Jonathan K.  LOL Whole Foods would have to drop their prices by a ton for it to suceed in detroit.

@Michael Noto since you mentioned Portfolio Lender - do you have any recommendations for the same?

They opened up a new Key Food Supermarket down the street from a flip we are working on in Newark. It was a big deal when it opened, Mayor Booker was there to cut the ribbon for the grand opening. Less than a year later, it was closed. The supermarket couldn't get approved to accept food stamps, which is a necessity in these type of areas.

@Pawan W. The portfolio lenders I have relationships with are smaller community banks here in Connecticut where I live.

How did I find them? I literally called every local bank in the state of Connecticut. They are out there, and you can find them if you put in the work and get yourself out there.

@Benjamin Timmins  It sounds like they're having some early success with the store near Wayne State University; not sure if the Englewood one has opened yet. This article also notes that Meijer recently opened its first Detroit store.

So while I'm far from being an expert on Detroit (and am not endorsing it as a place for investment), major retail tenant developments are definitely an example of something I'd be looking for in a potential buy & hold area.

I look for areas with appreciation potential that cash flow. I like 8% cap rates, class a neighborhoods I can manage from a distance and 10-15% when leverage with 20% downdown

I have found a few at $100,000 with 950 rent. Section 8 . I assume that would be a good deal. Right? With 20% down you will have some cash flow. That's above 1% rule. If you are interested,let me know.

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