How are investors making it work?

Question

I have been trying to get into multi unit rental properties the last few months. I have gone over deal after deal, running numbers and every deal is loosing money on a monthly basis. Each one of these properties comes on the market and within days or weeks they are under contract. What am I missing here? How are investors making money on properties that rents will not cover the cost of mortgage and taxes alone? Not even figuring in management costs or utilities

Bjorn Ahlblad · Answer

@Brandon Rauscher You are not missing a thing. REI is so overhyped that people with no clue are jumping in with both feet. I have not seen a cash flowing investment property in my area for a long time.

John Underwood · Answer

I'm buying distressed properties with cash. I have not paid over 30k for last 5 properties. Then they rent for over $1,000  per month, one just rented for $1,500 per month. I have put money into them to make them beautiful.

Nathan Gesner · Answer

Read the news. Seriously.

Every market around the country is inflated right now, and has been for the past two years. It was hard to find good cash-flowing deals before the market went crazy, now it's gotten much worse and may take a few years to balance out.

You need to look in different markets, work a little harder at it, be pickier about your choices.

John Underwood · Answer

You have to find properties that are not listed for sale. Problems with code enforcement,  back taxes, condemned, probate, preforclosure etc. Then find the owners and see if you can work out a deal.

When you can't find properties that work on MLS or Zillow.com, you look elsewhere. There are still deals to be had you just have to work harder to find them.

Rodney Sums · Answer

In addition to house hackers you're competing against people with all cash and other buyer types . As you know, the numbers look different for someone who doesn't have to factor a mortgage payment in to their cash flow analysis.

The rapid appreciation we've seen has made it possible for people to cash out their equity and buy a multi all cash for steady income.

Othe buyers with plans to use the property for STRs are going to do calculations with higher rents.

Jaron Walling · Answer

I agree with @John Underwood statements. Sticking to the numbers is everything. That said I think there's some gambling going on. It subsided a bit with higher interest rates but the cash-flow on listed properties is nearly impossible to find. This is coming from a cash-flow market investor. I've worked with other investors doing maintenance on there rentals and know the numbers. I then watched the same properties sell at full market price. The upside is future rent growth and appreciation. In the short term it's a terrible deal and cash-flow is completely negative. I'm still wrapping my head around this.

Rodney Sums · Answer

One of my favorite quotes from a book I read was "It's better to miss on 100 good deals than to buy one bad one".

There are those who may have bought within the last few years starting cash flow negative and today could say "told you so" for betting on appreciation.

Imagine being WRONG, buying with negative cash flow and staying that way for years.  That would be worse than saying "aw shucks I should have bought that one that appreciated".

Aria Drexler · Answer

The only reason I am getting by on my duplex (first and only investment purchase) is because I reinvested an inheritance sum and bought it free and clear…couldn’t get a loan since I was new, so I figured this was my only way in. Even so, the rents were only bringing 6-7% ROI at the time of purchase, which was ok, but now is barely covering inflation.  Am now grateful I don’t have a mortgage, due to my current life situation I am living on the rental income, but that inflation is killing it. Shifted all utilities over to the tenants with the new lease, but felt I couldn’t increase rents much with the utility takeover and wanting to keep amazing tenants. I am definitely waiting and watching for a bubble crash, hopeful to pick up another in the next few years, but I definitely would not advise anyone to jump in right now unless they are buying in a rural low-competition region.

Brandon Rauscher · Answer

I will send you a message

Joshua Janus · Answer

If you focus on buying properties under market value with a value add opportunity (almost always off market),  you can buy during any market and find yourself in a favorable position.

How are investors making it work?

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