How does anyone afford to purchase an STR?!
Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes
How does anyone afford to purchase an STR?!
Most Popular Reply
Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votesI don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
100 Replies
- 1yAndrew SteffensBusiness MemberTampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
As you mentioned there is house hacking - buying MF and living in one and renting the others. There are ones in my market Tampa 3-400k and 3.5% is $10-15k down plus your furnishing costs.
There is also owner finance. There is also BRRR. There are also 10% second home loans. I have great turnkey furnished options here in Tampa at $400-600k which would be $40-60k down and its already furnished.
Vacation Rentals of Florida53 Reviews- Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Quote from @Andrew Steffens:
As you mentioned there is house hacking - buying MF and living in one and renting the others. There are ones in my market Tampa 3-400k and 3.5% is $10-15k down plus your furnishing costs.
There is also owner finance. There is also BRRR. There are also 10% second home loans. I have great turnkey furnished options here in Tampa at $400-600k which would be $40-60k down and its already furnished.
I'm trying to go home and stick in Charleston, SC and the greater area. I will keep that in mind though as Florida is the second pick. BRRR is a good plan for sure. 10% I was thinking after I FHA and hack my first multi-family (probably duplex/townhouse deal).
Owner financing would be nice, curious to know more about this. Because that'd almost be like arbitrage but with some more privileges and opportunity to buy out later. Is owner financed common? I feel like nobody would ever go for this. - 1yAndrew SteffensBusiness MemberTampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Jason Eyerly:
Quote from @Andrew Steffens:
As you mentioned there is house hacking - buying MF and living in one and renting the others. There are ones in my market Tampa 3-400k and 3.5% is $10-15k down plus your furnishing costs.
There is also owner finance. There is also BRRR. There are also 10% second home loans. I have great turnkey furnished options here in Tampa at $400-600k which would be $40-60k down and its already furnished.
I'm trying to go home and stick in Charleston, SC and the greater area. I will keep that in mind though as Florida is the second pick. BRRR is a good plan for sure. 10% I was thinking after I FHA and hack my first multi-family (probably duplex/townhouse deal).
Owner financing would be nice, curious to know more about this. Because that'd almost be like arbitrage but with some more privileges and opportunity to buy out later. Is owner financed common? I feel like nobody would ever go for this.More common than you think - but likely they'll still require some skin in the game.
Vacation Rentals of Florida53 Reviews
- 1yCollin HaysBusiness MemberProperty Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
- Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I think it's unrealistic for a single man to save up $100k in any reasonable time in the current economy and job market. I was fortunate this year. Healthcare short staffing prompted a lot of bonuses and I'm gonna pull $40k this month with (24) twenty-four hour shifts and then I'm headed out west for fire season which will at least match if not surpass that and I'm owed $40k by my dad's estate. This is not the norm however and I'd have otherwise not been able to pull it off so quickly.
- 1yCollin HaysBusiness MemberProperty Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
Quote from @Jason Eyerly:
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I think it's unrealistic for a single man to save up $100k in any reasonable time in the current economy and job market. I was fortunate this year. Healthcare short staffing prompted a lot of bonuses and I'm gonna pull $40k this month with (24) twenty-four hour shifts and then I'm headed out west for fire season which will at least match if not surpass that and I'm owed $40k by my dad's estate. This is not the norm however and I'd have otherwise not been able to pull it off so quickly.
My son started investing at age 20, but not in earnest until he graduated college at age 22. He's 25 now and is at around $57K. That last $43K will come a lot faster than the first $57K.
You eat the elephant one bite at a time.
- Member since 2022 · 527 posts · 413 votes1y
Quote from @Jason Eyerly:
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I think it's unrealistic for a single man to save up $100k in any reasonable time in the current economy and job market. I was fortunate this year. Healthcare short staffing prompted a lot of bonuses and I'm gonna pull $40k this month with (24) twenty-four hour shifts and then I'm headed out west for fire season which will at least match if not surpass that and I'm owed $40k by my dad's estate. This is not the norm however and I'd have otherwise not been able to pull it off so quickly.
Definitely not unreasonable. My son is 26 (almost 27), graduated 4 years ago and is in the Army. He started investing $40k (he got a scholarship so was able to use his 529 funds) and saving. He now owns a house that he’s renting out (very little cash flow, it used to be his primary until the Army moved him) and has over $200k in investments. Patients, saving and investing wisely has paid off. I encouraged him to keep his house and rent it since the current market isn’t great and he can afford to do so.
All to say, I agree with others. I wouldn’t arbitrage as I think it would be a lot of work for very little money if any and I would encourage you to save up until you can do something sounds like you have some decent money coming in. It should t take long if you save diligently and invest wisely
- Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Quote from @Patricia Andriolo-Bull:
Quote from @Jason Eyerly:
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I think it's unrealistic for a single man to save up $100k in any reasonable time in the current economy and job market. I was fortunate this year. Healthcare short staffing prompted a lot of bonuses and I'm gonna pull $40k this month with (24) twenty-four hour shifts and then I'm headed out west for fire season which will at least match if not surpass that and I'm owed $40k by my dad's estate. This is not the norm however and I'd have otherwise not been able to pull it off so quickly.
Definitely not unreasonable. My son is 26 (almost 27), graduated 4 years ago and is in the Army. He started investing $40k (he got a scholarship so was able to use his 529 funds) and saving. He now owns a house that he’s renting out (very little cash flow, it used to be his primary until the Army moved him) and has over $200k in investments. Patients, saving and investing wisely has paid off. I encouraged him to keep his house and rent it since the current market isn’t great and he can afford to do so.
All to say, I agree with others. I wouldn’t arbitrage as I think it would be a lot of work for very little money if any and I would encourage you to save up until you can do something sounds like you have some decent money coming in. It should t take long if you save diligently and invest wisely
Again, not everyone's situation is the same. He was able to join the military, doesn't have to pay for any housing costs or support anyone else, and has at least one (if not two) parents to help along the way. Arbitrage isn't up for discussion and wasn't the point of the post. I've already made my mind up on that. I'm just trying to understand how people come to purchase one, let alone multiple, STR properties without worrying about a crash in the market or being over-leveraged. For me, personally, I always have healthcare to fall back on and I'm looking at the idea of a cash purchase of a semitruck and hiring a driver.
- Member since 2022 · 527 posts · 413 votes1yWell, you started the post stating to agree to disagree on arbitrage. You also make some incorrect assumptions, his parents are not helping him. He doesn’t live in military housing and has a wife and 1 year old daughter. So yeah, he is also supporting two other people. It is more about saving or spending and investing wisely. I would never recommend anyone getting over their skis. Over leveraging, especially in this market, is dangerous.
Quote from @Jason Eyerly:
Quote from @Patricia Andriolo-Bull:
Quote from @Jason Eyerly:
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I think it's unrealistic for a single man to save up $100k in any reasonable time in the current economy and job market. I was fortunate this year. Healthcare short staffing prompted a lot of bonuses and I'm gonna pull $40k this month with (24) twenty-four hour shifts and then I'm headed out west for fire season which will at least match if not surpass that and I'm owed $40k by my dad's estate. This is not the norm however and I'd have otherwise not been able to pull it off so quickly.
Definitely not unreasonable. My son is 26 (almost 27), graduated 4 years ago and is in the Army. He started investing $40k (he got a scholarship so was able to use his 529 funds) and saving. He now owns a house that he’s renting out (very little cash flow, it used to be his primary until the Army moved him) and has over $200k in investments. Patients, saving and investing wisely has paid off. I encouraged him to keep his house and rent it since the current market isn’t great and he can afford to do so.
All to say, I agree with others. I wouldn’t arbitrage as I think it would be a lot of work for very little money if any and I would encourage you to save up until you can do something sounds like you have some decent money coming in. It should t take long if you save diligently and invest wisely
Again, not everyone's situation is the same. He was able to join the military, doesn't have to pay for any housing costs or support anyone else, and has at least one (if not two) parents to help along the way. Arbitrage isn't up for discussion and wasn't the point of the post. I've already made my mind up on that. I'm just trying to understand how people come to purchase one, let alone multiple, STR properties without worrying about a crash in the market or being over-leveraged. For me, personally, I always have healthcare to fall back on and I'm looking at the idea of a cash purchase of a semitruck and hiring a driver.
- 1yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Jason Eyerly:
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I think it's unrealistic for a single man to save up $100k in any reasonable time in the current economy and job market. I was fortunate this year. Healthcare short staffing prompted a lot of bonuses and I'm gonna pull $40k this month with (24) twenty-four hour shifts and then I'm headed out west for fire season which will at least match if not surpass that and I'm owed $40k by my dad's estate. This is not the norm however and I'd have otherwise not been able to pull it off so quickly.
False.
It's definitely harder to eat the costs of todays life, but not difficult to catch a healthy yield. You go at this with discipline and patience, and because of that most people fail at getting there.
Start planting some seeds, let the 8th wonder of the world work, then go from there.
FWIW, we get into STRs but with no more than 30% leverage. The original capital is all capital recycled from previous ventures. The start of it was funds from 2017. Once you understand how to invest and make money, you then learn how to manage and save it properly to where you're working off all recycled capital. Same risk with the capital, no risk to original capital, yet different emotion and arguably more impulsive but you learn your lessons there too and manage that.
- New to Real Estate · KS · Member since 2025 · 35 posts · 25 votes1y
@Collin Hays Once you get to 100k what do you recommend the first move be with that.
- 1yCollin HaysBusiness MemberProperty Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
Quote from @Dawson Burton:
@Collin Hays Once you get to 100k what do you recommend the first move be with that.
In general investing terms, you wait for the right deal and attack. For me, it was a Great Clips franchise. We then used the cashflow from that to buy real estate, open more Great Clips franchises, etc.
We now own 5 GCs with no debt, three vacation rentals with no debt, two more with 60-70 percent equity.
We opened a new 3D/4D women’s imaging center on 6/27 with cash.
Nothing too fancy or daring. Crockpot approach. Also, I do not recommend 401Ks or IRAs to anyone trying to reach financial independence before retirement. They are a huge drain on your Ava labor resources for wealth building.
- USA · Member since 2023 · 145 posts · 84 votes1y
@Collin Hays couldn't have said it better. I appreciate your conservative approach.
- New to Real Estate · KS · Member since 2025 · 35 posts · 25 votes1y
@Collin Hays thank you for the wisdom!
- Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes1y
Quote from @Jason Eyerly:
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I think it's unrealistic for a single man to save up $100k in any reasonable time in the current economy and job market. I was fortunate this year. Healthcare short staffing prompted a lot of bonuses and I'm gonna pull $40k this month with (24) twenty-four hour shifts and then I'm headed out west for fire season which will at least match if not surpass that and I'm owed $40k by my dad's estate. This is not the norm however and I'd have otherwise not been able to pull it off so quickly.
A single man with determination and discipline is in the best position to save $100K in a reasonable time . Work as much as possible , spend wisely , and save . Without a wife and children , and new car payment its easy . I had that and more at 24 years old as a single male doing construction . Bought a house and put 50% down and paid it off in 5 years . No its not the norm , but to get ahead you dont follow norms
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I 1,000% echo Collin's advice here.
I know it's a sour taste for many have-not's looking to REI as there mechanism to being a have... but keep in mind it's called INVESTING for a reason.
If your in a situation that you only have $50k, $20k, $5k whatever and think "Ooof, $100k, how can you ever do that?" your over complicating it, it's actually very simple.
Go get a 2nd job. 3rd, 4th.....
Yes, 40hr work weeks is NOT enough if your living in those shoes.
You have 168hrs in a week, if you truly care about investing in your future, turn off the tv, hell throw the tv out! Serious, sell it!
Work your 40 to cover your life as it is, and work the second 40 for your future.
80hrs is still less than half the time you have in the week.
If your not willing to invest in yourself like that...... well, wish in 1 hand and poo in the other as they say.
Can't find a 2nd job? Then make one. Take your lawn mower and go door to door offering mowing services. Take your shovel and go door 2 door offering snow shoveling services. Drive uber. Deliver pizzas. It has literally NEVER been easier to make $ than it is today, FACTS.
So if you want it, you just gotta get up and go out and get it, it's that simple.
Does it mean choices, heck yeah it does.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Matthew Paul:
Quote from @Jason Eyerly:
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I think it's unrealistic for a single man to save up $100k in any reasonable time in the current economy and job market. I was fortunate this year. Healthcare short staffing prompted a lot of bonuses and I'm gonna pull $40k this month with (24) twenty-four hour shifts and then I'm headed out west for fire season which will at least match if not surpass that and I'm owed $40k by my dad's estate. This is not the norm however and I'd have otherwise not been able to pull it off so quickly.
A single man with determination and discipline is in the best position to save $100K in a reasonable time . Work as much as possible , spend wisely , and save . Without a wife and children , and new car payment its easy . I had that and more at 24 years old as a single male doing construction . Bought a house and put 50% down and paid it off in 5 years . No its not the norm , but to get ahead you dont follow norms
1,000%!
If you want a life of the 2%, expect that your going to have to do what 98% won't/don't.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Jason Eyerly:
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I think it's unrealistic for a single man to save up $100k in any reasonable time in the current economy and job market. I was fortunate this year. Healthcare short staffing prompted a lot of bonuses and I'm gonna pull $40k this month with (24) twenty-four hour shifts and then I'm headed out west for fire season which will at least match if not surpass that and I'm owed $40k by my dad's estate. This is not the norm however and I'd have otherwise not been able to pull it off so quickly.
And what's your point about unrealistic?
Is being a Real Estate Investor realistic for most? Nope.
Is being a millionaire realistic for most? Nah-ah.
The life and wealth that everyone who comes to BP speaks of pursuing is NOT realistic for the vast majority of the country/world......
So exactly what does realistic have to do with it?
No, I am NOT realistic, I am AMBITIOUS, I am visionary, I am HUNGRY, I am a lot of things but realistic is about as low on my totem pole as it get's.
Everyone you look up to; Musk, Bezos, Jensen etc etc etc, nothing about what made them worth idolizing was realistic.
"Realistic" is an excuse to accept failure without ever even trying........
- Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Quote from @Collin Hays:
Quote from @Dawson Burton:
@Collin Hays Once you get to 100k what do you recommend the first move be with that.
In general investing terms, you wait for the right deal and attack. For me, it was a Great Clips franchise. We then used the cashflow from that to buy real estate, open more Great Clips franchises, etc.
We now own 5 GCs with no debt, three vacation rentals with no debt, two more with 60-70 percent equity.
We opened a new 3D/4D women’s imaging center on 6/27 with cash.
Nothing too fancy or daring. Crockpot approach. Also, I do not recommend 401Ks or IRAs to anyone trying to reach financial independence before retirement. They are a huge drain on your Ava labor resources for wealth building.
I am dying to open a Waffle House but they no longer franchise. Eyeballing a Taco Bell or something at this point. What site/forum do you recommend to peruse franchises for sale?
- 1yCollin HaysBusiness MemberProperty Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votesI live in a smaller town. I visited and investigated large markets - DFW in my case - and looked at different franchise concepts that we did not yet have. We did not have Great Clips in our market so that’s what led me to begin the process of opening my first.
Quote from @Jason Eyerly:
Quote from @Collin Hays:
Quote from @Dawson Burton:
@Collin Hays Once you get to 100k what do you recommend the first move be with that.
In general investing terms, you wait for the right deal and attack. For me, it was a Great Clips franchise. We then used the cashflow from that to buy real estate, open more Great Clips franchises, etc.
We now own 5 GCs with no debt, three vacation rentals with no debt, two more with 60-70 percent equity.
We opened a new 3D/4D women’s imaging center on 6/27 with cash.
Nothing too fancy or daring. Crockpot approach. Also, I do not recommend 401Ks or IRAs to anyone trying to reach financial independence before retirement. They are a huge drain on your Ava labor resources for wealth building.
I am dying to open a Waffle House but they no longer franchise. Eyeballing a Taco Bell or something at this point. What site/forum do you recommend to peruse franchises for sale?
I am quite amazed that there are still no Great Clips in Syracuse NY. That market would easily support 20 salons. - Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Quote from @James Hamling:
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I 1,000% echo Collin's advice here.
I know it's a sour taste for many have-not's looking to REI as there mechanism to being a have... but keep in mind it's called INVESTING for a reason.
If your in a situation that you only have $50k, $20k, $5k whatever and think "Ooof, $100k, how can you ever do that?" your over complicating it, it's actually very simple.
Go get a 2nd job. 3rd, 4th.....
Yes, 40hr work weeks is NOT enough if your living in those shoes.
You have 168hrs in a week, if you truly care about investing in your future, turn off the tv, hell throw the tv out! Serious, sell it!
Work your 40 to cover your life as it is, and work the second 40 for your future.
80hrs is still less than half the time you have in the week.
If your not willing to invest in yourself like that...... well, wish in 1 hand and poo in the other as they say.
Can't find a 2nd job? Then make one. Take your lawn mower and go door to door offering mowing services. Take your shovel and go door 2 door offering snow shoveling services. Drive uber. Deliver pizzas. It has literally NEVER been easier to make $ than it is today, FACTS.
So if you want it, you just gotta get up and go out and get it, it's that simple.
Does it mean choices, heck yeah it does.
A moot point. I already have the 100k. I work 268 hours every two weeks with overtime stipends to make it happen. And the wildfire season is busy. I lucked out.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Jason Eyerly:
Quote from @James Hamling:
Quote from @Collin Hays:
I don’t recommend RE until you have $100K in your account. Be patient, save, and invest in a good index ETF. Shortcuts could be very risky and set you back a decade.
It takes a while but you’ll get there. When you reach $100K, you have something to work with.
I 1,000% echo Collin's advice here.
I know it's a sour taste for many have-not's looking to REI as there mechanism to being a have... but keep in mind it's called INVESTING for a reason.
If your in a situation that you only have $50k, $20k, $5k whatever and think "Ooof, $100k, how can you ever do that?" your over complicating it, it's actually very simple.
Go get a 2nd job. 3rd, 4th.....
Yes, 40hr work weeks is NOT enough if your living in those shoes.
You have 168hrs in a week, if you truly care about investing in your future, turn off the tv, hell throw the tv out! Serious, sell it!
Work your 40 to cover your life as it is, and work the second 40 for your future.
80hrs is still less than half the time you have in the week.
If your not willing to invest in yourself like that...... well, wish in 1 hand and poo in the other as they say.
Can't find a 2nd job? Then make one. Take your lawn mower and go door to door offering mowing services. Take your shovel and go door 2 door offering snow shoveling services. Drive uber. Deliver pizzas. It has literally NEVER been easier to make $ than it is today, FACTS.
So if you want it, you just gotta get up and go out and get it, it's that simple.
Does it mean choices, heck yeah it does.
A moot point. I already have the 100k. I work 268 hours every two weeks with overtime stipends to make it happen. And the wildfire season is busy. I lucked out.
Give yourself more credit, the luck was the result of a series of good choices and hard work.
Luck is made. It's where preparation meet's opportunity.
- 1yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votesYou may be the only one, besides me, that has a view like that. My view may be a bit different, I do think some contributions are fine. But this view of max out at all costs is too dogmatic.
Quote from @Collin Hays:
Quote from @Dawson Burton:
@Collin Hays Once you get to 100k what do you recommend the first move be with that.
In general investing terms, you wait for the right deal and attack. For me, it was a Great Clips franchise. We then used the cashflow from that to buy real estate, open more Great Clips franchises, etc.
We now own 5 GCs with no debt, three vacation rentals with no debt, two more with 60-70 percent equity.
We opened a new 3D/4D women’s imaging center on 6/27 with cash.
Nothing too fancy or daring. Crockpot approach. Also, I do not recommend 401Ks or IRAs to anyone trying to reach financial independence before retirement. They are a huge drain on your Ava labor resources for wealth building.
- 1yCollin HaysBusiness MemberProperty Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
Quote from @V.G Jason:
You may be the only one, besides me, that has a view like that. My view may be a bit different, I do think some contributions are fine. But this view of max out at all costs is too dogmatic.Quote from @Collin Hays:
Quote from @Dawson Burton:
@Collin Hays Once you get to 100k what do you recommend the first move be with that.
In general investing terms, you wait for the right deal and attack. For me, it was a Great Clips franchise. We then used the cashflow from that to buy real estate, open more Great Clips franchises, etc.
We now own 5 GCs with no debt, three vacation rentals with no debt, two more with 60-70 percent equity.
We opened a new 3D/4D women’s imaging center on 6/27 with cash.
Nothing too fancy or daring. Crockpot approach. Also, I do not recommend 401Ks or IRAs to anyone trying to reach financial independence before retirement. They are a huge drain on your Ava labor resources for wealth building.
I’m not a max out guy. Save 10 percent, give 10 percent, live on the rest.
- 1yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Collin Hays:
Quote from @V.G Jason:
You may be the only one, besides me, that has a view like that. My view may be a bit different, I do think some contributions are fine. But this view of max out at all costs is too dogmatic.Quote from @Collin Hays:
Quote from @Dawson Burton:
@Collin Hays Once you get to 100k what do you recommend the first move be with that.
In general investing terms, you wait for the right deal and attack. For me, it was a Great Clips franchise. We then used the cashflow from that to buy real estate, open more Great Clips franchises, etc.
We now own 5 GCs with no debt, three vacation rentals with no debt, two more with 60-70 percent equity.
We opened a new 3D/4D women’s imaging center on 6/27 with cash.
Nothing too fancy or daring. Crockpot approach. Also, I do not recommend 401Ks or IRAs to anyone trying to reach financial independence before retirement. They are a huge drain on your Ava labor resources for wealth building.
I’m not a max out guy. Save 10 percent, give 10 percent, live on the rest.
Oh, I mean max out 401k, every retirement account, etc. that every financial advisor immediately recommends(especially so if you have your own companies) type of guy. Those recommendations are the one's I am referring as too dogmatic.
- 1yCollin HaysBusiness MemberProperty Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votesGotcha. Yeah I don’t like things that are gubmit endorsed. Usually the trade off is way too great.
Quote from @V.G Jason:
Quote from @Collin Hays:
Quote from @V.G Jason:
You may be the only one, besides me, that has a view like that. My view may be a bit different, I do think some contributions are fine. But this view of max out at all costs is too dogmatic.Quote from @Collin Hays:
Quote from @Dawson Burton:
@Collin Hays Once you get to 100k what do you recommend the first move be with that.
In general investing terms, you wait for the right deal and attack. For me, it was a Great Clips franchise. We then used the cashflow from that to buy real estate, open more Great Clips franchises, etc.
We now own 5 GCs with no debt, three vacation rentals with no debt, two more with 60-70 percent equity.
We opened a new 3D/4D women’s imaging center on 6/27 with cash.
Nothing too fancy or daring. Crockpot approach. Also, I do not recommend 401Ks or IRAs to anyone trying to reach financial independence before retirement. They are a huge drain on your Ava labor resources for wealth building.
I’m not a max out guy. Save 10 percent, give 10 percent, live on the rest.
Oh, I mean max out 401k, every retirement account, etc. that every financial advisor immediately recommends(especially so if you have your own companies) type of guy. Those recommendations are the one's I am referring as too dogmatic.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @V.G Jason:
You may be the only one, besides me, that has a view like that. My view may be a bit different, I do think some contributions are fine. But this view of max out at all costs is too dogmatic.Quote from @Collin Hays:
Quote from @Dawson Burton:
@Collin Hays Once you get to 100k what do you recommend the first move be with that.
In general investing terms, you wait for the right deal and attack. For me, it was a Great Clips franchise. We then used the cashflow from that to buy real estate, open more Great Clips franchises, etc.
We now own 5 GCs with no debt, three vacation rentals with no debt, two more with 60-70 percent equity.
We opened a new 3D/4D women’s imaging center on 6/27 with cash.
Nothing too fancy or daring. Crockpot approach. Also, I do not recommend 401Ks or IRAs to anyone trying to reach financial independence before retirement. They are a huge drain on your Ava labor resources for wealth building.
Oh come on V.G, it makes perfect sense....... For the W.S. industry, lol.
The dogma is dollar cost averaging over a duration of time. Which in theory, yeah, kinda works. It depends on the length of duration and on what time window. If you started that in say 2006...... ouch, your probably still dollar cost averaging to get back to $0 vs if had thrown it into a savings account.
But the dogma keeps so many "financial advisors" busy, not to mention how many funds with plenty of $ to play with and fee's upon fee's upon fee's, oh all the fee's.....
Wall Street is, at it's core, a fee machine.
So yeah, the dogma makes perfect sense, only problem is too few ponder on "for WHOM".
Now an SDIRA, with a competent person at the wheel.... Not even doing anything jazzy just using a solid wheel strategy, THAT makes a lot of sense for a person. And to max out annually.
- 1yJeff ChisumPro MemberLender · All 50 States · Member since 2020 · 248 posts · 142 votes
10% down second home occupancy loan
- 1yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
Arbitrage is just a job and the owner of the property gets the tax breaks and appreciation.
Get cash by working and saving, flipping etc.
- Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Quote from @John Underwood:
Arbitrage is just a job and the owner of the property gets the tax breaks and appreciation.
Get cash by working and saving, flipping etc.
A job where I don't have to deal with high acuity patients. The worst arb couldn't be more stressful than what I deal with now and reinvesting my income doesn't produce decent returns anywhere. A house hacked multifamily and flipping is in the works. I'd like an STR at some point though.
- Member since 2022 · 1k+ posts · 1k+ votes1y
Still a job in the sense that you are trading hours for dollars, even if it is less stressful than your day job. As mentioned you get none of the appreciation, which is what really builds wealth.
Arbitrage is unlike a job in the worst ways, because if you decide it is no longer working for you, you can't just collect your last check and be on your way. You are still on the hook for your lease and you have to figure out what to do with a house full of furniture.
If I were starting from scratch I would buy a primary with an ADU or walk out basement, and do a 1 bedroom optimized for 1-2 people.
- Investor · Forest Hills, NY · Member since 2014 · 101 posts · 52 votes1y
STRs don't have to be in expensive areas or vacation markets. Probably also something that many won't agree on here as most here say to only invest in vacation markets. You can buy an STR in a midwest market for way under $400-500k. Definitely make sure that the municipality allows it as that's one issue that you may run into if you are not in the vacation market areas.
- Investor · Madison, WI · Member since 2023 · 21 posts · 32 votes1y
Buying a duplex to house hack and using the other unit as a short-term rental is a solid option here. With just 5% down on a FHA loan, you could be all in for under $40K and kill two birds with one stone, eliminating (or drastically reducing) your housing costs and gaining hands-on STR/investing experience. And all the benefits that come with ownership that you don't get through arbitrage.
To keep your cash-to-close even lower, try finding a property that's been sitting for a bit and see if the seller will cover closing costs. If you can snag something already furnished, that's also a huge bonus and will save you a lot on STR startup costs.
This could be a great way to get your foot in the door without needing to drop $80K–$100K+
- 1yMichael BaumPro MemberOlympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
Hey @Jason Eyerly, you might be missing the point/strategy on the FHA loan for multifamily.
You don't do it to STR, you do it to LTR.
You are a single guy so this is an easy strategy to do IMHO. Just get that FHA loan on a triplex or fourplex. Live in one and rent the others. After a year, refinance into a conventional, rehab your unit, then do it all again.
Do it all a few times then you will have 3 or 4 performing LTRs. That is a good base to build on and moving to a STR then will make more sense.
The biggest issue I think you have is trying to do everything in year or so. It took us about 5 years to get everything in order to start looking for our first STR. It took another 3 years to find one that worked. We did that all on W2 jobs and for me, disability. Took a long time.
Our biggest restriction was buying a specific area. Properties were more scarce and prices higher so that required us to continue to save. In the end it worked out for us.
That was 8 years ago and the market is now very different. You are wanting to buy in a specific market so you will have to adjust your strategy to buy to fit that market.
All I can tell you is be patient and don't get all FOMO on yourself. If I were you, I would do the FHA thing I just talked about. That will give you all sorts of options in a few years. You will be sitting pretty!
- 1yBryce JamisonPro MemberRental Property Investor · Mebane, NC · Member since 2015 · 493 posts · 439 votes
I assume most folks are saving up money, or 1031ing other properties they saved up for, into STRs. That's what we did.
Despite all the flashy deals we see online, I imagine the overwhelming majority of people are buying properties with money they've saved up over years. Also, despite what the the internet would have you believe, many of us have and are married to people with well paying jobs. 100K is a lot of money, but not an unreasonable amount to save up over the course of a year or 3 between 2 incomes.
- 1yCollin HaysBusiness MemberProperty Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
Never give a lengthy response on BP at a stoplight. ;)
I realized I had a huge typo in my last sentence:
Also, I do not recommend 401Ks or IRAs to anyone trying to reach financial independence before retirement. They are a huge drain on your available resources for wealth building.
Apologies!- Rental Property Investor · New Braunfels, TX · Member since 2021 · 289 posts · 256 votes1y
Quote from @Collin Hays:
Never give a lengthy response on BP at a stoplight. ;)
I realized I had a huge typo in my last sentence:
Also, I do not recommend 401Ks or IRAs to anyone trying to reach financial independence before retirement. They are a huge drain on your available resources for wealth building.
Apologies!Ha Ha, I was googling "Ava labor resources" because I had never heard of it before...
- Member since 2022 · 19 posts · 4 votes1y
@Collin Hays I really really agree with this . Me and my fiancial advisor go back and forth on this a lot because he wants me to put a large amount or money away NOW for retirement and I rather take my money and buy investment properties .
- Member since 2022 · 1k+ posts · 1k+ votes1y
Quote from @Adonis Williams:
@Collin Hays I really really agree with this . Me and my fiancial advisor go back and forth on this a lot because he wants me to put a large amount or money away NOW for retirement and I rather take my money and buy investment properties .
Of course he does, especially if gets a percentage of your profile and/or a commission for the fund you purchase.
- Member since 2022 · 19 posts · 4 votes1y
@Jon Martin so do you think I should stop investments into my retirement accounts ?! I'm really more intereted in real estate and have 4 homes and rather take my liquid reserves and invest in real estate more and NOT retirement accounts.
- Investor · Rochester Area, NY · Member since 2012 · 79 posts · 17 votes1y
Quote from @Adonis Williams:
@Jon Martin so do you think I should stop investments into my retirement accounts ?! I'm really more intereted in real estate and have 4 homes and rather take my liquid reserves and invest in real estate more and NOT retirement accounts.
You can do both. Open a Self Directed IRA.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Adonis Williams:
@Jon Martin so do you think I should stop investments into my retirement accounts ?! I'm really more intereted in real estate and have 4 homes and rather take my liquid reserves and invest in real estate more and NOT retirement accounts.
Opportunity Cost and the opportunity at hand should lead your decision on how you allocate your investment capitol at the time. It's really just that simple.
Some times the best opportunity at hand is real estate, and the Opportunity Cost of let's say you ETF of choice is feeling a bit pricy, ok, real estate it is.
Another month, maybe a chef buddy Edwardo says "hey, I'm ready, I got this amazing food truck idea that I want to build into a B&M shop, I need an investor" and maybe that's the best horse in the gate of the day.
I go where the profits are.
Some weeks back, that was NVDA and wall street. Today, it's a new business venture. Next month, who knows.
The #1 key to profitability is ability to move and pivot as the landscape shifts. Because holly-cow does the landscape shift a heck of a lot the past recent years, right.
- Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Quote from @James Hamling:
Quote from @Adonis Williams:
@Jon Martin so do you think I should stop investments into my retirement accounts ?! I'm really more intereted in real estate and have 4 homes and rather take my liquid reserves and invest in real estate more and NOT retirement accounts.
Opportunity Cost and the opportunity at hand should lead your decision on how you allocate your investment capitol at the time. It's really just that simple.
Some times the best opportunity at hand is real estate, and the Opportunity Cost of let's say you ETF of choice is feeling a bit pricy, ok, real estate it is.
Another month, maybe a chef buddy Edwardo says "hey, I'm ready, I got this amazing food truck idea that I want to build into a B&M shop, I need an investor" and maybe that's the best horse in the gate of the day.
I go where the profits are.
Some weeks back, that was NVDA and wall street. Today, it's a new business venture. Next month, who knows.
The #1 key to profitability is ability to move and pivot as the landscape shifts. Because holly-cow does the landscape shift a heck of a lot the past recent years, right.
Depending on how the wildfire season goes, I'll be opening an options trading account again for sure and grinding away at it. Tastytrade taught me so much years ago, it's time to get back at it. There's no other sensible form of trading in my opinion.
- 1yCollin HaysBusiness MemberProperty Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
Quote from @Adonis Williams:
@Collin Hays I really really agree with this . Me and my fiancial advisor go back and forth on this a lot because he wants me to put a large amount or money away NOW for retirement and I rather take my money and buy investment properties .
There is certainly nothing wrong with stashing money away for retirement, but if you are entrepreneurial, you are essentially using a significant portion of your financial resources to bet against yourself becoming financially independent before your 60s. The benefits of retirement accounts are way oversold, and the negatives are practically never mentioned.
- Member since 2022 · 19 posts · 4 votes1y
@Collin Hays I agree with this wholeheartedly !!!!!! I am currently 30 years old and I have 2.45 Million AUM and I believe that I am stifling my ability to more aggressively purchase more real estate because I am putting away way too much for 'retirement'. I been thinking about this a lot lately .....
- 1yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votesI think a healthy mix is prudent. Don't put all your eggs in one basket.
Quote from @Collin Hays:
Quote from @Adonis Williams:
@Collin Hays I really really agree with this . Me and my fiancial advisor go back and forth on this a lot because he wants me to put a large amount or money away NOW for retirement and I rather take my money and buy investment properties .
There is certainly nothing wrong with stashing money away for retirement, but if you are entrepreneurial, you are essentially using a significant portion of your financial resources to bet against yourself becoming financially independent before your 60s. The benefits of retirement accounts are way oversold, and the negatives are practically never mentioned.
There are Pros and Cons to everything.
Maybe you can borrow against your 401k?
Maybe you have a W2 job and your employer does matching up to a certain percentage.
Retirement accounts also offer great protection against law suits.
Buying and investing in RE early, done properly, can certainly set you up for sucess and allow you to quit your day job early on as it did for me.
You can also use other people's money and owner financing so you minimize how much of your money you need to bring to the table.I took an old employer 401k from a precious employer and converted it to a self directed ROTH IRA and it owns rentals. I have done much better than the stock market could have ever done.
I would put some money in your company 401k (ROTH is best) and invest heavily in RE outside your 401k to get yourself to Fininacial Independence as soon as possible.
Forgo that shiny new expensive car and expensive house for now. These are liabilities that slow you down on your journey to Financial Independence. Reinvest in your self and ultimately own rental properties.
- 1yCollin HaysBusiness MemberProperty Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
Quote from @Adonis Williams:
@Collin Hays I agree with this wholeheartedly !!!!!! I am currently 30 years old and I have 2.45 Million AUM and I believe that I am stifling my ability to more aggressively purchase more real estate because I am putting away way too much for 'retirement'. I been thinking about this a lot lately .....
That's a big part of why I quit my corporate job at 46. I wanted to get to my 401K. I quit, and I did.
- Member since 2022 · 19 posts · 4 votes1y
@John Underwood thank you so much for this perspective ! It's so many ways to skin a cat and I want to make sure that I'm diversifying my investments !
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes1y
"I think it's unrealistic for a single man to save up $100k in any reasonable time in the current economy and job market."
This is how we all did it. For me, I worked, saved, and did a live in the flip (and did some of the work myself) to get my seed capital.
- Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes1yYou can do it in a year when young and single. Work 3-4 jobs...at night, weekends, holidays, etc. When you have gaps, drive Lyft or Door dash if you have to. Live cheap....rent a cheap room or a sofa somewhere. Maybe live for free being a PM for someone so you're also getting an education on someone elses dime. Be a park manager/host in an RV park or self storage facility. Plenty of ways to save money and bank cash.
Quote from @Mike Dymski:
"I think it's unrealistic for a single man to save up $100k in any reasonable time in the current economy and job market.
- Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes1y
You can buy with low down loans and owner occupy at first for a year and then turn it into a rental. So can buy 3.5-5% down. You still need reserves but even 20-30k left over after downpayment or on lines of credit is fine.
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
This is a workable idea. I got my start house hacking an FHA home purchased for 3.5% down. You can get started like that, make your $100k, and then reduce your levels of leverage. Here is the logic: you are just starting and you have nothing to lose. Go ahead and bet a few thousand on your project. If you fail, whatever, it's a few thousand bucks, you can get it again. If it's successful, and you sell out or refi, now you have the seed money for your future business, and you need to safeguard that carefully. The truth is most people who invest in real estate have highly paid jobs and saving $100k isn't a big deal for them. They are dentists, doctors, or lawyers. I never had a job like that and getting $100k outside real estate would have been ridiculous, so I get it. Once you have your $100k, you do have something to lose, so then start being conservative.
- Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Quote from @Mike D.:
This is a workable idea. I got my start house hacking an FHA home purchased for 3.5% down. You can get started like that, make your $100k, and then reduce your levels of leverage. Here is the logic: you are just starting and you have nothing to lose. Go ahead and bet a few thousand on your project. If you fail, whatever, it's a few thousand bucks, you can get it again. If it's successful, and you sell out or refi, now you have the seed money for your future business, and you need to safeguard that carefully. The truth is most people who invest in real estate have highly paid jobs and saving $100k isn't a big deal for them. They are dentists, doctors, or lawyers. I never had a job like that and getting $100k outside real estate would have been ridiculous, so I get it. Once you have your $100k, you do have something to lose, so then start being conservative.
I have the $100k, or rather will, in another few months. I'm torn on keeping my dads house and if I do how do I get the 100k out of the equity I have into it or do I just sell it. The mortgage and such is so good it's hard to pass on. I made a post about it and threw it into the classifieds. I'd appreciate if you could give it a look and tell me your thoughts. I'd love to finish paying his debts, keep it, place a renter, season it, and take a 50% equity out on it to get my $100k back, use that for an FHA hack, and then whatever is left for flips/STRs. Or I say to hell with everything and go live abroad. Ya never know.
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @Jason Eyerly:
Quote from @Mike D.:
This is a workable idea. I got my start house hacking an FHA home purchased for 3.5% down. You can get started like that, make your $100k, and then reduce your levels of leverage. Here is the logic: you are just starting and you have nothing to lose. Go ahead and bet a few thousand on your project. If you fail, whatever, it's a few thousand bucks, you can get it again. If it's successful, and you sell out or refi, now you have the seed money for your future business, and you need to safeguard that carefully. The truth is most people who invest in real estate have highly paid jobs and saving $100k isn't a big deal for them. They are dentists, doctors, or lawyers. I never had a job like that and getting $100k outside real estate would have been ridiculous, so I get it. Once you have your $100k, you do have something to lose, so then start being conservative.
I have the $100k, or rather will, in another few months. I'm torn on keeping my dads house and if I do how do I get the 100k out of the equity I have into it or do I just sell it. The mortgage and such is so good it's hard to pass on. I made a post about it and threw it into the classifieds. I'd appreciate if you could give it a look and tell me your thoughts. I'd love to finish paying his debts, keep it, place a renter, season it, and take a 50% equity out on it to get my $100k back, use that for an FHA hack, and then whatever is left for flips/STRs. Or I say to hell with everything and go live abroad. Ya never know.
Hey Jason, if you've already got $100k, then my advice changes. You do have something to lose, and 3.5% down is not enough to protect you in an economic downturn.
I don't know how to find your post in classifieds, but generally, the whole problem with the refi, reinvest, repeat thing (the RRR part of BRRR) right now is current interest rates. You can't really cashflow on anything if your down payment comes from borrowed funds. So what now? If it were me, I'd probably sell the house with the $100k equity and invest in multiple turnkey properties in a high cashflow market in the Midwest or the South. You didn't share exact numbers for the house but it's very likely taking advantage of reasonable leverage on several properties with a good cashflow cushion is going to be a better long-term move, with the caveat that not everybody wants to own properties out of state.
- Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Quote from @Mike D.:
Quote from @Jason Eyerly:
Quote from @Mike D.:
This is a workable idea. I got my start house hacking an FHA home purchased for 3.5% down. You can get started like that, make your $100k, and then reduce your levels of leverage. Here is the logic: you are just starting and you have nothing to lose. Go ahead and bet a few thousand on your project. If you fail, whatever, it's a few thousand bucks, you can get it again. If it's successful, and you sell out or refi, now you have the seed money for your future business, and you need to safeguard that carefully. The truth is most people who invest in real estate have highly paid jobs and saving $100k isn't a big deal for them. They are dentists, doctors, or lawyers. I never had a job like that and getting $100k outside real estate would have been ridiculous, so I get it. Once you have your $100k, you do have something to lose, so then start being conservative.
I have the $100k, or rather will, in another few months. I'm torn on keeping my dads house and if I do how do I get the 100k out of the equity I have into it or do I just sell it. The mortgage and such is so good it's hard to pass on. I made a post about it and threw it into the classifieds. I'd appreciate if you could give it a look and tell me your thoughts. I'd love to finish paying his debts, keep it, place a renter, season it, and take a 50% equity out on it to get my $100k back, use that for an FHA hack, and then whatever is left for flips/STRs. Or I say to hell with everything and go live abroad. Ya never know.
Hey Jason, if you've already got $100k, then my advice changes. You do have something to lose, and 3.5% down is not enough to protect you in an economic downturn.
I don't know how to find your post in classifieds, but generally, the whole problem with the refi, reinvest, repeat thing (the RRR part of BRRR) right now is current interest rates. You can't really cashflow on anything if your down payment comes from borrowed funds. So what now? If it were me, I'd probably sell the house with the $100k equity and invest in multiple turnkey properties in a high cashflow market in the Midwest or the South. You didn't share exact numbers for the house but it's very likely taking advantage of reasonable leverage on several properties with a good cashflow cushion is going to be a better long-term move, with the caveat that not everybody wants to own properties out of state.
Would love to hear your thoughts!
https://www.biggerpockets.com/forums/517/topics/1251242-join...
- 1yJorge VazquezBusiness MemberReal Estate Broker · Tampa, FL · Member since 2017 · 1k+ posts · 685 votes
Hey Jason—solid question. I own 40 properties, and only about 20% are short-term rentals because I’ve seen too many folks flood the market and get stuck. The two STRs I bought were in gentrifying areas—grabbed one for $75K and the other for $150K—and they’ve done great because they’re clean, affordable, and in practical spots with good access, not overpriced tourist zones. I set them up as corporate rentals with home offices, and once one HR rep liked the setup, the referrals just kept coming. Worst case, I can still rent them long-term and break even. Lately, I’ve been leaning into subject-to deals—I picked up two recently with rates way below market and ended up with infinite cash returns since I had barely anything in. Been at this 20 years—happy to help however I can.
Graystone Investment Group4.6271 Reviews- Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Quote from @Jorge Vazquez:
Hey Jason—solid question. I own 40 properties, and only about 20% are short-term rentals because I’ve seen too many folks flood the market and get stuck. The two STRs I bought were in gentrifying areas—grabbed one for $75K and the other for $150K—and they’ve done great because they’re clean, affordable, and in practical spots with good access, not overpriced tourist zones. I set them up as corporate rentals with home offices, and once one HR rep liked the setup, the referrals just kept coming. Worst case, I can still rent them long-term and break even. Lately, I’ve been leaning into subject-to deals—I picked up two recently with rates way below market and ended up with infinite cash returns since I had barely anything in. Been at this 20 years—happy to help however I can.
I see lots of foreclosures around me. Some on nicer properties, some not so much. How do you convince the seller to do this and then how do you estimate or get loans on the rehab? Same hard money loans and such for rehab? How do you guarantee they leave and what's the exit plan to get it out of their name at some point? Surely you're risking a due on sale clause. That is a solid plan. I definitely want a few STRs but I think it's important to know the area and what people who come to the area are looking for beyond tourism. I also like the idea of the more regulated markets as it provides a barrier to entry that even at it's face value turn away those who may be looking for an easy dollar.
- 1yJorge VazquezBusiness MemberReal Estate Broker · Tampa, FL · Member since 2017 · 1k+ posts · 685 votes
Quote from @Jason Eyerly:
Quote from @Jorge Vazquez:
Hey Jason—solid question. I own 40 properties, and only about 20% are short-term rentals because I’ve seen too many folks flood the market and get stuck. The two STRs I bought were in gentrifying areas—grabbed one for $75K and the other for $150K—and they’ve done great because they’re clean, affordable, and in practical spots with good access, not overpriced tourist zones. I set them up as corporate rentals with home offices, and once one HR rep liked the setup, the referrals just kept coming. Worst case, I can still rent them long-term and break even. Lately, I’ve been leaning into subject-to deals—I picked up two recently with rates way below market and ended up with infinite cash returns since I had barely anything in. Been at this 20 years—happy to help however I can.
I see lots of foreclosures around me. Some on nicer properties, some not so much. How do you convince the seller to do this and then how do you estimate or get loans on the rehab? Same hard money loans and such for rehab? How do you guarantee they leave and what's the exit plan to get it out of their name at some point? Surely you're risking a due on sale clause. That is a solid plan. I definitely want a few STRs but I think it's important to know the area and what people who come to the area are looking for beyond tourism. I also like the idea of the more regulated markets as it provides a barrier to entry that even at it's face value turn away those who may be looking for an easy dollar.
Haha Jason, where do I even start? For the due-on-sale clause, you’re gonna use a land trust—that’s what keeps things under the radar and avoids triggering anything with the bank. Seller nervous about you making the payments? That’s where the wraparound mortgage comes in. It protects them, shows them you're serious, and in some cases even helps them with less taxation. And to keep your end buyer safe, you use an option agreement to change the beneficiary of the trust down the road. Finally, you go full Hulk and break it all down for the seller in a way that makes it a win-win. There are so many ways to structure these creatively that once they see the benefits, it’s hard for them to say no. I’ve done at least 3,500 transactions and been through every version of this—I'm happy to share more anytime. Just inbox me.
Graystone Investment Group4.6271 Reviews
- Investor · Rochester Area, NY · Member since 2012 · 79 posts · 17 votes1y
Everyone has a story and they're not all the same.
Years ago I had an successful STR before they were popular in the Poconos, then the market started to change after 911 and I sold.
In Upstate NY, I now have 8 properties (21 units) that I rent long term. I have a mix of personal and SDIRA owned homes.
There's lot of ways to do it.
I would be careful with the STRs as I have started to look back into those markets and have seen many investors make a large purchase only to have the local municipality enact legislation limiting STRs in the community.
As others stated, the easiest is to buy a MF and live in one unit and rent the other(s).
Good luck!
- 1yStephen SchmittBusiness MemberReal Estate Agent · Liverpool, NY · Member since 2019 · 111 posts · 72 votes
Quote from @Mark Turner:
Everyone has a story and they're not all the same.
Years ago I had an successful STR before they were popular in the Poconos, then the market started to change after 911 and I sold.
In Upstate NY, I now have 8 properties (21 units) that I rent long term. I have a mix of personal and SDIRA owned homes.
There's lot of ways to do it.
I would be careful with the STRs as I have started to look back into those markets and have seen many investors make a large purchase only to have the local municipality enact legislation limiting STRs in the community.
As others stated, the easiest is to buy a MF and live in one unit and rent the other(s).
Good luck!
I agree with Mark. I'm in the Syracuse area, and of my 10 units two are STR's. I wouldn't count on them as the local government can eliminate under 30 day rentals quickly, however I have evolved one into a medium term rental. Great for traveling nurses and families waiting for homes to be built or house searching. The bookings on the STRs have been down this year so far and I've had to adjust the rates.
Buy a 2 family (5% down conventional) live in one unit, repair and renovate, and then move to the next in a year and rent the first. It's the best way to start out.
- 1yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
- 1yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
- 1yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
- 1yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
- 1yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
- 1yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit(or mtm) and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
Ok so here is the problem Mike, you using "Liar Math" and very incorrect perception of things.
First, your using the word "investing" BUT your detailing Self-Employment, not investing.
Class C is in no way shape or form passive, not remotely, it's VERY active, it's WORK. And odd's are Sec8, right.
Next your speaking of sacrificing appreciation..... Well hell Mike, appreciation is the entire point and premise of "investing". Cash-flow ie dividends are NOT "investing", that is for AFTER you've built up investments and want to convert them into DISTRIBUTIONS.
Now to the "Liar Math".....
When a person buys say a $200k property, with $100k down out of pocket, NO, the $1k per month is NOT profit. And in that it's NOT a true NET, it's a GROSS net.
It's investment recapture. You need to get that $1k 100 times (nearly 9 years) to get to $0.
And if were being accurate, we are inflation adjusting it so you actually need closer to 12-14 years to get to $0.00. And than finally your into NET.
This is why sacrificing appreciation to do such is financial stupidity, it is, there is no nice way to say it.
It's just like if you put that $100k into a bank account and set it to auto-send you $1k per month. Then run around telling everyone "Look, I'm making $1k per month cash-flow on my $100k"....... No, your not making anything, your just slowly getting your $ back.
If you want to spend $100k, wait 10-15yrs to get it back...... I'd buy a food truck and find a chef who's keen on a side hustle to see what he can make happen. And I'd lease it to him for 50% of profits. I bet I'd blow away your monthly "cash-flow" at a fraction of the work, hassle and headaches of those class-C dumps.
Hell..... If BP want's to sponsor the "VS" video series, let's do it! I'm game, I will accept that challenge.
I will do the food truck model, you can do the class-c thing and let's see where we sit at 90, 180, 1yr......
And let's make it saucy, the bet is everything; we play for "pink slips"..... Looser hands over everything to winner.
It's kind of a ridiculous bet because all I have to do is make $1.00 in profit and I win, lol.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
If a person is willing to "cook the books" you can make anything look like an amazing return.....
$2,500 a year for cap-x AND maintenance on a duplex is NOT accurate. At all.
$1,250 per year...... Per unit.
For an aged existing inventory.
How much is a roof, siding, flooring, cabinetry, c-tops, fixtures, appliances.......
$104 per month for BOTH maintenance and cap-x....... come on buddy......
After 10 years that's $12,500.
Being wildly gracious let's say over 10 years you only spent $4k on maintenance. Yes, were in fantasy land but roll with me.
So we have $8,500 left for cap-x.
Ok, how much is a furnace? Roof? New kitchen appliances? Yup, your already deep in the red.
But you still need flooring.......
Oh, ignore it, were going the bubble-gum and duck-tape route, ok. Now rents are dropping because it's a degrading unit as is tenant class and now tenant damage and vacancy is increasing.......
Like so many your using incorrect long term analysis; not correctly accounting for cap-x, not accounting for inflation, using best case "perfect" scenarios projecting a window of performance as a permanency of performance.
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
Ok so here is the problem Mike, you using "Liar Math" and very incorrect perception of things.
First, your using the word "investing" BUT your detailing Self-Employment, not investing.
Class C is in no way shape or form passive, not remotely, it's VERY active, it's WORK. And odd's are Sec8, right.
Next your speaking of sacrificing appreciation..... Well hell Mike, appreciation is the entire point and premise of "investing". Cash-flow ie dividends are NOT "investing", that is for AFTER you've built up investments and want to convert them into DISTRIBUTIONS.
Now to the "Liar Math".....
When a person buys say a $200k property, with $100k down out of pocket, NO, the $1k per month is NOT profit. And in that it's NOT a true NET, it's a GROSS net.
It's investment recapture. You need to get that $1k 100 times (nearly 9 years) to get to $0.
And if were being accurate, we are inflation adjusting it so you actually need closer to 12-14 years to get to $0.00. And than finally your into NET.
This is why sacrificing appreciation to do such is financial stupidity, it is, there is no nice way to say it.
It's just like if you put that $100k into a bank account and set it to auto-send you $1k per month. Then run around telling everyone "Look, I'm making $1k per month cash-flow on my $100k"....... No, your not making anything, your just slowly getting your $ back.
If you want to spend $100k, wait 10-15yrs to get it back...... I'd buy a food truck and find a chef who's keen on a side hustle to see what he can make happen. And I'd lease it to him for 50% of profits. I bet I'd blow away your monthly "cash-flow" at a fraction of the work, hassle and headaches of those class-C dumps.
Hell..... If BP want's to sponsor the "VS" video series, let's do it! I'm game, I will accept that challenge.
I will do the food truck model, you can do the class-c thing and let's see where we sit at 90, 180, 1yr......
And let's make it saucy, the bet is everything; we play for "pink slips"..... Looser hands over everything to winner.
It's kind of a ridiculous bet because all I have to do is make $1.00 in profit and I win, lol.
The idea that investing in C class rentals is the same as self employment is completely wrongheaded.
There is no such thing as a truly passive investment. C class is quite passive if you use a good management company. B class, I would estimate, has approximately half the headache factor, but not such a difference to you if a manager is on the receiving end of that. Even if you buy stocks, which seems totally passive, you must pick up the phone or get online and make the purchase. There is some form of effort involved in all these. The richer you get, the more valuable your time is, the less snags or BS you want to deal with, and the more likely you are to want to go down the chain of the types of investments I just described to the ones that come closer to the ideal of a passive investment. That does not mean that the more involved types nearer to the beginning of the chain are the same as buying a job.
I disagree strongly with the idea that "appreciation is the entire point of investing." So would you go to Phoenix, put 20% down on a home that incurs $7k negative cashflow (a likely scenario for a smaller single family home), and call that a win because Phoenix has high appreciation? In fact, if you were an institutional investor, it might actually be one, because you'd have sophisticated strategies for dealing with the negative cashflow, and the overall return would be quite high. For most individual actual humans that's an awful idea that can quickly end your foray into investing.
Your assertion that cashflow investing is not investing would be seriously contested by most investors.
I'm afraid I'm not at all following the second half of your post. Are you assuming that a cashflowing investment has no appreciation at all and you have to add your cashflow up to equal the equity invested or you failed? I don't get where you're going.
You can call C class investments dumps if you want. I don't think you've ever calculated your return on equity and invite you to do it. Best guess, if you're investing in B in a place like Phoenix, it's probably half of what I described, with somewhat less headache. I think somebody who's already say a multimillionaire could rationally decide not to invest in C class stuff, making a conscious decision to sacrifice the much greater return for somewhat less work. However, I suspect that instead of making a rational decision not to invest in C class stuff because your position merits it, you haven't thought any of this through.
The idea that appreciation is the point of investing... argh, pacepalm... - Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
If a person is willing to "cook the books" you can make anything look like an amazing return.....
$2,500 a year for cap-x AND maintenance on a duplex is NOT accurate. At all.
$1,250 per year...... Per unit.
For an aged existing inventory.
How much is a roof, siding, flooring, cabinetry, c-tops, fixtures, appliances.......
$104 per month for BOTH maintenance and cap-x....... come on buddy......
After 10 years that's $12,500.
Being wildly gracious let's say over 10 years you only spent $4k on maintenance. Yes, were in fantasy land but roll with me.
So we have $8,500 left for cap-x.
Ok, how much is a furnace? Roof? New kitchen appliances? Yup, your already deep in the red.
But you still need flooring.......
Oh, ignore it, were going the bubble-gum and duck-tape route, ok. Now rents are dropping because it's a degrading unit as is tenant class and now tenant damage and vacancy is increasing.......
Like so many your using incorrect long term analysis; not correctly accounting for cap-x, not accounting for inflation, using best case "perfect" scenarios projecting a window of performance as a permanency of performance.
Oh, I just saw this other post. I mean, you don't invest in this stuff and I do. You can think my numbers are wrong and say they're wrong but in the end you don't know. Why do you have such a hard time believing them? In the end it doesn't matter James, I'll keep collecting my checks, so you do you and I'll do me.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Mike D.:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
Ok so here is the problem Mike, you using "Liar Math" and very incorrect perception of things.
First, your using the word "investing" BUT your detailing Self-Employment, not investing.
Class C is in no way shape or form passive, not remotely, it's VERY active, it's WORK. And odd's are Sec8, right.
Next your speaking of sacrificing appreciation..... Well hell Mike, appreciation is the entire point and premise of "investing". Cash-flow ie dividends are NOT "investing", that is for AFTER you've built up investments and want to convert them into DISTRIBUTIONS.
Now to the "Liar Math".....
When a person buys say a $200k property, with $100k down out of pocket, NO, the $1k per month is NOT profit. And in that it's NOT a true NET, it's a GROSS net.
It's investment recapture. You need to get that $1k 100 times (nearly 9 years) to get to $0.
And if were being accurate, we are inflation adjusting it so you actually need closer to 12-14 years to get to $0.00. And than finally your into NET.
This is why sacrificing appreciation to do such is financial stupidity, it is, there is no nice way to say it.
It's just like if you put that $100k into a bank account and set it to auto-send you $1k per month. Then run around telling everyone "Look, I'm making $1k per month cash-flow on my $100k"....... No, your not making anything, your just slowly getting your $ back.
If you want to spend $100k, wait 10-15yrs to get it back...... I'd buy a food truck and find a chef who's keen on a side hustle to see what he can make happen. And I'd lease it to him for 50% of profits. I bet I'd blow away your monthly "cash-flow" at a fraction of the work, hassle and headaches of those class-C dumps.
Hell..... If BP want's to sponsor the "VS" video series, let's do it! I'm game, I will accept that challenge.
I will do the food truck model, you can do the class-c thing and let's see where we sit at 90, 180, 1yr......
And let's make it saucy, the bet is everything; we play for "pink slips"..... Looser hands over everything to winner.
It's kind of a ridiculous bet because all I have to do is make $1.00 in profit and I win, lol.
The idea that investing in C class rentals is the same as self employment is completely wrongheaded.
There is no such thing as a truly passive investment. C class is quite passive if you use a good management company. B class, I would estimate, has approximately half the headache factor, but not such a difference to you if a manager is on the receiving end of that. Even if you buy stocks, which seems totally passive, you must pick up the phone or get online and make the purchase. There is some form of effort involved in all these. The richer you get, the more valuable your time is, the less snags or BS you want to deal with, and the more likely you are to want to go down the chain of the types of investments I just described to the ones that come closer to the ideal of a passive investment. That does not mean that the more involved types nearer to the beginning of the chain are the same as buying a job.
I disagree strongly with the idea that "appreciation is the entire point of investing." So would you go to Phoenix, put 20% down on a home that incurs $7k negative cashflow (a likely scenario for a smaller single family home), and call that a win because Phoenix has high appreciation? In fact, if you were an institutional investor, it might actually be one, because you'd have sophisticated strategies for dealing with the negative cashflow, and the overall return would be quite high. For most individual actual humans that's an awful idea that can quickly end your foray into investing.
Your assertion that cashflow investing is not investing would be seriously contested by most investors.
I'm afraid I'm not at all following the second half of your post. Are you assuming that a cashflowing investment has no appreciation at all and you have to add your cashflow up to equal the equity invested or you failed? I don't get where you're going.
You can call C class investments dumps if you want. I don't think you've ever calculated your return on equity and invite you to do it. Best guess, if you're investing in B in a place like Phoenix, it's probably half of what I described, with somewhat less headache. I think somebody who's already say a multimillionaire could rationally decide not to invest in C class stuff, making a conscious decision to sacrifice the much greater return for somewhat less work. However, I suspect that instead of making a rational decision not to invest in C class stuff because your position merits it, you haven't thought any of this through.
The idea that appreciation is the point of investing... argh, pacepalm...Lol.....
Look, to make this really simple, you should probably start via doing some research into exactly who I am, that will address a whole heck of a lot of this.
I understand you don't know what you don't know, and I have empathy for people on that point.
What I don't have empathy for is arrogant ignorance.
One deciding what ity-bity tid-bit's they do know are the entirety, because it's all they know. That's where it appears your at.
If your not ready to learn, well it is what it is.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Mike D.:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
If a person is willing to "cook the books" you can make anything look like an amazing return.....
$2,500 a year for cap-x AND maintenance on a duplex is NOT accurate. At all.
$1,250 per year...... Per unit.
For an aged existing inventory.
How much is a roof, siding, flooring, cabinetry, c-tops, fixtures, appliances.......
$104 per month for BOTH maintenance and cap-x....... come on buddy......
After 10 years that's $12,500.
Being wildly gracious let's say over 10 years you only spent $4k on maintenance. Yes, were in fantasy land but roll with me.
So we have $8,500 left for cap-x.
Ok, how much is a furnace? Roof? New kitchen appliances? Yup, your already deep in the red.
But you still need flooring.......
Oh, ignore it, were going the bubble-gum and duck-tape route, ok. Now rents are dropping because it's a degrading unit as is tenant class and now tenant damage and vacancy is increasing.......
Like so many your using incorrect long term analysis; not correctly accounting for cap-x, not accounting for inflation, using best case "perfect" scenarios projecting a window of performance as a permanency of performance.
Oh, I just saw this other post. I mean, you don't invest in this stuff and I do. You can think my numbers are wrong and say they're wrong but in the end you don't know. Why do you have such a hard time believing them? In the end it doesn't matter James, I'll keep collecting my checks, so you do you and I'll do me.
Is this supposed to be a serious statement or a joke? I'm not catching the joke.
If a serious statement..... Wow, you really have an issue with making bold statements from a very deep cavern of ignorance.
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
If a person is willing to "cook the books" you can make anything look like an amazing return.....
$2,500 a year for cap-x AND maintenance on a duplex is NOT accurate. At all.
$1,250 per year...... Per unit.
For an aged existing inventory.
How much is a roof, siding, flooring, cabinetry, c-tops, fixtures, appliances.......
$104 per month for BOTH maintenance and cap-x....... come on buddy......
After 10 years that's $12,500.
Being wildly gracious let's say over 10 years you only spent $4k on maintenance. Yes, were in fantasy land but roll with me.
So we have $8,500 left for cap-x.
Ok, how much is a furnace? Roof? New kitchen appliances? Yup, your already deep in the red.
But you still need flooring.......
Oh, ignore it, were going the bubble-gum and duck-tape route, ok. Now rents are dropping because it's a degrading unit as is tenant class and now tenant damage and vacancy is increasing.......
Like so many your using incorrect long term analysis; not correctly accounting for cap-x, not accounting for inflation, using best case "perfect" scenarios projecting a window of performance as a permanency of performance.
Oh, I just saw this other post. I mean, you don't invest in this stuff and I do. You can think my numbers are wrong and say they're wrong but in the end you don't know. Why do you have such a hard time believing them? In the end it doesn't matter James, I'll keep collecting my checks, so you do you and I'll do me.
Is this supposed to be a serious statement or a joke? I'm not catching the joke.
If a serious statement..... Wow, you really have an issue with making bold statements from a very deep cavern of ignorance.
I'll admit that I'm not too good at figuring out who people are, so if you want me to know, why don't you tell me?James, I don't know what type of investments you're into, but it's pretty clear to me from this that you don't understand how C class rentals in the Midwest work. Don't you know other people who invest in the Midwest who can confirm what I'm saying? In the end it doesn't much matter to me if you believe me or not, but just for the heck of it, ask them if the numbers I've put forth are BS. I don't understand why this is so threatening to you or why you're being so dogmatic about something you don't know about. I don't discuss my actual investments on Biggerpockets but I collect data on my own rentals and I'm not an idiot or a book cooker. The numbers I gave are realistic.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Mike D.:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
If a person is willing to "cook the books" you can make anything look like an amazing return.....
$2,500 a year for cap-x AND maintenance on a duplex is NOT accurate. At all.
$1,250 per year...... Per unit.
For an aged existing inventory.
How much is a roof, siding, flooring, cabinetry, c-tops, fixtures, appliances.......
$104 per month for BOTH maintenance and cap-x....... come on buddy......
After 10 years that's $12,500.
Being wildly gracious let's say over 10 years you only spent $4k on maintenance. Yes, were in fantasy land but roll with me.
So we have $8,500 left for cap-x.
Ok, how much is a furnace? Roof? New kitchen appliances? Yup, your already deep in the red.
But you still need flooring.......
Oh, ignore it, were going the bubble-gum and duck-tape route, ok. Now rents are dropping because it's a degrading unit as is tenant class and now tenant damage and vacancy is increasing.......
Like so many your using incorrect long term analysis; not correctly accounting for cap-x, not accounting for inflation, using best case "perfect" scenarios projecting a window of performance as a permanency of performance.
Oh, I just saw this other post. I mean, you don't invest in this stuff and I do. You can think my numbers are wrong and say they're wrong but in the end you don't know. Why do you have such a hard time believing them? In the end it doesn't matter James, I'll keep collecting my checks, so you do you and I'll do me.
Is this supposed to be a serious statement or a joke? I'm not catching the joke.
If a serious statement..... Wow, you really have an issue with making bold statements from a very deep cavern of ignorance.
I'll admit that I'm not too good at figuring out who people are, so if you want me to know, why don't you tell me?James, I don't know what type of investments you're into, but it's pretty clear to me from this that you don't understand how C class rentals in the Midwest work. Don't you know other people who invest in the Midwest who can confirm what I'm saying? In the end it doesn't much matter to me if you believe me or not, but just for the heck of it, ask them if the numbers I've put forth are BS. I don't understand why this is so threatening to you or why you're being so dogmatic about something you don't know about. I don't discuss my actual investments on Biggerpockets but I collect data on my own rentals and I'm not an idiot or a book cooker. The numbers I gave are realistic.
The numbers and info I give is the result of ~7,000 unit's managed over ~20 years.......
Fruit for thought.
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
If a person is willing to "cook the books" you can make anything look like an amazing return.....
$2,500 a year for cap-x AND maintenance on a duplex is NOT accurate. At all.
$1,250 per year...... Per unit.
For an aged existing inventory.
How much is a roof, siding, flooring, cabinetry, c-tops, fixtures, appliances.......
$104 per month for BOTH maintenance and cap-x....... come on buddy......
After 10 years that's $12,500.
Being wildly gracious let's say over 10 years you only spent $4k on maintenance. Yes, were in fantasy land but roll with me.
So we have $8,500 left for cap-x.
Ok, how much is a furnace? Roof? New kitchen appliances? Yup, your already deep in the red.
But you still need flooring.......
Oh, ignore it, were going the bubble-gum and duck-tape route, ok. Now rents are dropping because it's a degrading unit as is tenant class and now tenant damage and vacancy is increasing.......
Like so many your using incorrect long term analysis; not correctly accounting for cap-x, not accounting for inflation, using best case "perfect" scenarios projecting a window of performance as a permanency of performance.
Oh, I just saw this other post. I mean, you don't invest in this stuff and I do. You can think my numbers are wrong and say they're wrong but in the end you don't know. Why do you have such a hard time believing them? In the end it doesn't matter James, I'll keep collecting my checks, so you do you and I'll do me.
Is this supposed to be a serious statement or a joke? I'm not catching the joke.
If a serious statement..... Wow, you really have an issue with making bold statements from a very deep cavern of ignorance.
I'll admit that I'm not too good at figuring out who people are, so if you want me to know, why don't you tell me?James, I don't know what type of investments you're into, but it's pretty clear to me from this that you don't understand how C class rentals in the Midwest work. Don't you know other people who invest in the Midwest who can confirm what I'm saying? In the end it doesn't much matter to me if you believe me or not, but just for the heck of it, ask them if the numbers I've put forth are BS. I don't understand why this is so threatening to you or why you're being so dogmatic about something you don't know about. I don't discuss my actual investments on Biggerpockets but I collect data on my own rentals and I'm not an idiot or a book cooker. The numbers I gave are realistic.
The numbers and info I give is the result of ~7,000 unit's managed over ~20 years.......
Fruit for thought.
Then you must not be managing this kind of unit, because I've been doing this for 15 years and I know what my numbers are. Do you think I'm lying, or I'm a fool? I don't care to lie to anybody and I don't come here to brag and if I were a fool I would have been forced out of this business long ago.
A well-managed unit in the area where I invest makes what I said it does.
Whatever you have done, learned, taught, bought, or accomplished, you are wrong about this, and I wonder why it is so threatening and apparently personal.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
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your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
If a person is willing to "cook the books" you can make anything look like an amazing return.....
$2,500 a year for cap-x AND maintenance on a duplex is NOT accurate. At all.
$1,250 per year...... Per unit.
For an aged existing inventory.
How much is a roof, siding, flooring, cabinetry, c-tops, fixtures, appliances.......
$104 per month for BOTH maintenance and cap-x....... come on buddy......
After 10 years that's $12,500.
Being wildly gracious let's say over 10 years you only spent $4k on maintenance. Yes, were in fantasy land but roll with me.
So we have $8,500 left for cap-x.
Ok, how much is a furnace? Roof? New kitchen appliances? Yup, your already deep in the red.
But you still need flooring.......
Oh, ignore it, were going the bubble-gum and duck-tape route, ok. Now rents are dropping because it's a degrading unit as is tenant class and now tenant damage and vacancy is increasing.......
Like so many your using incorrect long term analysis; not correctly accounting for cap-x, not accounting for inflation, using best case "perfect" scenarios projecting a window of performance as a permanency of performance.
Oh, I just saw this other post. I mean, you don't invest in this stuff and I do. You can think my numbers are wrong and say they're wrong but in the end you don't know. Why do you have such a hard time believing them? In the end it doesn't matter James, I'll keep collecting my checks, so you do you and I'll do me.
Is this supposed to be a serious statement or a joke? I'm not catching the joke.
If a serious statement..... Wow, you really have an issue with making bold statements from a very deep cavern of ignorance.
I'll admit that I'm not too good at figuring out who people are, so if you want me to know, why don't you tell me?James, I don't know what type of investments you're into, but it's pretty clear to me from this that you don't understand how C class rentals in the Midwest work. Don't you know other people who invest in the Midwest who can confirm what I'm saying? In the end it doesn't much matter to me if you believe me or not, but just for the heck of it, ask them if the numbers I've put forth are BS. I don't understand why this is so threatening to you or why you're being so dogmatic about something you don't know about. I don't discuss my actual investments on Biggerpockets but I collect data on my own rentals and I'm not an idiot or a book cooker. The numbers I gave are realistic.
The numbers and info I give is the result of ~7,000 unit's managed over ~20 years.......
Fruit for thought.
Then you must not be managing this kind of unit, because I've been doing this for 15 years and I know what my numbers are. Do you think I'm lying, or I'm a fool? I don't care to lie to anybody and I don't come here to brag and if I were a fool I would have been forced out of this business long ago.
A well-managed unit in the area where I invest makes what I said it does.
Whatever you have done, learned, taught, bought, or accomplished, you are wrong about this, and I wonder why it is so threatening and apparently personal.
"Do you think I'm lying, or I'm a fool?"
Given those options, I'd say fool.
But ya know, you do seem rather fixated on if I think your lying......
Meah, either way, it's a struggle to give a damn. - Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
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your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
If a person is willing to "cook the books" you can make anything look like an amazing return.....
$2,500 a year for cap-x AND maintenance on a duplex is NOT accurate. At all.
$1,250 per year...... Per unit.
For an aged existing inventory.
How much is a roof, siding, flooring, cabinetry, c-tops, fixtures, appliances.......
$104 per month for BOTH maintenance and cap-x....... come on buddy......
After 10 years that's $12,500.
Being wildly gracious let's say over 10 years you only spent $4k on maintenance. Yes, were in fantasy land but roll with me.
So we have $8,500 left for cap-x.
Ok, how much is a furnace? Roof? New kitchen appliances? Yup, your already deep in the red.
But you still need flooring.......
Oh, ignore it, were going the bubble-gum and duck-tape route, ok. Now rents are dropping because it's a degrading unit as is tenant class and now tenant damage and vacancy is increasing.......
Like so many your using incorrect long term analysis; not correctly accounting for cap-x, not accounting for inflation, using best case "perfect" scenarios projecting a window of performance as a permanency of performance.
Oh, I just saw this other post. I mean, you don't invest in this stuff and I do. You can think my numbers are wrong and say they're wrong but in the end you don't know. Why do you have such a hard time believing them? In the end it doesn't matter James, I'll keep collecting my checks, so you do you and I'll do me.
Is this supposed to be a serious statement or a joke? I'm not catching the joke.
If a serious statement..... Wow, you really have an issue with making bold statements from a very deep cavern of ignorance.
I'll admit that I'm not too good at figuring out who people are, so if you want me to know, why don't you tell me?James, I don't know what type of investments you're into, but it's pretty clear to me from this that you don't understand how C class rentals in the Midwest work. Don't you know other people who invest in the Midwest who can confirm what I'm saying? In the end it doesn't much matter to me if you believe me or not, but just for the heck of it, ask them if the numbers I've put forth are BS. I don't understand why this is so threatening to you or why you're being so dogmatic about something you don't know about. I don't discuss my actual investments on Biggerpockets but I collect data on my own rentals and I'm not an idiot or a book cooker. The numbers I gave are realistic.
The numbers and info I give is the result of ~7,000 unit's managed over ~20 years.......
Fruit for thought.
Then you must not be managing this kind of unit, because I've been doing this for 15 years and I know what my numbers are. Do you think I'm lying, or I'm a fool? I don't care to lie to anybody and I don't come here to brag and if I were a fool I would have been forced out of this business long ago.
A well-managed unit in the area where I invest makes what I said it does.
Whatever you have done, learned, taught, bought, or accomplished, you are wrong about this, and I wonder why it is so threatening and apparently personal.
"Do you think I'm lying, or I'm a fool?"
Given those options, I'd say fool.
But ya know, you do seem rather fixated on if I think your lying......
Meah, either way, it's a struggle to give a damn.Seems that you’re threatened that someone else has an approach that’s contrary to yours and is making it work, so you insist that it has to somehow be fake news, because you know everything I guess? I’ve laid out exactly what I do and if you don’t get it or appreciate it that’s your problem.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
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Quote from @James Hamling:
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Quote from @Mike D.:
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Quote from @Mike D.:
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Quote from @Mike D.:
Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
If a person is willing to "cook the books" you can make anything look like an amazing return.....
$2,500 a year for cap-x AND maintenance on a duplex is NOT accurate. At all.
$1,250 per year...... Per unit.
For an aged existing inventory.
How much is a roof, siding, flooring, cabinetry, c-tops, fixtures, appliances.......
$104 per month for BOTH maintenance and cap-x....... come on buddy......
After 10 years that's $12,500.
Being wildly gracious let's say over 10 years you only spent $4k on maintenance. Yes, were in fantasy land but roll with me.
So we have $8,500 left for cap-x.
Ok, how much is a furnace? Roof? New kitchen appliances? Yup, your already deep in the red.
But you still need flooring.......
Oh, ignore it, were going the bubble-gum and duck-tape route, ok. Now rents are dropping because it's a degrading unit as is tenant class and now tenant damage and vacancy is increasing.......
Like so many your using incorrect long term analysis; not correctly accounting for cap-x, not accounting for inflation, using best case "perfect" scenarios projecting a window of performance as a permanency of performance.
Oh, I just saw this other post. I mean, you don't invest in this stuff and I do. You can think my numbers are wrong and say they're wrong but in the end you don't know. Why do you have such a hard time believing them? In the end it doesn't matter James, I'll keep collecting my checks, so you do you and I'll do me.
Is this supposed to be a serious statement or a joke? I'm not catching the joke.
If a serious statement..... Wow, you really have an issue with making bold statements from a very deep cavern of ignorance.
I'll admit that I'm not too good at figuring out who people are, so if you want me to know, why don't you tell me?James, I don't know what type of investments you're into, but it's pretty clear to me from this that you don't understand how C class rentals in the Midwest work. Don't you know other people who invest in the Midwest who can confirm what I'm saying? In the end it doesn't much matter to me if you believe me or not, but just for the heck of it, ask them if the numbers I've put forth are BS. I don't understand why this is so threatening to you or why you're being so dogmatic about something you don't know about. I don't discuss my actual investments on Biggerpockets but I collect data on my own rentals and I'm not an idiot or a book cooker. The numbers I gave are realistic.
The numbers and info I give is the result of ~7,000 unit's managed over ~20 years.......
Fruit for thought.
Then you must not be managing this kind of unit, because I've been doing this for 15 years and I know what my numbers are. Do you think I'm lying, or I'm a fool? I don't care to lie to anybody and I don't come here to brag and if I were a fool I would have been forced out of this business long ago.
A well-managed unit in the area where I invest makes what I said it does.
Whatever you have done, learned, taught, bought, or accomplished, you are wrong about this, and I wonder why it is so threatening and apparently personal.
"Do you think I'm lying, or I'm a fool?"
Given those options, I'd say fool.
But ya know, you do seem rather fixated on if I think your lying......
Meah, either way, it's a struggle to give a damn.Seems that you’re threatened that someone else has an approach that’s contrary to yours and is making it work, so you insist that it has to somehow be fake news, because you know everything I guess? I’ve laid out exactly what I do and if you don’t get it or appreciate it that’s your problem.
Aah, your from California. That explains a lot....
- 1yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @James Hamling:
Quote from @Mike D.:
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Quote from @Mike D.:
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Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
If a person is willing to "cook the books" you can make anything look like an amazing return.....
$2,500 a year for cap-x AND maintenance on a duplex is NOT accurate. At all.
$1,250 per year...... Per unit.
For an aged existing inventory.
How much is a roof, siding, flooring, cabinetry, c-tops, fixtures, appliances.......
$104 per month for BOTH maintenance and cap-x....... come on buddy......
After 10 years that's $12,500.
Being wildly gracious let's say over 10 years you only spent $4k on maintenance. Yes, were in fantasy land but roll with me.
So we have $8,500 left for cap-x.
Ok, how much is a furnace? Roof? New kitchen appliances? Yup, your already deep in the red.
But you still need flooring.......
Oh, ignore it, were going the bubble-gum and duck-tape route, ok. Now rents are dropping because it's a degrading unit as is tenant class and now tenant damage and vacancy is increasing.......
Like so many your using incorrect long term analysis; not correctly accounting for cap-x, not accounting for inflation, using best case "perfect" scenarios projecting a window of performance as a permanency of performance.
Oh, I just saw this other post. I mean, you don't invest in this stuff and I do. You can think my numbers are wrong and say they're wrong but in the end you don't know. Why do you have such a hard time believing them? In the end it doesn't matter James, I'll keep collecting my checks, so you do you and I'll do me.
Is this supposed to be a serious statement or a joke? I'm not catching the joke.
If a serious statement..... Wow, you really have an issue with making bold statements from a very deep cavern of ignorance.
I'll admit that I'm not too good at figuring out who people are, so if you want me to know, why don't you tell me?James, I don't know what type of investments you're into, but it's pretty clear to me from this that you don't understand how C class rentals in the Midwest work. Don't you know other people who invest in the Midwest who can confirm what I'm saying? In the end it doesn't much matter to me if you believe me or not, but just for the heck of it, ask them if the numbers I've put forth are BS. I don't understand why this is so threatening to you or why you're being so dogmatic about something you don't know about. I don't discuss my actual investments on Biggerpockets but I collect data on my own rentals and I'm not an idiot or a book cooker. The numbers I gave are realistic.
The numbers and info I give is the result of ~7,000 unit's managed over ~20 years.......
Fruit for thought.
Then you must not be managing this kind of unit, because I've been doing this for 15 years and I know what my numbers are. Do you think I'm lying, or I'm a fool? I don't care to lie to anybody and I don't come here to brag and if I were a fool I would have been forced out of this business long ago.
A well-managed unit in the area where I invest makes what I said it does.
Whatever you have done, learned, taught, bought, or accomplished, you are wrong about this, and I wonder why it is so threatening and apparently personal.
"Do you think I'm lying, or I'm a fool?"
Given those options, I'd say fool.
But ya know, you do seem rather fixated on if I think your lying......
Meah, either way, it's a struggle to give a damn.Seems that you’re threatened that someone else has an approach that’s contrary to yours and is making it work, so you insist that it has to somehow be fake news, because you know everything I guess? I’ve laid out exactly what I do and if you don’t get it or appreciate it that’s your problem.
Aah, your from California. That explains a lot....
Finally, a California-based investor that found the pot of hidden gold in the Midwest.
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1y
Quote from @V.G Jason:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @James Hamling:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
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Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
Quote from @Mike D.:
Quote from @V.G Jason:
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Quote from @Nicholas L.:
your posts are usually really good so I just wanted to comment on "multiple turnkey properties in a high cashflow market."
there aren't really such things at the moment, at least in the short term - cash flow seems to ALWAYS fall short of the expectations of a new investor. and buying multiple right off the bat seems risky.
thoughts?
Hey Nicholas. I think that if you use reasonable leverage (let's say 50-60% LTV) to buy small multifamily in a market like Memphis or Cleveland, even if you screw some things up, you're very unlikely not to cashflow. Sure, he should give an extra "beginner's" buffer if he doesn't have other rentals.
I am pro-concentration, but if you're going to concentrate those markets are not the one's to do that in. I understand lower barrier of entry, but there's a reason why. Relatively poor markets. The capital is better served elsewhere, in almost any case.
As for OP, Taco bell is a great franchise to own if you get the right location & own the property. That makes it a lot harder, but yes in a nutshell.
I think that's generalizing quite a lot! If you are:
- Looking for great cashflow
- Willing to deal with the turnover and maintenance of C class properties
- Willing to accept modest appreciation
- Looking for the max total return you can get with 40-50% down
Then I would put these markets up against any markets. Basically, if you are someone with $100k to invest, I think these are some of the best markets. If you have $100m to invest, they are terrible--way too much work, don't at all meet the goals of institutional investors. However, note that OP has $100k.
I'd rather just invest in mortgage notes or equities. Or put 30% down in a slightly more expensive city that can garner a higher upside like Phoenix, Dallas, etc.
You can get maybe a 10% return in performing mortgage notes, or maybe, I dunno, 12% if you're investing in one of those high-appreciation markets with enough down to break even on cashflow. Expect 20%+ in Memphis or Cleveland. This is return on equity, counting cashflow, appreciation, and principal paydown.
We're having the same conversation in two threads. Have you realized any of these appreciation returns and how long have you invested for?
I've been investing for the better part of 15 years. I own property in Indianapolis and you can definitely go back and see what appreciation has been like over those years. I've gotten around 6% annual appreciation, and yeah it's more than theoretical, backed up by refis with appraisals. It stands up very strongly to markets that are thought of as high appreciation and has much better cashflow.
You would've been better off with concentration in Vegas, Phoenix than Indianapolis from 2010 to today. Quick back testing can show this. Cagr shows the former two north of 8% and Indiana sub 5%. Granted, each property is specific and there are nuances. Almost every metric is better for Vegas, and Phoenix, besides the barrier to entry. I'm just using those as examples but appropriate ones.
Backtesting shows history is right, so not saying that's the future but pretty confident your thesis is off in general. For you, you may have done 20% returns regularly and good for you.
You'll be 20% Mike here.
For the rest of us, there's reality.
Very creative nickname, kudos for the imagination. Your math is lacking though--you are looking only at appreciation numbers, totally ignoring cashflow and principal paydown. I never said the Midwest appreciates equally to the Sun Belt, I said it has higher overall return on equity including cashflow and principal paydown. Still higher if you include depreciation benefits, too. I'm not trying to be rude, but if you are thinking only about appreciation and not including those other factors in your decisions, what you are doing is not real estate investing at all, it's speculation.
If you want to look into those numbers and come back, I'd be glad to discuss further. If you are happy with 8% appreciation and don't care that your total return is 12% or whatever, far be it from me to burst your bubble.
Have a great night.
Rental appreciation is about the same in these cities. So the question is leverage, capex, vacancy, etc. I said in this thread or another, appreciation is absolutely a focus not the sole one. No one "got rich" with cash flow on RE, it's almost a farce. The wealth is made on entry, exit and mitigating cash at risk. Shouldn't need to add that color, but clearly do.
Lots of little variables, regardless, unless you hit home runs in Indianapolis you aren't performing better than the average Vegas, Phoenix portfolio.
You've hit home runs, good for you. It's not likely for others. Not sure how much more you want to debate those things.
Let's run a few quick numbers. I'll show what you can expect to make off a typical turnkey duplex in the city of Indianapolis purchased right off the MLS. Say it costs $200k, has $2000 monthly revenue, and you finance it on a 30 year loan with 7% interest at 25% down, P+I $998. I've been running 5% vacancy for the past several years, capex and maintenance together at about $2500 a year, turns averaging $2000 per year, insurance $800, tax $4k. That duplex will cashflow $1524. Principal paydown totals $1524 the first year and if appreciation is 5% that's $10k. The total gain is $13,048 on an investment of $50,000 or 26.1% return on equity. This is not a homerun, this is not a value add purchased from a wholesaler, this is a typical duplex in Indianapolis that can be bought off the MLS. That's to say nothing of ones on the outskirts of Indianapolis that have lower property taxes, or value adds.
If you can show how I can do better in Phoenix, I'll start investing there. Like I said, you do you. Let me know if we're still in fantasy land?
If a person is willing to "cook the books" you can make anything look like an amazing return.....
$2,500 a year for cap-x AND maintenance on a duplex is NOT accurate. At all.
$1,250 per year...... Per unit.
For an aged existing inventory.
How much is a roof, siding, flooring, cabinetry, c-tops, fixtures, appliances.......
$104 per month for BOTH maintenance and cap-x....... come on buddy......
After 10 years that's $12,500.
Being wildly gracious let's say over 10 years you only spent $4k on maintenance. Yes, were in fantasy land but roll with me.
So we have $8,500 left for cap-x.
Ok, how much is a furnace? Roof? New kitchen appliances? Yup, your already deep in the red.
But you still need flooring.......
Oh, ignore it, were going the bubble-gum and duck-tape route, ok. Now rents are dropping because it's a degrading unit as is tenant class and now tenant damage and vacancy is increasing.......
Like so many your using incorrect long term analysis; not correctly accounting for cap-x, not accounting for inflation, using best case "perfect" scenarios projecting a window of performance as a permanency of performance.
Oh, I just saw this other post. I mean, you don't invest in this stuff and I do. You can think my numbers are wrong and say they're wrong but in the end you don't know. Why do you have such a hard time believing them? In the end it doesn't matter James, I'll keep collecting my checks, so you do you and I'll do me.
Is this supposed to be a serious statement or a joke? I'm not catching the joke.
If a serious statement..... Wow, you really have an issue with making bold statements from a very deep cavern of ignorance.
I'll admit that I'm not too good at figuring out who people are, so if you want me to know, why don't you tell me?James, I don't know what type of investments you're into, but it's pretty clear to me from this that you don't understand how C class rentals in the Midwest work. Don't you know other people who invest in the Midwest who can confirm what I'm saying? In the end it doesn't much matter to me if you believe me or not, but just for the heck of it, ask them if the numbers I've put forth are BS. I don't understand why this is so threatening to you or why you're being so dogmatic about something you don't know about. I don't discuss my actual investments on Biggerpockets but I collect data on my own rentals and I'm not an idiot or a book cooker. The numbers I gave are realistic.
The numbers and info I give is the result of ~7,000 unit's managed over ~20 years.......
Fruit for thought.
Then you must not be managing this kind of unit, because I've been doing this for 15 years and I know what my numbers are. Do you think I'm lying, or I'm a fool? I don't care to lie to anybody and I don't come here to brag and if I were a fool I would have been forced out of this business long ago.
A well-managed unit in the area where I invest makes what I said it does.
Whatever you have done, learned, taught, bought, or accomplished, you are wrong about this, and I wonder why it is so threatening and apparently personal.
"Do you think I'm lying, or I'm a fool?"
Given those options, I'd say fool.
But ya know, you do seem rather fixated on if I think your lying......
Meah, either way, it's a struggle to give a damn.Seems that you’re threatened that someone else has an approach that’s contrary to yours and is making it work, so you insist that it has to somehow be fake news, because you know everything I guess? I’ve laid out exactly what I do and if you don’t get it or appreciate it that’s your problem.
Aah, your from California. That explains a lot....
Finally, a California-based investor that found the pot of hidden gold in the Midwest.
It doesn't really matter how many ignorant, nasty people want to pile on and say up is down and black is white and on top of it get unpleasant and personal. I find it truly puzzling that the two of you react like this. Why don't you focus on your business and making some money? Maybe you're not having success at that so you have some silly beef. Get a life.
- Rental Property Investor · Arlington, TX · Member since 2016 · 706 posts · 611 votes1y
I don't hate arbitrage however I do understand the ups and downs of it but your question is valid and a great question. You're attempting to purchase a STR in a vacation rental markets and this is where STR knowledge kicks in. If you're looking in VR markets then your price point is going to be ridiculously high. If you start looking in metro STR/MTR markets you're going to get reduced cost and more consistent income. VRs generate substantial income during vacation periods. You can arbitrage in metro markets better than VR markets, so in your post, you're comparing Airbnb arbitrage to a VR market, and you're going to get frustrated because they are two different market types. Also, if you use an FHA, you're only dropping 3.5 - 5% and you can easily offset your life expenses by following the STR/MTR model. If you already have cash, arbitraging is a waste of time; if you can build equity now and only drop 3.5 - 5% to get started. I started with arbitrage and stacked cash to develop reserves and get into buying. The better model after 8 years in the business is to manage instead of arbitrage, as this reduces your risk and ensures consistent cash flow. If you have a bad month, the most significant cost is an unhappy client, and you gain valuable knowledge to improve.
Additionally, I do BRRRRs for most of my STRs/MTRs. I usually acquire a free house that I can STR/MTR for a few years, and then 1031 into small multifamilies, effectively triple the cash flow.
I then flip/wholesale if I need to bring additional liquid. You're on the right path and asking the right questions!
- Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Quote from @Myka Artis:
I don't hate arbitrage however I do understand the ups and downs of it but your question is valid and a great question. You're attempting to purchase a STR in a vacation rental markets and this is where STR knowledge kicks in. If you're looking in VR markets then your price point is going to be ridiculously high. If you start looking in metro STR/MTR markets you're going to get reduced cost and more consistent income. VRs generate substantial income during vacation periods. You can arbitrage in metro markets better than VR markets, so in your post, you're comparing Airbnb arbitrage to a VR market, and you're going to get frustrated because they are two different market types. Also, if you use an FHA, you're only dropping 3.5 - 5% and you can easily offset your life expenses by following the STR/MTR model. If you already have cash, arbitraging is a waste of time; if you can build equity now and only drop 3.5 - 5% to get started. I started with arbitrage and stacked cash to develop reserves and get into buying. The better model after 8 years in the business is to manage instead of arbitrage, as this reduces your risk and ensures consistent cash flow. If you have a bad month, the most significant cost is an unhappy client, and you gain valuable knowledge to improve.
Additionally, I do BRRRRs for most of my STRs/MTRs. I usually acquire a free house that I can STR/MTR for a few years, and then 1031 into small multifamilies, effectively triple the cash flow.
I then flip/wholesale if I need to bring additional liquid. You're on the right path and asking the right questions!
So, you buy a deal, use hard money to rehab, STR it, cash out refi, repeat?
- Rental Property Investor · Arlington, TX · Member since 2016 · 706 posts · 611 votes1yYes sir!! The returns are crazy if you're in the right market and especially if you can successfully do it with today's interest rates!
Quote from @Jason Eyerly:
Quote from @Myka Artis:
I don't hate arbitrage however I do understand the ups and downs of it but your question is valid and a great question. You're attempting to purchase a STR in a vacation rental markets and this is where STR knowledge kicks in. If you're looking in VR markets then your price point is going to be ridiculously high. If you start looking in metro STR/MTR markets you're going to get reduced cost and more consistent income. VRs generate substantial income during vacation periods. You can arbitrage in metro markets better than VR markets, so in your post, you're comparing Airbnb arbitrage to a VR market, and you're going to get frustrated because they are two different market types. Also, if you use an FHA, you're only dropping 3.5 - 5% and you can easily offset your life expenses by following the STR/MTR model. If you already have cash, arbitraging is a waste of time; if you can build equity now and only drop 3.5 - 5% to get started. I started with arbitrage and stacked cash to develop reserves and get into buying. The better model after 8 years in the business is to manage instead of arbitrage, as this reduces your risk and ensures consistent cash flow. If you have a bad month, the most significant cost is an unhappy client, and you gain valuable knowledge to improve.
Additionally, I do BRRRRs for most of my STRs/MTRs. I usually acquire a free house that I can STR/MTR for a few years, and then 1031 into small multifamilies, effectively triple the cash flow.
I then flip/wholesale if I need to bring additional liquid. You're on the right path and asking the right questions!
So, you buy a deal, use hard money to rehab, STR it, cash out refi, repeat?
- Rental Property Investor · Arlington, TX · Member since 2016 · 706 posts · 611 votes1yYes sir!! The returns are crazy if you're in the right market and especially if you can successfully do it with today's interest rates!
Quote from @Jason Eyerly:
Quote from @Myka Artis:
I don't hate arbitrage however I do understand the ups and downs of it but your question is valid and a great question. You're attempting to purchase a STR in a vacation rental markets and this is where STR knowledge kicks in. If you're looking in VR markets then your price point is going to be ridiculously high. If you start looking in metro STR/MTR markets you're going to get reduced cost and more consistent income. VRs generate substantial income during vacation periods. You can arbitrage in metro markets better than VR markets, so in your post, you're comparing Airbnb arbitrage to a VR market, and you're going to get frustrated because they are two different market types. Also, if you use an FHA, you're only dropping 3.5 - 5% and you can easily offset your life expenses by following the STR/MTR model. If you already have cash, arbitraging is a waste of time; if you can build equity now and only drop 3.5 - 5% to get started. I started with arbitrage and stacked cash to develop reserves and get into buying. The better model after 8 years in the business is to manage instead of arbitrage, as this reduces your risk and ensures consistent cash flow. If you have a bad month, the most significant cost is an unhappy client, and you gain valuable knowledge to improve.
Additionally, I do BRRRRs for most of my STRs/MTRs. I usually acquire a free house that I can STR/MTR for a few years, and then 1031 into small multifamilies, effectively triple the cash flow.
I then flip/wholesale if I need to bring additional liquid. You're on the right path and asking the right questions!
So, you buy a deal, use hard money to rehab, STR it, cash out refi, repeat?
- 1yJulie KnutsonBusiness MemberReal Estate Broker · Watertown, SD · Member since 2024 · 24 posts · 7 votes
I am a RE Broker that manages STR's, for a friend.
I cringe every time I hear someone say the want to take out a mortgage specifically for an STR. There is so much risk involved that is completely out of your control.
most of mine are older mixed use buildings that have been remodeled. owned by a small group of private investors. Initially all the residental was long term, they slowly turned a single unti into an STR to give it a try. Every time we talk about NOI, we talk about going back to long term. The market for these can be very volitale.
It's costly, risky, and way more time consuming that you could imagine.
I would carefully analyze the market and talk to some people that have them in your area before jumping in. Always run conservative numbers. .
I also will do an STR setup on occasion, when I give people an estimate of what is needed there is sticker shock there as well. - Real Estate Agent · Louisiana · Member since 2017 · 215 posts · 148 votes1y
I did a 10% second home loan on my first. Previous owner strictly used VRBO, was doing roughly 15% of purchase price a year in revenue. Felt confident we could list on VRBO & AirBNB to increase revenue based on a partners property around the corner being majority AirBNB bookings. Turns out that was the case & we've paid all of year 1 carrying costs in the first 7 months. Be patient & confident in your numbers. It's all about the buy & finding something that makes sense or something that you feel is underutilized. Good luck on your search.
- Lender · San Diego, CA · Member since 2022 · 130 posts · 75 votes1y
I don’t agree with some of these posts saying to wait until you have $100k, etc. to invest. Although that’s a realistic amount to actually make damage in your market, it’s not the only solution.
I’ve personally met individuals at meetups who found deals and brought them to the right people (with capital), and they partnered up to split the investment. That’s one way to do it, but not the only way.
- Member since 2021 · 124 posts · 87 votes1y
I started STR in my 20s. I had a job, but I didn't have 100k saved, like a lot of people say here. I bought the shittest house with no knowledge of how to repair anything. (House was 150k, 3 bedrooms and I paid 23k) It wasn't an easy journey, and I spent every single minute I had on repairing the house and taking care of guests. I didn't have a single day off for three years. Now, I make people's salaries in 2 weeks, and I am younger than most of the people's kids here. Anything is possible if you act like your life depends on it. STR is very easy if you have knowledge and money. The problem is that when you are young, you don't have either money or knowledge. You gotta find a way to close that gap, which is very very very hard. Good luck
- 1yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
i actually feel like @V.G Jason was kind of giving you a compliment - that you're getting better returns than the average random investor who buys a random property should expect. we just see so many posts from people in HCOL areas who buy in the midwest and get absolutely crushed.
- Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes1yThanks for this. I guess Jason can say what he meant, but this discussion has been extending across another thread as well and it seemed to be getting rather personal for him, not to mention James, whose comments about Caifornia seem meant to be unpleasant. I never intended to start a firestorm by saying that well-managed small multifamily in the Midwest can get 25%+ ROE and I’m puzzled by why one started! Maybe because those properties are not glitzy at all and it challenges people’s assumptions that they actually have far better returns than, say, luxury apartments in LA. It just surprises me that property managers and investors would also be so shaken by this. Anyway, yeah, whenever you invest I think the way you manage it makes all the difference. I know people have lost their shirt in Indy and it’s usually because they buy crappy turnkey properties from unscrupulous companies without ever looking at them.
Quote from @Nicholas L.:
i actually feel like @V.G Jason was kind of giving you a compliment - that you're getting better returns than the average random investor who buys a random property should expect. we just see so many posts from people in HCOL areas who buy in the midwest and get absolutely crushed.
- Real Estate Agent · Charleston, SC · Member since 2013 · 424 posts · 99 votes1y
Holy thread jacking, batman.
- 1yJeff ChisumPro MemberLender · All 50 States · Member since 2020 · 248 posts · 142 votes
100% of my business is helping clients in with purchasing vacation homes/STR properties. 90% of my clients use the 10% down loan because the lower down payment requirement and rates/cost similar to a primary residence.
- 1yAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Trying to break into STR (short-term rental) ownership but stuck on that 20% down payment? You're not alone — and most successful investors didn't just save their way there. Here's how they did it:
How Most Investors Fund STR Purchases
- BRRRR Strategy (Buy, Rehab, Rent, Refinance, Repeat)
Build equity by renovating undervalued properties, then refinance to pull out cash. That cash becomes your down payment for an STR.
- Fix & Flip Profits
Flip houses to generate lump-sum profits. Use those profits to fund the 20% down on STRs. It’s faster, but you’ll pay taxes on those gains unless structured carefully.
- FHA House Hack (Low Down Payment)
Buy a 2–4 unit property with just 3.5% down using FHA financing. Live in one unit, rent out the rest (long-term or short-term mix). Works best outside strict tourist markets where zoning and lenders allow STR use.
Why Investors Shift from Arbitrage to Ownership
- Cash flow is stronger — you keep more of the upside.
- You get tax benefits — especially with 100% bonus depreciation back in 2025.
- You build equity — appreciation, mortgage paydown, and forced value.
- You control your exit — sell, refinance, or 1031 exchange into something bigger.
Arbitrage = Low Barrier, But Limited Upside
Sure, Airbnb arbitrage is easier to start — but:
- No tax write-offs
- No equity
- No long-term wealth
- Fewer exit options if the lease ends or laws change
Bottom Line
If your goal is long-term wealth and tax efficiency, ownership beats arbitrage. Most people get there through BRRRR, flipping, or creative financing. 20% down isn't impossible, it just takes a strategy.
This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.
INVESTOR FRIENDLY CPA®5241 Reviews - 1yAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Quote from @Jason Eyerly:
So, I know airbnb arbitrage as it's so called is hated here but I will agree to disagree. I've looked at the idea of purchasing an STR either by an FHA loan on a multifamily and renting out the other units in a mix of short/long term but that seems tough in tourist driven markets. Otherwise 20% down when homes are at $400-$500k in some of these markets seems impossible. Do most people BRRRR or Fix N Flip their way to this kind of liquid cash and then make the purchase? The cash flow seems better than on arbitrage and you have more options and exit plans but 20% these days is no small feat.
You're asking the right questions, and honestly, a lot of STR investors wrestle with this exact situation. The 20 percent down payment in today's high-priced markets can feel like a mountain to climb, especially when homes are going for $400K to $500K and competition is tight.
Yes, many investors do use flips, wholesaling, or BRRRR strategies to build the liquidity needed to acquire their first or next short-term rental. Those models let you grow capital faster than traditional long-term rentals, and once you've built that cushion, you have more flexibility and better financing options when it's time to buy.
FHA house-hacking can work in certain cases, but like you said, it's tough in true vacation markets. Inventory is limited, and prices often exceed FHA loan limits. Not to mention, if you're planning to STR one of the units, you need to check local zoning and loan program rules to make sure it doesn't disqualify you.
Arbitrage gets a bad rap, but it’s just a tool. Some investors use it as a stepping stone. It requires less capital upfront, and if you’re good at operations and marketing, it can cash flow well. The trade-off is less control and more exposure to things outside your ownership like landlord decisions, lease renewals, or policy changes. But if you structure it smart and use it to build your reserves, it can be a launchpad toward owning.
If ownership is the goal, and you don’t have 20 percent saved yet, you might look into:
- Secondary or drive-to markets where prices and regulations are more accessible
- Partnerships or private lenders for gap funding
- Combining a smaller BRRRR project with a future 1031 exchange into an STR asset
You’re on the right track. Whether you build up capital through flips or start lean with arbitrage, the important thing is staying focused on your long-term strategy and choosing markets where the numbers and regulations work in your favor. Happy to workshop ideas if you're narrowing down locations or weighing which path to take next.
This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.
INVESTOR FRIENDLY CPA®5241 Reviews
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