With so much info out there how are you filtering out the noise

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With so much info out there how are you filtering out the noise

Trey Bonner
Investor · Atlanta, GA · Member since 2019 · 25 posts · 4 votes

Since catching the RE bug last November, I have read 8 books (more than I've read in the past 4 years), attended local RE meet-ups & events, identified my markets (Atlanta & Memphis), started building my team in both markets, daily read both the articles and forums on biggerpocket and other sites, analysis deals daily, and have put in a few offers in both markets. But now with Covid... there is so much information and opinions out there, all of which make a green wannabe (we don't have any investment properties yet) investor like me freeze. Do folks have hard markers/indicators that they are watching to decide when there are great deals out there? Is it solely based on consistent and continuous analysis of properties in your market until you see a shift in values? Are there certain experts, businesses, gurus or local organizations that you are following as indicators of a shift? 

I recently read an article stating RedfinNow is resuming their all-cash home purchase program immediately and Zillow Offers is not far behind. Does this mean anything? It seems more likely that we won't truly understand the impact of Covid19 on real estate until after (1) mortgage forbearance periods end; (2) evictions are allowed; and (3) foreclosures are processed. All of which makes me think we should just sit on the sidelines until the dust settles. I guess we don't want to look back on all this and realize we were the "fearful" in Buffet's quote, when we should have been "greedy". 

 My wife and I are excited to jump into the game, with the hopes of showing our 3-year old twins the path to financial freedom, but we are becoming more and more cautious in an attempt to avoid stumbling out of the blocks. Instead of consuming information/data by the masses, I guess I am trying to figure out how best to filter out the noise. As things continue to unfold I find myself a lot more shy about even entertaining potential deal, not to mention pulling the trigger on one. 
 

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Pat L.
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
6y

try jumping in when mtg rates are 18-19% & everyone keeps telling you that you will lose everything :)

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  • Kody Thompson
    Rental Property Investor · Lehi, UT · Member since 2020 · 159 posts · 158 votes
    6y

    Cashflow is always the consistent benchmark. Who knows what is going to happen in 3-6-9 months from now as all the so called experts have continually been wrong time and time again. 

    As long as you are in a growing market with cashflow I would pull the trigger 

    1Reply
  • Karl B.
    Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
    6y

    I filter out the noise by ignoring the news and social media and by doing what has always worked (my buy and hold and the metrics I use to distinguish a good deal).

    I can understand why a new investor would be overwhelmed during this time. 

    You have your markets picked out and I'm hoping you were looking at property prices prior to coronavirus. If they're more appealing than prior CV, that's a good sign. 

    A good deal is a good deal and there will always be renters. Again, find a really good deal where the numbers make sense and make it happen. And if the property needs work add 10% to your rehab cost to be safe; if the numbers still look good, make it happen.

    Just make certain you have a good property manager lined up if you're not self-managing.

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  • Pat L.
    Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
    6y

    try jumping in when mtg rates are 18-19% & everyone keeps telling you that you will lose everything :)

    2Reply
  • Trey Bonner
    OP
    Investor · Atlanta, GA · Member since 2019 · 25 posts · 4 votes
    6y

    Thanks for responding @Kody Thompson I definitely agree that cashflow is king 

    @Karl B. could you speak more about your metrics and if any have changed since Covid? I was focused on cashflow per door (@ least $200), CoC (9.5% and higher), and total cash needed to buy and fix up property (lite rehab). I don't see these changing but not sure if there are additional things that should be considered due to Covid. I will definitely take incorporate in the extra 10% for rehab cost.

    We are looking at small multifamily (2-4 doors) and single family homes. Buy and hold

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  • Kenneth GarrettPro Member
    Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
    6y

    @Trey Bonner

    There are two main methods of buying rentals. Buy with 20% down and conduct a very small rehab if any or going the BRRRR route. Each strategy works. At the end of the day each requires financing. Make sure you are approved for financing.

    The 20% down payment method. I like to see between 15%-18% return on my money. If you put 20K down and cash flow is $200 that's a 12% CoC return not bad. I prefer $300 cash flow which gets you 18% CoC return.

    BRRRR projects take longer to do and more risk, but the payback is better. When I refinance say I have 10K stuck in which is not the goal, the goal is no money stuck in but let's be realistic that's tough in today's times. Using your $200 cash flow that's a 24% return and with my $300 cash flow that's 36%.

    It’s ok to listen to the noise.  Analyze your projects, pick good neighborhoods and good tenants and make your move when you find the right project.
     

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  • George W.
    Investor · NJ · Member since 2018 · 869 posts · 921 votes
    6y

    A great way to filter out noise is to ignore all of the gurus who claim you can make money over night with no money down utilizing their special system. 

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  • Jingru Sui
    Real Estate Agent · Atlanta, GA · Member since 2014 · 683 posts · 317 votes
    6y

    You need to have a goal of how much cash flow you want. Set your criteria. Stick with your criteria.

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  • Trey Bonner
    OP
    Investor · Atlanta, GA · Member since 2019 · 25 posts · 4 votes
    6y

    Thanks @Kenneth Garrett I am familiar with both strategies. We did a ~$70k rehab on our current primary, prior to moving in. I was very hands on in the process and based on that experience I would agree that a full BRRRR is not ideal for my first investment property, especially considering that the property may be in a different state. Thanks for sharing your numbers, maybe I should raise the bar a bit. What market(s) do you invest in?

    I definitely agree @George W.

    Thanks for your response @Jingru Sui A reoccurring theme I am hearing is to stick with your numbers/criteria, which makes sense. I just don't want to miss the boat on future (potentially better) opportunities because I jumped in too early. Whose to say that I couldn't purchase two properties with the same amount of cash if only I were patient and waited until 2020 Q4/2021 Q1 versus buying one (which met all criteria) now? I guess that's trying to guess the market which is never a good idea. 

    Maybe for a newbie like me I should only focus on (1) pulling together all my landlord templates/processes, (2) continue to read and educate myself, and (3) keep a close eye on my target markets -analyze and track properties (I created a property tracking sheet). I am thinking it may be best to sit on the sidelines and let the pros do their thing until there is visibly a shift in the market. I think my risk tolerance is shrinking by the day. Thanks for weighing in everyone. 

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  • Jingru Sui
    Real Estate Agent · Atlanta, GA · Member since 2014 · 683 posts · 317 votes
    6y

    I hear you. At the end its what you feel most comfortable doing. Good luck in the future.

    0Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    6y

    IMO, if you can do it financially, jump up to 5 units+.... why? They are priced in a rational way (based on NOI) and the market is a lot more stable , the lending in more easy to get and based on the buildings metrics, etc

    sometimes its hard to find that size building and a 4 plex would be ok too.... just be sure it is selling based on NOI, and not comps.... 

    i also suggest you start reading about commercial lending, the financial metrics of MFH etc. I personally want economies of scale, etc. 

    as for investing now? Have realistic expectations on returns and pricing and remember that people need housing.... and a well purchased asset will be a good investment over the long term. 

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