Was just hoping someone could look at the sheet below and provide me some feedback. Am I missing anything? Because it seems like it's impossible to find a good deal in my area. I am trying to find a fixer-upper in a B C+ neighborhood. This one is the best so far that I could find on MLS, but the numbers just don't really work out. It is only cash flow positive with 20% down payments, and even then the return is weak. Are my estimates too conservative? What are some of the ways to improve cash flow on this property aside from reducing the level of costs? I was going through some of the deal diaries' posts, and found people that have similar price range and have CF positive. So what am I missing?
Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes
7y
Sorry!!! The video has two problem. 1) There is a banging sound in the background. I think I was talking with my hands and 2) The very last calculation is not correct because I gave an example for a 10-unit building and forgot to change the number or rent increases from 28 to 10.
I will correct the problems later, but the video still shows the amazing numbers for rental properties.
Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes
7y
Wow!!! I am having some technical difficulties. Let me try this another way.
If i am reading it right, if everything goes right you are looking at a 1.85% ROI the first year. Put your money in the stock market. To know whether or not a property is a good deal you have to stretch your calculations to a 1-year, 10-year and 30-year projection that includes rent increases and appreciation.
My business model is to double my investment capital every 1 to 2 year, or to earn a 50% to 100% return on my investment capital every year. This is achievable by purchasing the right properties for the right and/or purchasing properties that were neglected for a low price and you can do improvements and increase the rent.
Sometimes, it is better to park your money and do nothing until you find the best deal.Here are two youtube videos I made for analyzing. The numbers is this first video are so amazing they keep me awake all night and earning this type of money. When you know how to crunch the numbers, have the right business model and philosophy earning this type of ROI is very doable. I did what you are going to see in this video many times.
So, if you own a 28-unit apartment building and you increase the rents by an average of $200 you earn a profit of $1,142,000 your first year. If you raise the rents an average of $400 over a 10-year period you earn $ 4,032,000 in 10 years and in 30 years if you raise your rents an average of $600 you earn $11,088,000.
How do I get those numbers. I use software. You multiply the total monthly rent increase times 12 times the Gross Multiplier. That total is the amount you increased the property's value.
Then, add to your increased property value your regular annual cashflow before you increased the rents + your increased annual cash flow. You can also add normal property appreciation, but my numbers do not include that.