How are investors making numbers work in todays interest rate environment?

Question

Just out of curiosity, how are new investors making deals work in todays market? Commercial, residential, etc. How are y'all making the numbers work? Almost every SFH I come across is cash flow negative. Every commercial property for sale on costar is overpriced and impossible to cash flow.

I guess it just comes down to finding off market deals right now, so what is every one doing to make it work? I am new to investing, have done a few flips in the last 12 months, but want to eventually start building out my portfolio.

Thoughts? Discussion? Would love to hear from people!

Alecia Loveless · Answer

@Tim Goddard I’ve only been doing this for 5 years but am still finding deals that cash flow on the MLS. It all depends on your market area and how many deals you’re willing to analyze to find the right one.

Bruce Lynn · Answer

1.  Cash flow is a function of your leverage.  That means put down more money, borrow less.  Same for both residential and commercial.  On commercial deals your lender probably will require less leverage...maybe 40% down.  Single family in general in DFW area I typically see about 30-40 down will break even or cash flow.

2.  Off market is often a myth unless you are the one perhaps generating the leads, but then again that cost money and time and effort.  The biggest wholesalers are probably sending out anywhere from 3000-30,000 pieces of mail a month.  Postcards and letters.   Making 200 calls per person a day or more with a multi phone line dialer.   I also see them buy off MLS and then remarket them is off-market wholesale deal.   Every been to an off-market showing where there are 30-50 investors there looking to bid?   It might not be on MLS, but it certainly isn't "off the market", very much on the market when that many people show up.

3.  Probably the better deals are outside of the main DFW area.  I usually say draw a big circle around DFW and invest on the outskirts of that.   Maybe look at places like Cleburne, Waxahatchie, Greenville, Denison, Bonham, Lavon, Gainesville.

4.  Prophawk is probably a good resource for you in Texas.

5. There are always deals....you just have to find them.  They are out there.

Nicholas L. · Answer

@Tim Goddard

I think this is a great and valid question.

I'm still looking for BRRRRs - I'll BRRRR if I can break even on the rent when done and force a bunch of equity.  Then, if I'm fortunate enough to refinance in a few years - great.  If not - also great.

I'm also looking into MTRs but haven't bought one yet.

And yes, I buy 100% off market.  The last time I bought off the MLS was 2021.

Julie Muse · Answer

Well, I can't offer any help in the commercial world. However, in residential I buy everything direct to seller.  I try to offer solutions to their house problems. We are finding that working with individuals in pre-foreclosure has been fruitful and there are so many people that have 40% equity or more. The goal is to buy their home before loosing it back to the bank and in alot of cases we are able to buy and give them money to move onto the next stage of their life. Also, PPC leads have been extremely profitable as well.

Eric Gerakos · Answer

In a high interest rate environment I stop buying and start lending.

Julie Muse · Answer

https://www.propertyleads.com/peter-vekselman/

Sometimes get them from ispeedtolead too

Bradley Buxton · Answer

@Tim Goddard

There is not one answer for how people make deals work. You can buy in a lower priced market, buy down the interest rate and or put more money down.  You strategy and notions of the "deal" will change with market conditions. Where you put the work in will change if it's not more capital you'll be adding time and skill. There are still great investments in Reno Tahoe, NV that are on market and will continue to have strong appreciation.  If you're looking for pure cash flow then that strategy will be different.  It's about adjusting expectations and maybe giving up on some of the "rules" for good deals. Everyone's good deal will be different.

How are investors making numbers work in todays interest rate environment?

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