All Forum Posts by: Ayyub Omer

How can there not be a negative cap rate? If expenses exceed rental income on average, then you would be losing money even if you had bought the property all cash, and so your cap rate would be negative. Such a property might be exceedingly rare or nonexistent on the market, but it is at least theoretically possible.

Also, I believe the formula for cap rate is NOI/Capital* 100%, so if NOI is negative, cap rate should be negative by definition.

Well, let me restate my question a bit then. Can I make 8-10%, while being unleveraged and also being out of state (or out of country in this case)? Some of the turnkey properties I've looked at only seem to return maybe 4-6% unleveraged. Some of the cheaper properties I've seen seem to return about what I'm looking for, but I'm worried about being unable to manage a property a C class property from a distance. So I feel maybe what I wanted was a bit unrealistic.

Regarding the whole leverage thing, I can always leverage later if I feel things are going well. Not interested in starting off with it though.

Hey everyone,

I've thought about my goals for real estate, and I've come up with the following:

1. 8-10% target yearly returns including appreciation and cash flow. No US income, so tax benefits would be limited to the income from the property itself.
2. No leverage, properties bought with cash
3. At least 4% cash flow from the properties that I can live off eventually, the rest can be appreciation, I don't mind. I don't mind negative cash flow for the first 8 years either, but I want to retire after 8-10 years. I can life like a pauper and save a decent amount yearly until then.
4. I don't live in the states so everything is oos to me :). I'm also looking into my home town in the meantime, but I know this forum is focused on the states.

Are my goals realistic and achievable? I'm thinking that any decent investment property from the MLS that I buy and holds should let me reach my goals, but I don't own any property so I was hoping for the perspective of someone more experienced.

Thanks,
Ayyub

Another option to consider is buying a property in turnkey or near turnkey condition, rather than a property from a turnkey company. There's usually more of an opportunity to get deals doing it that way, and it is work, but not nearly as much work as an involved rehab.

I'm also from Calgary. My intuition is that Calgary is a bad place for buy and holds because of low cashflow and low expected appreciation. I'm guessing flips are the name of the game here? I would love to hear more about how people are successfully investing in real estate in Calgary. I'll definitely check out Azad Chandler and co. Are there other good resources for REI in Calgary?

900 in rent for 40k properties sounds good to me. I guess there's a bit more management hassle, but you're local so you can probably handle it I think. Where having class A or B properties becomes really important is when you're out of state, so you can't really deal with C class tenants. I would be buying similar properties to yours if I was in an area where I could get them. I wouldn't expect St. Louis to appreciate that much even if you had higher class properties.

If we want to compare cap rates to interest rates they should be compared to real interest rates rather than nominal interest rates because the property being held provides a hedge against inflation.

Everyone says that retail lending will never go negative, but there are instances of negative interest rate mortgages in some European countries (or more accurately, one instance that I know of). https://www.theguardian.com/mo... Maybe it'll happen in the states too at some point. Who knows what the future holds?

I know there are a lot of foreign all cash investors who I guess buy a property in L.A. or San Francisco or some other expensive market, and are basically content to collect a 2-3% return on their investment. These guys are hoping to avoid losing money, rather than to make money, I'm assuming. If they were a bit less risk averse, and a bit more eager to make a return, how would you suggest they invest? Should they try to flip houses from out of the country using all of the technology available nowadays? Are they better off just investing in the stock market? A lot of these guys don't qualify for mortgages, at least that's what I'm assuming for the purposes of this question, so they would only get the type of return you can expect from a free and clear property.

I know a couple of people in this situation, and it seems that the combination of not being local, and not having access to mortgages makes it difficult to do well investing in real estate, or at least in American real estate.

I know people who avoid interest for religious reasons. You can't argue with the numbers though, you're definitely making less money when you go all cash.