All Forum Posts by: Chris Webb

Rate is a simple input to determine if the income makes sense. I look for Cash on Cash return and rate determines one side of this equation. 

I had to think about it and I heard rents increased during that time period. In fact, I found this from BLS which shows that for the most part rents were steady or slightly increased. Just because we are going to see a recession does not mean it will effect housing. 

@Katie Miller I use both. I will do back of the envelope calculations initially and if it hits my threshold of 10% CoC I will look at the numbers more closely. I will verify my numbers at this point, talk with a rental agent, get some closing costs and verify my possible rate. I have a simple spreadsheet where I can add in the sales price and rents and get a yield on my cash invested.

My basic equation is (rent - monthly costs [prop management, vac, repairs]) X 12 which gives me annual cashflow (ACF). I then take ACF/ total money into the property [ down payment, closing costs, any make ready costs]. So a simplified equation is ACF/Total Cash = CoC return. I look for the highest yield and work backwards from there. I am not actively investing now as I am saving for a down payment, but I look at the market every day.

What is the cash on cash return and is it better than area average? 

Hi @Katie Miller, I use one metric and look at the rest as icing on the cake. Cash on Cash return is what I use to evaluate investments. This allows me to analyze a single family home with an apartment complex. This one metric actually allows me to see how hard my money is working for me. Appreciation, cash flow, and other metrics are just icing on the cake. Think of accounting. Statement of Cash Flows show the blood of the business, or the cash funneling through the business. Balance Sheets show the overall body. If there is no blood, the body will die. I hope this helped! 

Hi @Anthony Barraza, take a look at "One rental at a time" on YouTube, he used to write for BP and now has excellent content on YT. 

Yes, one thing I forgot to mention is that pricing will not decline because the bottom half of the price points will evaporate since over 80% of mortgages are under 5%rates. These people will not sell unless they have to. This will put upward pressure on pricing. However, the market will see "wish pricing" over the next few months where sellers are going to expect a price and be forced to drop it. This should not be seen as price drops as they are actual equilibrium pricing.

As for the BRRRR - every market is different and each BRRRR project does fall into the three things in real estate; location, location, location. Keep an eye on the supply chain issues and building costs. I have also heard that refi's can be tough when doing a BRRRR, I am sure there are posts here in the forums about BRRRR refi issues. Take a look and good luck!!

I see both. A correction in Real Estate and a Recession in the economy. The correction is already starting. We are going to see a drastic fall in RE transactions over the next 12-16 months if not longer. We are going to see a recession either now or early next year. The difficulty with recessions is that we have a fairly good jobs market. Once we see the employment numbers decrease it will be the last straw leading into a recession. Keep in mind that the RE market will still have transactions, just not as many as we are used to. The trick is to find motivated sellers and not compete with first time home buyers.

Hi @Brandon Roundtree check out the YouTube channel called Dion Talk Financial, he house hacks and self manages. 

Is your expected cash flow the first number (621) or the second one(-158)? With all the uncertainty out there, I would look at Cash on Cash return first and let the other things fall into place. That is my opinion and others may disagree.