All Forum Posts by: Curtis Farnham

Hi @Cory Bogler. It's been 2 years since you started this thread. How's it going? Did you end up investing in North Omaha? Or anywhere in "Big O"? I grew up in Omaha area, and I'm from San Diego now too, and I'm considering North Omaha myself right now. So your post caught my attention.

I'm curious how this area is treating those in 2023 who want to dive in with a BRRRR and/or Long-term Rental strategy. I see the property values here (68111 anyway) have a sustained CAGR of 16.9% over the past 10 years. That's phenomenal, and it's right up there with other hot places like Kansas City, Detroit, and Houston. Does such a sustained ultra-high growth rate indicate that the place is turning around in terms of crime rates and stability of the tenant pool?

Thanks @Nathan Gesner! I guess I should have dug into the BP site better.

And thanks @Account Closed! I was hoping there'd be a North County specific REIA like that.

I'm located in Fallbrook, CA, and I'm looking to network with REI folks who are local-ish. Anyone based in North County San Diego, or Temecula/Murrieta? Are there any meetup groups or clubs around here?

I found one totally by accident a few days ago:

I'd been getting random text messages about once a week for several weeks, asking if I'd be willing to sell my home. I have no idea how I got on anyone's list. It was from a different phone number each time. It's not clear if it's from the same person or not.

On the most recent one, I responded back and asked if they were a wholesaler, and I mentioned I'm looking for investment properties too. They called me back a few hours later, and it was a lady saying she was a wholesaler. She wanted to know what kind of properties I might be interested in. We had a good chat, and she sent me some info on her latest offerings.

I'm going to use this trick again!

Yay for house hacking! Sounds like you're doing good as far as education goes. I'll DM you to connect more.

Agreed, ignoring capex, maintenance, and vacancy doesn't sound like a recipe for success. Were those investors going for appreciation rather than cashflow? I've thought long and hard about this tradeoff, due to the area I live in. That's what has kept me from putting in any offers. While the IRR would be decent on the couple of local properties I nearly offered on (assuming my assumptions would hold over time), it would mean being underwater for all-in cashflow by anywhere from $800-$1600/month in the beginning, and taking 5-10 years to turn positive. While my monthly cashflow from my employer is more than enough to cover this, I can't scale up like that.

The factor that breaks this appreciation-vs-cashflow debate is ask this: Why does it have to be one or the other? Why not both? It might take investing outside of one's local area, but there are markets even in the current economy that have both.

Hey, another software guy!! That's my bread-and-butter too. I've been reading the literature on REI intensely for the past few months, looking to get away from that. A few points:

First, from all I see and hear, this is one of the toughest housing economies for cashflowing deals in a very long time. Many, many zipcodes all over the country are like this. I'm in southern California, and this was true even before Covid. I've been looking for months, and I can't find anything that will cashflow locally. It's making me strongly look at investing out-of-state.

Second, not every seller will be interested in your offer, and you might need to adjust your expectations. Experienced investors I've heard from say that they only get 1 out of 10 offers accepted. 

Third, how are you educating yourself on deal-finding? Are you reading books? There's a ton of literature on this subject. I love Audible.com because there's a huge number of relevant titles and I can listen while driving in the car or doing mundane stuff around the house. It's a great way to make better use of the time. For evaluating different deals, especially for BRRRR and buy-and-hold, look at Internal Rate of Return (IRR) calculations. I made a calculator for this in Excel, using BP's BRRRR calculator as my inspiration and to know what input parameters to factor in. IRR is excellent for understanding complex series of cash inflows and outflows over time. You probably want to aim for an IRR that's a fair amount better than simply sticking your money in the stock market. I'm aiming for 15% at a bare minimum.

Have you looked at calculating Internal Rate of Return (IRR)? I'm studying a lot of deals and this looks like a much better way to evaluate and compare deals over long periods of time than CoC or other ROI measures, and it makes it easier to compare to stock market returns as well. IRR factors in the time value of money, and provides a much more nuanced way of accounting for cash influx/outgo at various points in time. Excel makes this easy to calculate.

Also, I'm not understanding why you're BRRRR adverse when your goal is net worth. (My goal too.) Seems to me like it's a best-in-class method of building it.

Is Rehab (the first "R") the part that you're not fond of? That's a huge way to build net worth fast. It's forcing appreciation. And the faster the property builds equity, the more options you have if you need to exit the deal.

Or is the refinance (the 3rd "R") what you don't like? The reason this is there, is that you pull out cash that you can put toward your next deal. That's how you scale everything up. You won't scale nearly as fast without this.

Or are you adverse to being leveraged that much? If you leave 25-30% equity in each of your properties, as the BRRRR strategy recommends, and if you're keeping a 6-month cash reserve for each property, and you're being realistic with how much you'll lose on vacancies, repairs, capex, and management, then the investment should still be pretty safe. But you don't have to follow BRRRR in every precise detail. You could leave a higher amount of equity in the deal, say, 40-60%.

Newbie here, trying to formulate a strategy. I've been reading up a lot on REI (16 books in 3 months! And counting.) My ultimate goal is long-term net worth. I'm not afraid of fixers, and I love the idea of BRRRR and multi-family. I've been looking at properties daily and crunching a lot of numbers.

The appreciation-vs-cashflow debate hits me hard because of my location, which is north county San Diego, California. I can't find anything within a 1-hour drive that will cashflow in the near-term. And long-distance looks risky due to having to build a network and rely on others for almost everything, notwithstanding much better cash flow. My income from my employer is great and we keep our expenses low, so I could go either way in the near-term. But I'll need cashflow in order to really scale.

I came across IRR (Internal Rate of Return), and it seems like a great way to cut through some of the guesswork and compare long-term returns. But what's a good minimum IRR to look for? And how to balance that with the extra pains of long-distance investing? And why isn't IRR and time-value of money brought up in more of these appreciation-vs-cashflow debates? In order to make the extra effort worthwhile over stock market gains I think I'd need a minimum IRR of 15%, but 20% looks a lot more attractive. Does that sound reasonable?

The IRR I'm seeing from local SFRs is 10-12%. Multi-family is rare around here, especially in today's market. I did look at one duplex and it was coming in around 20%, but I decided it was too risky as my first deal, for other reasons.

I'm also studying other remote zipcodes where SFR values are sub-$250k and the rent-to-price ratios are 0.8 to 1.2. In those places, IRR is coming in as high as 30%. Again, does this sound right? What IRR is worthwhile for you under different scenarios?