All Forum Posts by: John Russo

 Your other comment said you're looking in Tennessee, Georgia and Oklahoma. I know California investors who own properties in those markets but they either bought in that 2011-2018 time frame or are experienced investors. I considered Nashville (and Franklin and Brentwood) but it would have taken many months to research those markets. I did visit those areas long ago before I was interested in real estate. 

I invest in the Bay Area and Indianapolis metro area. For context I did live in Indiana and rented out my home Class A (in a nice suburb with great schools) when I moved back to CA. I made the mistake of buying Class C "cash flow on paper" - those are the homes I've put in $70,000+. My property tax increases were 17%, the last round on both the Class A and C, are reducing my cash flow.  

I've been looking in Nevada (Reno and Las Vegas), which has some of the lowest property taxes in the country. You would need to go above $200k to $300k on your search, unless you buy a distressed property to BRRRR (wouldn't recommend that to a first time investor). I won't even BRRRR out of state. I'm not an agent or work in the real estate industry in any way other than my own properties. I'm not trying to pitch a certain market but Nevada is where I would buy. Las Vegas is drivable from LA area or a short flight. Maybe look at new builds there.

I would have plenty of cash reserves to pay for repairs, capital expenses, and vacancies. And to fly out to the areas you're considering and get to know those areas in detail. Don't buy sight unseen - that was my mistake too. The numbers might look good at first but add in increasing property taxes and insurance costs for each additional year.  Then you have to balance how much you'll increase the rent each year. It depends on the market but if you increase the rent too much the tenant may say they can't afford it and move out. Now there's a vacancy. 

Feel free to DM me if you have further questions :) 

Unfortunately, that is just how things are. It's hard to find. If you do find them, they are probably in class D areas they tell you to stay away from on here. Now, many just are cool with having negative cashflow and waiting for appreciation and some cashflow years later. with a class B. Not my style but I get it. I'm well versed in low-income areas. I don't care for them that much anymore. However, if one falls in my lap, I know how to work it for a while until I may decide to sell. Also, since I understand the flip game, I can get a rundown property in a decent area. I add value, rent over years and when the appreciation pops, I sell. Recently, I got a duplex in a class B area overall. However, my little pocket is full of renters and has characteristics of a class C. It sold every year because those investors did not understand how to work that community. I came in and got instant cashflow, because they wanted out as usual. 

@John Russo Good question. Most on-market properties aren’t cash flowing right now, especially with high interest rates.

One screening trick: start with your desired cash-on-cash return and work backward. If you’re putting $50K down and want a 10% return, that’s $5K/year or ~$417/mo in cash flow.

In other words, filter for properties that meet the X% rule based on market rents from your initial analysis. If they don’t come close, move on. If they do, dig deeper.

Over time, you’ll learn what your “% rule” is — maybe it’s 1.2% or 1.4% in your market, then you figure out an offer from there (might be emarassingly low). Most true cash-flowing deals now come from off-market leads, creative financing, or value-add plays.

Keep running the numbers — it’s the best way to practice.

It’s all about the market you invest in. Outside of Midwest markets it going to be very hard to find cash flow (assuming a mortgage with 20% down). I have a portfolio across Memphis and Detroit and they all cash flow. Happy to share resources if you are interested.