All Forum Posts by: Llewelyn A.

As a multi-Family Real Estate Investor, I'm very curious on the business model of the Turnkey Company.

Let's look at it from my point of view, a Real Estate Investor.

I find properties, renovate them when needed, rent them out, then manage them. In other words, I make them Turnkey for myself.

It seems that the business model for a Turnkey Company would be what I do as a Real Estate Investor, except that the PM would be retained for a new Owner after it is sold.

Sort of like a Flip but with retained PM.

I was thinking that if I were to do that, I would only sell Properties that are subpar to my buy and hold criteria.

In other words, if I find a property which will not meet my Cash Flow, Appreciation AND ease of Management, then I would just flip it and offer management as a turnkey property.

I can see that a great Turnkey Business Model would be creating a portfolio of great properties, but because I have the Acquisition, Renovate and Property Management machine well oiled, HEY! let's sell these properties that don't meet my buy and hold criteria!

A question that pops into my head is, if the property is Turnkey and you are willing to manage it, why would you want to sell it to someone else, other than it doesn't meet your buy and hold criteria? 

Is it because there is more money in Managing the property than in holding onto the property itself? That opens up some more questions if that's the case because then I, as the buyer of the turnkey property would start to think, well, if this Turnkey Company isn't owning the Turnkey Property, what's wrong with this Property?

Maybe I'm way over thinking it!

Any thoughts? I'm missing something..... maybe something like the Turnkey Company needs to sell the property in order to build more Capital for other investments?

What's in it for the Turnkey Company so I can understand what they are really doing to make money and maintain their high level of excellence (if there is a high level of excellence)?

@John Hickey

If you all don't mind, I'd like to give my 2 cents, since I am a Brooklyn, NYC Investor with 2 decades of experience.

I'm only giving 2 cents worth though, because the reality when it comes to the knowledge you need for investing, it's a lot more than 2% of a dollar's worth of education and experience!

Also, I tend to put all my references in the beginning of my posts because I find there are problems when I try to put them into the content of my posts. So if I do reference you in the beginning, what follows may only be for me to alert you to this post, but it may not be necessarily about you unless I specify it.

I am going to speak mostly in a very Layman's way, because I don't want to scare away those who would begin to read this post and then stop because the Jargon and Math may be something they are not used to. However, in professional investing, I would encourage the readers who do find something in this post difficult to understand, to please try to take it all in and then apply it for themselves.

I'd like to make the following Statements: 

1) YOU DON'T HAVE TO CASHFLOW to MAKE MONEY!

2) YOU DON'T NEED TO BET ON APPRECIATION TO MAKE MONEY!

Now I'd like to prove that statement.

In a strictly Financial Math point of view, it works like this:

Assumption:

a) Mortgage: Max on a 3 FAMILY FHA - $984,200, 30 year fixed, 4% Interest Rate, Payment: $4,698.72

b) Purchase Price: $1,230,250 (Why? Because $984,200 is 80% LTV, which means you put down 20%)

c) Monthly Expenses and Mortgage Payment of $4,698.72 is EQUAL TO RENTS AT ALL TIMES. 

e.g. 3 Units average $2k per month or $6k monthly rent roll, $1,300 monthly for Taxes, Insurance, Maint. etc.

d) ASSUME NO APPRECIATION and CASH FLOW REMAINS NEUTRAL AT ALL TIMES (IMPOSSIBLE OVER 30 years in NYC, but I am humoring the readers of this post).

What will be the final outcome? YOU WILL MAKE MONEY!

In fact, you will make $922,687 over the 30 years! You would just need to put together Partners that will be able to put together around $307k.

How do I know this works? 2 DECADES OF EXPERIENCE.

How do I know this is SUPER CONSERVATIVE? 2 DECADES OF EXPERIENCE!

Now, let's get back to the calculations, where it will put a lot of people to sleep, but, by understanding the Calculations, you can see that is pretty much a no brainer and dispels any thoughts that you need APPRECIATION AND CASH FLOW to make money.

If you invest this way, you will really have to try HARD to make it fail.... and I've seen that happen plenty of times, especially with Investors who do really bad Due Diligence on their tenant screening process.

I think that the problem with most Investors is that they don't really know how to put together a comprehensive spreadsheet which will prove the business plan. OR, they just don't know what is a Business Plan and how to put it together given a set of future assumptions.

Imagine that you can put together a business plan, but this time, make conservative assumptions in regards to Appreciation Rates, Rental Increases, Expense Increases and Cap Ex spending over a 30 year holding period. That's why what I am writing here may seem like it's more than 2 cents.... but in reality, without a full set of a proforma assumptions with at least 10 years of projection calculations..... it's only worth 2 cents.

That's the kind of business plan you really need to answer some of the questions or issues that came up in this thread.

ANYWAY, I don't really want to take up too much of my time or yours, so......

Enjoy the Spreadsheet Snapshot here:

What a coincidence! I happen to have a Portfolio of Properties I own that I can sell for..... $20 Million!

Haha... just kidding.... except that I do have a Portfolio of Properties in Brooklyn, NY worth close to that amount.

If I had more time, I'd love to learn your networking techniques! :)

@Account Closed

Hi Phil.

I am a Brooklyn Investor with several multi-family properties that I have bought within the last 2 decades.

You will need to know your goal and determine whether or not it will fit with purchasing a Brooklyn, NY multi-family.

If you read through my posts, you'll find a lot of information on the differences between at least two different kinds of investment strategies. 1) Investing for Cash Flow NOW and 2) Investing for Cash Flow for the Future.

Brooklyn is not a 1) Cash Flow NOW investment. It's definitely a cash flow for the Future as you won't be able to cash flow your investment until the rents move higher in the upcoming years.

Many call 2) the Appreciation Game.... but really, the value of an Investment, in General, does not Appreciate if the rent roll does not go up in time.

As a real example, in 1999, one of my properties had apts which rented for $500 per month. 18 years later, those same apts rent for $1,900 per month.

Keep in mind that past results do not ensure future results. However, my partners and I are in contract to buy another multi-family property in Brooklyn.

Another thing to look out for is Rent Stabilization or Rent Controlled buildings. Your Property Taxes will be abated for a duration of time, but as exchange for that advantaged treatment, the rental increases for apts in these buildings that are rent stabilized/controlled are limited.

The rents are determined by a Board known as the Rent Guildlines Board of NYC

Two years ago, they ruled rents should have a ZERO increase. Last Year, I believe it was a 1% increase.

When you are investing for 2) Future Cash Flows, obviously, if the future cash flow looks bleak, as in these kinds of increases from the ruling of the board, it affects the Value of the Investment Property.

When you start looking for your own Brooklyn Investments, you will see that typically, rent stabilized buildings are generally buildings with more than 4 units that have NOT been recently built. However, some recently built buildings may fall into Rent Stabilization due to accepting the Tax Abatement.

You will tend to find that buildings under 5 family in NYC will be much more expensive that building over 4 units, mainly because of Rent Stabilization.

It's also a pain to manage because of the rules and regulations that you must follow and your interaction with the Division of Housing & Community Renewal (DHCR).

 Hopefully you will spend a lot of time to really look into these aspects of investing in NYC. Like any big Metro, investing can have a lot of options but also a lot of landmines that you did not expect to navigate through.

Good Luck!

On your application, is there anything that states that the tenant needs to be in good standing? If so, although you have a signed contract, let him know that you are canceling the contract unless he proves that he is in good standing, which can be defined as having the rent paid with proof of those payments.

If you don't have a statement in which he needs to be in good standing, ask him to sign a paper with that statement and give proof and all will be ok.

If he refuses, document everything, including getting an affidavit from the reference. You will need this evidence should it go to court.

If he cannot prove he is currently in good standing, give him his check back.

On the MEMO of the check, write in "Tenant Agrees to Cancel Lease." If he actually deposits the check, you have at lease some evidence in which you can fight in court that the Tenant was asked to prove he was in good standing as per your application that was signed by the tenant, that the tenant did not show such proof, and lastly, that the tenant agreed to cancel the lease as is evidence from this canceled check's memo which was purposely deposited by the tenant.

I don't know if any of this will work for you, but this is what I would do if I was in your shoes.

Some comments here seem to think you are morally obligated as well as legally. Your tenant is morally obligated to pay their rent. As a landlord, you cannot go on hearsay, you need verification that he is as moral as yourself.

Bottom line is that yes, you are legally bound to your contract. BUT, that being said, if I were you, I would NOT rent to him AND I would try to build enough evidence to reduce the damage as much as possible.

As @Drew Shirley mentioned earlier, then plaintiff can sue for breach of contract, but can only sue for damages.

I am not a Lawyer nor do I have any legal expertise other than being a NYC Landlord and Investor, so take everything I say here in that light.

I know in some courts they can be awarded treble damage. If he can prove he was damaged in the amount of say, $2k, then he can win $6k of damages.

One has to weigh the risks and rewards, of which the rewards would be preventing a bad tenant's occupancy.

Give him his money back, write in "Tenant Agrees to Cancel Lease", let him take you to court, have him prove he was damaged, and make sure you know if the Court will award him with any extra damages.

Weight it all before you decide to accept him without evidence of good standing.

@Nicholas Weckstein

Hi Nicholas. 

You asked: "My question is, how do we do it ? How do we find the next area that will see significant growth over a 10-20 year period."

@Gurjeet Singh had some good insights. I agree with his 4 points.

There is also a consistent cycle which one sees all the time. It's something like this:

- Artists and Creative Types come into a very inexpensive neighborhood. Usually this is a very young crowd as they really can't afford the typical expensive apts until they group up. They also generally want to have a Loft or work studio for sculpting, painting, etc. where they can also live.

- The neighborhood begins to offer amenities such as specialty foods like great Coffee, Gourmet Coffee, Avocado Toast, French, Japanese, etc. Foods that you expect to be offered only in a up and coming or matured neighborhood.

- Bands and music starts to predominate. Specialty bars and micro-breweries pop up.

- As the cycle progress, younger, wealthier people take notice and generally like what they see. The Young Urban Professionals (Yuppies) begin to move in to the neighborhood. This is where the rents start moving up.

- Eventually, word gets around, people from all over the US and else where wants to visit and AirBnB becomes popular as the Artists/Musicians need to make up for the increase in rents.

- Developers then take notice. Money starts to flood in the area. Shiny new buildings in a creative design starts to pop up.

- The public transportation starts to get crowded.

- If the trend continues...... it becomes a viable, maturing neighborhood, as some of the Artists/Musicians/Yuppies begin to have children. Some Strollers start to pop up.

- As the developers continue building, a need for more amenities such as chartered or specialized schools materialize to support the wealthier of the gentrifying crowd.

- Eventually, the Artists/Musicians/Yuppies in the neighborhood falls into the same situation as the long term residents, those who wish that the rents and prices didn't skyrocket so much. This leads to apt sharing and a migration of those that really can't afford to live there to move elsewhere, hopefully around the same location.

- This trend can continue for a while. By this time, even a downturn in the Economy won't stop the upward trend. It won't reverse gentrify.

- The Realtors start to call the neighborhood something else than what it was known... ie. Clinton Hill in Brooklyn was known as Bed-Stuy up until 15 years ago or so.

- There are a few other economic paths that this cycle can take, some modifications, etc. But this is generally what happens.

The problem with most Real Estate Investors is that they don't really have training in the kind of financial math that makes your think of this cycle.

The kind of financial math you need are future value calculations. Some of the the math calculations include Internal Rate of Return (IRR), Discounted Cash Flows (DCF), Future Value (FV) of the Appreciating property, Net Present Value (NPV),10 year projections, etc.

There's no need for this kind of math if the Investor will not get any kind of appreciation, such as LONG TERM rental increases and value appreciation.

If you have only been taught one kind of math, which is the Cash Flow NOW math (Cash on Cash Return, GRM, etc.), and you never do a 10 year pro-forma business plan which includes things like the above calculations, your mindset is not correlated towards the future possibilities of what might happen 10 year, 20 years or 30 years from now.

This is the type of math I do because no other Math makes sense for an Investor like me, an Investor that has been Investing in Brooklyn for 2 Decades.

If I did the normal financial math, like Cash on Cash Return..... I would not have bought in Clinton Hill, Bed-Stuy, Ditmas Park, Windsor Terrace, all in Brooklyn.

I would never have seen rents and appreciations which moved up 5 times the purchase price, 10 times the purchase price, etc.

I would not be purchasing MORE investments, this time at $2 Million for a multi-family.

If you really want to Invest in these higher appreciation areas, you should really put some thoughts into the Future Financial Maths, the Pro-Forma 10 year Projection Business Plans, the Economic activities in the areas, the cycle that I described above, and for international cities like NYC and SF, global fluctuations in Currency risks as foreign money moves from higher risky international areas (think Venezuela in today's current economic news) to less risky International cities.

Just some food for thought!

@Mike Dymski

While I'm mentioning Mike on this posting, it's really for everyone.

I will have to say that when it comes to sharing the numbers, it will be a very lengthy posting as I like to share the whole truth and nothing but the truth!

Many of my previous posts are very lengthy and share some of the complex and sophisticated calculations that go into the numbers.

Since this topic is "Ever get jealous? How do $1M homeowners own that?!" I would lead us down an entirely different thread.

However, to keep somewhat on this thread, I will give some motivation/inspiration to those who have not yet achieved owning a Million Dollar Home or Investment Property.

For this $1.9 Million Project, it involves two other Partners and myself.

The two partners are incredibly qualified. The first Partner, call him Mike, the second, Kevin. I'll just mention Mike because this post will be just too long if I mentioned Kevin.

Mike is my age, around 50, is one of my long term friends. We've know each other for 25 years or more. He's a Medical Doctor and earns around $300k plus per year, PART TIME! Funny as it may seem, his net worth is very low in comparison to what he has made as a Medical Doctor.

Mike was under the impression that working as a professional, be it a Doctor, a Lawyer, etc. was the way out of the rat race.

How wrong he was!

Mike thought that his high salary is all he needed. He even lived in Brooklyn for a long time before moving to Florida. His spending habits were crazy. He bought lots of dodads, took trips all the time, ate out very often at high priced restaurants, etc. just because he was constantly stressed out when he did work.

He was virtually living pay check to pay check.

15 years ago, I told him to change his ways, start putting away savings, and work a bit harder so he can make more than his $300k Part-Time, and invest with me.

However, his attitude as a 35 year old Doctor with a high income at that time, made him feel invincible. He felt that he needs to live life now, not when he gets older. His salary would eventually make up for his immediate gratifications.

15 years ago, around 2002, Brooklyn Properties were very reasonable when compared to his salary at that time, say $150k+.

Times have CHANGED!! Mike always came to visit me because he runs the NYC Marathon every year. Every year, he basically watched as my Investment Properties moved up in Appreciation.

He saw as my 2004 purchase of a Clinton Hill property moved up from a Purchase Price of $890k to almost $3 Million today!

He also experienced 5 other properties my Partners and I owned do exactly that in various years and various up and coming, gentrifying Brooklyn neighborhoods.

He finally started to understand, after all these years, what I had tried to tell him 15 years ago.

By 2015, he had an accident which almost paralyzed him for life. He woke up and realized that no, he is not invincible, AND, he hardly has anything for retirement at almost 50!

Not only that, but his $300k salary now won't qualify him to buy the same property I bought 13 years ago and he doesn't even have enough to even put down 10%!

These realizations caused Mike to finally make a decision to Invest. Mike became one of my Investing Partners then. We invested in 2 properties. I'll only mention one because this posting is getting very long.

In 2015, we bought a 3 Family Bed-Stuy Brownstone for $1.35 Million. Today, that Brownstone can sell for $1.65 Million CONSERVATIVELY. That's a $300k profit in 2 years. The ROI is fantastic, the cash flow really great, TODAY, but was not so great when we bought it.

He slowly warmed up to my Business Analysis Plans, which are quite detailed and involved a lot of Future Calculations and Projections. He doesn't really understand those calculations, as most Investors don't, but experiencing the evolution of the Bed-Stuy Brownstone over the last two years and gauging it with the spreadsheet proved to him that the spreadsheet calculations was REALLY OFF on a CONSERVATIVE basis.

In other words, we bought the Bed-Stuy Brownstone with assumptions that we would make far less than what we eventually wind up making. Mike realized that ALL of my projections are Conservative and that even in a crisis like what happened in 2007/8, we would have easily survived it.

We went into another 3 Family Investment in 2016 for $1.71 Million. It's too early for us to give an analysis, but it is in line with my other investments.

This year, Mike, Kevin and I are in Contract for yet another, which is a 3 Family in Prospect Heights for $1.9 Million, directly in the way of the WAVE of development heading down from the Barclay's Center and pointing towards the area where this specific property is in.

We are securing a Portfolio loan from a Bank that I had established a great relationship with and because both Kevin and Mike make such high incomes, we are getting a $1.2 Million 30 year fixed Mortgage at 4.25%, Residential Investment Loan. Additionally, the Bank secured a Line of Credit for $300k at closing.

The cash flow for this investment is very low. Probably under $2k per month.

Tomorrow's cash flow for this property will be great, as normally happens over time.

Anyway, to get back on topic.....

"How do $1 Million Homeowners own that?!" - in my case, just like I described above.

You can really build a great net worth over time if you get the right partners, the right vision, the right strategy, education and analysis.

Networking is a great skill to have. If you have not found partners that can mutually help you grow your net worth, then I would suggest you work very hard on that.

So many people on BP seem to go it alone. I think the chances of that happening is rare, but not impossible. For those that did make it alone, I'm sure it's a lot of hard work.

There is an old saying, building a great business is 1% Inspiration...... and 99% perspiration.

If you are inspired to Invest in Real Estate (or any business or Investment), just think of that great saying.

I'm sure if you do, you will eventually get that $1 Million Home.

In the Years 1997 to 2001, I worked as a Software Developer for around $100k, peaking around $200k per year with Bonus.

The stock market crashed in 2001, so bonuses was cut and I was making on average around $140k or so.

By 2004, I quit my job.

During that time, my Partners and I bought 3 Brooklyn, NY Investments:

1) 1997 - $340k 2 Family in Ditmas Park worth $1.7 Million today

2) 1999 - $140k 2 Family in Windsor Terrace now worth $1 Million conservatively today

3) 2004 - $890k 3 Family in Clinton Hill now worth $2.8 Million today

Note that today's values included going through the Great Recession of 2007/8.

We also bought more Investments and currently own 7 Investments and another in Contract.

Funny thing is now I'm going back to software development and started researching the jobs I can possible get. They are still around $120k to $150k for the position I last held.

Salaries in my field are still approximately the same. But the home values have all skyrocketed to current levels.

I cannot imagine what it would be like if I NEVER Invested and just horded the money. There is NO WAY I could have achieved the level of wealth without Investing.

I do want to contrast my results with another Investor's results, however. Let's call him Dave.

Dave bought a SFR in Germantown area of Philly around 2004 for around $100k. It was a dilapidated 6 Bedroom house in a War Zone area.

His Calculations told him that he would have something like a 20% Cash on Cash Return.

During the holding period of his Investment, it's been destroyed several times by his tenants, all section 8s that had large number of children because the house has 6 Bedrooms. Section 8 doesn't seem to want to give a 6 Bedroom House to a mother with under a certain number of children.

He wants out and had been trying to sell the SFR for what he paid. He can't. The offers are around 30% or so under what he paid and under the current mortgage balance.

Regrettably,  Dave turned down to be included in the Partnership with me on my 3rd Brooklyn Purchase of the $890k which appreciated to $2.8 Million because the Cash on Cash was breaking even on 20% down. Today, this property cashflows around $4k per month when it was zero in 2004.

I needed to Contrast my experience with Dave's because I don't want people to think that investing in Real Estate and making millions is a normal thing.

I know I'm lucky. But there's an old saying, "Luck is when Opportunity meets Preparedness."

My Analysis of the Brooklyn Market at that time told me there was an opportunity and I was prepared to get them.

So did Dave's. BUT, my Analysis of Dave's property told me at best, he may have made a small profit, which didn't turn out to be the case.

Today, after being successful in all the properties I've purchased in the last 2 decades, we buying another 3 Family for $1.9 Million.

We will hear the same responses again and again like we experienced for the last 2 decades..... "What are you crazy buying a property for $1.9 Million?" etc.

Then in 10 years from now when the property is worth $4 Million, everyone will call me Lucky for the 8th time in a row, especially if Salaries do not improve.

I've come to accept the fact that there will be a multitude of investors that will tell me my business plans are incorrect, despite all the analysis and results I can give them.

But getting back to the topic, there is no need to be jealous.... JUST INVEST CORRECTLY AND YOU WILL BE REWARDED!

I believe a great strategy for Tenant Screening, other than the usual Background/Credit/Income checks, is to get a letter of recommendation from the current Landlord AND, at the same time, PROVE that they have paid their rent for the last 12 months ON TIME and are CURRENT on their rent.

While no strategy is foolproof, this one prevents getting a letter of recommendation from a Landlord who just wants to get rid of a bad tenant.

Bad tenants probably 95% of the time are not current on their rents and certainly do not have 12 months of on time payments.

While I didn't implement this until recently, one of my tenants that is searching for a cheaper apartment was asked to give proof of on time monthly rent payments while I gave him a Letter or Recommendation.

In other words, the on time monthly rent payments corroborated the story given by the Letter or Recommendation.

While I haven't had a tenant issue for the last decade, I do believe this is a GREAT strategy to try and weed out bad tenants.

From now on, this has become my policy.

I also let some of my tenants who have a habit of paying late that their Rent History is very important and they should treat it more important than their Credit History.

If you can prove you have a great Rent Payment History, dings in your credit which may have come from something like a Divorce, etc. can be looked at in a better light, or so I believe.

All my tenants are on an online Payment System, Rentalutions.

They all have access to their Payment History and can produce a report. Submitting this is virtually painless for either my tenant leaving for an other apt or for me to give it to them as their proof.

Let me know if this makes sense at all.

@Jeff Greenberg <---- see further down.

I agree with the three posters above me.

I wanted to add to this conversation, however.

There are actually two ways to use Cap Rate, Both ways work as a Comparison to know if you are over paying or getting a deal. Here is how it can and should be used:

1) Analyzing if you are over paying for you Investment by Comparing ONLY Cap Rates.

In this example, let's take two properties, A and B. Both are very similar. The details of A and B are as follows:

Property A

-------------

Selling Price: $100k

NOI (Rents minus Expenses excluding Debt Service) = $8k.

Cap Rate = 8%

Property B

-------------

Selling Price: $234,124

NOI: 26k

Cap Rate: 11.1%

This tells you that Property B is a bit better than Property A because you will make approximately 3.1% more ROI annually, excluding Debt Service. I used a strange selling price so I can show that both A and B may have crazy numbers but you can boil them down to just the Cap Rates and compare them easily.

HOWEVER, we must then compare the neighborhoods.

Property A is in a GREAT Neighborhood. In fact, it is in an A Class Neighborhood where you are extremely likely to find good tenants all the time and will have very consistent and increasing cash flow through rising rents. In other words, the QUALITY of the Cash Flow is excellent.

Property B is in a terrible neighborhood where there is so much crime, you will need to bring your bullet proof vest when you visit your property! It's the War ZONE!

Now we need to look at the RISK of the Cash Flow.

Hypothetically, let put Property A in NYC in a very LOW Risk or HIGH Quality area say Brooklyn Heights. You are getting an 8% Cap Rate in this neighborhood. If we compared Brooklyn Heights, generally, the neighborhood is around a 3% Cap Rate. Let's call that the Neighborhood Cap or NCap for simplicity sake. If you are getting an 8% Cap Rate in a 3% NCap neighborhood, you are doing FANTASTIC! How Fantastic?

So, if you use Jeff's calculations of NOI / NCap to get the actual Fair Market Value (FMV) of the property you are targeting which is Property A, you get $8k / 3% = $267k versus the actual Selling Price of $100k! That's a GREAT Bargain because you are assured that you will get much more than that if there are no conditions that offset that difference!

Now, let's take a look at Property B in the War Zone in Brooklyn, say Brownsville area. Because of the risk of the Cash Flow, most properties in this area are really selling for around 15% NCap because at any time, you may lose the ability to get the cash flow either through eviction, high crime, lack of response from police or fire dept, etc. In other words, for you to take on greater risk, you MUST get greater compensation via a higher NOI translating to a higher Cap Rate.

Using NOI / NCap again, we get $26k / 15% = $173k! Woah! But it is selling at $234k! You are getting ripped off because of the Quality of the Cash flow!

Really, you need to take into account BOTH a comparison of your Cap Rate to the target properties AND the RISK of the neighborhood using the Neighborhood's Cap Rate. You need to get compensated for the Risk you take!

As an aside to buying properties in lower Cap Rate areas, there is a trade off of LACK of Cash Flow when compared to higher Cap Rate areas. BUT, it is generally the case that you are compensated in several ways when you buy at lower Cap Rates. Accepting a lower Cap Rate needs to also be compensated with higher Rents later on, increasing your Cash Flow and translating to higher Property Values as a result.

In other words, don't buy Low Cap Rate Properties without a good probability that you will be compensated with increases in stable future rents and increasing stable cash flows.

As an aside, I buy in Brooklyn, usually with around 5% Cap Rate properties. However, as the rents move up, if I were to recalculate the Cap Rate after locking in the Buy Price where I purchased the Property, over time, my personal Cap Rate will be GREAT. In most of my properties, my personal Cap Rates exceed 20% since I bought the property with today's rent roll.

If I were to sell today, I don't use my personal Cap Rate at purchase, I use the current Neighborhood Cap Rate and my current NOI which is much higher than the NOI at purchase. That translates to incredible appreciation. This is why the few of us who buy in places like NYC or SF are perfectly fine with low Cap Rate properties. We are paying a premium in order to have consistent cash flow increases over a long period of time.