All Forum Posts by: Llewelyn A.

I am really busy these days with a few other businesses besides my highly appreciating Brooklyn, NY properties. I have been a buy and hold Investor here for 2 decades and hold 8 multi-family properties in at least class B or better neighborhoods.

I thought I would take the time to make a comment on so called Cash Flow properties.

If an Investor paid all cash for a Investment Property, therefore not incurring Debt Service, which then leads to a positive Cash Flow, does this really mean the property is Good based on the fact that it cash flows?

If the same property was bought by another Investor with NO MONEY DOWN, fully mortgaged at 100% LTV, therefore incurring a HUGE debt service, which then leads to a Negative Cash Flow scenario, does this mean that the property is all of a sudden a BAD investment based on the fact that it is a Negative Cash Flowing Property?

What is this property? Good or Bad? Obviously, you can't use whether or not the Investor makes it cash flow or not as the answer.

I don't believe Properties cash flows. It's the INVESTOR that actually cash flows a property.

In fact, a lot depends on the Investor's qualifications for their Mortgage. Someone putting down the exact same 20% Down Payment may Cash flow the Investment while another will not because of their low income and Credit Scores, causing the Interest Rates to Jump.

Personally, I believe the emphasis on the Investment is misplaced. Mathematically, a property should be analyzed without regards to it's debt service first. We use Cap Rate for that. Then we compare Cap Rates to determine what's the best Investment at that time.

Then a second analysis needs to take place which calculates the future 10 year pro-forma IRR. Here is where we add in all Cash Flows, negative or positive, doesn't matter. Just make sure you don't forget ANY of the future cash flows.

Anyway, I am trying not to be too involved as my time is limited.

However, I find that I cannot help but comment on a few topics.

@Laura Moreno

"how can you predict the Selling Price?"

Here is a Quote from one of my earlier posts:

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I know Investors tend to think of only in terms of Today and find it very unpredictable to think of tomorrow, but please remember that even Squirrels think about tomorrow as they put away their Nuts for the Winter. If they didn't do that, they would starve when winter arrives.

The Future is VERY important.

Another analogy I like to use is to Drive your Investments like an Investment Vehicle.

When you look at past Data such as previous Sales, you are looking at the Rear View Mirror of your Investment Vehicle.

When you look at current data, such as the current Rents and Expenses to calculate your Current cashflows or your Cash on Cash Return, you are looking at the side view... watching the action go by as it is occurring.

When you look through the Windshield of your Investment Vehicle, you are looking at the road ahead.... seeing the path that it is taking you... and all the obstacles in the way.

You are less likely to CRASH your investment vehicle by focusing on looking through your Windshield than remaining fixated on the Rear View Mirror or the Side Windows.

If the bridge is out and you fail to see the bright red warning signs..... if your eyes are not looking straight through that windshield........ you will Drive your Investment Vehicle into the abyss down below.

So please..... Drive your Investment Vehicle like you drive your Car..... by MOSTLY focusing on looking through the windshield and occasionally checking your side views and rear view mirrors.

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I'd like to give a very fundamental understanding on Price Prediction.

There will be several factors which will contribute towards Future Price Appreciation. Examples:

- New Subway Line such as the new East Side Access East Side Access

- Large Developments like the new World Trade Centers and the Barclay Center

- Past Data (which should not necessarily be a prediction of the future, however)

- Jobs and Wages moving up

- etc.

Nationally, there is a natural Appreciation Rate for Housing. It's around 4% to 5%. However, that's a National Number. Places like SF and NYC are quite different. However, remember that some neighborhoods will have it's different dynamics of Appreciation.

In most of my Investment Neighborhoods, I've achieved around 9% to 13% Appreciation Rates.

When you are using 80% Loan to Value Mortgages, the ROI is accelerated on these Appreciation Rates.

Think of it this way, in 1999, I purchased a building for $140k. Today, it is worth around $1 Million.

If we work backward, we will be able to calculate the Appreciation Rate using the following Excel Table:

In Cell B1, we calculated the Appreciation Rate for this property at 11.54% and the Chart Below it merely demonstrates that using this Apprec. Rate, it achieves a Value of $1 Million in 2017 from a price of $140k in 1999.

HOWEVER, this is just the Appreciation Rate. This is not the Return on Investment (ROI).

You cannot use the $140k as the Investment. The Investment is calculated in the D to E columns, Rows 1 to 8.

Because I used a Mortgage of $119k and only Invested $28k including Closing Costs, I am able to generate extremely high ROIs.

If this property was kept by me (It's not, this is Marshall's property now and I'm just using it as a demo for this example), and I sold it today, the Sales Proceeds would be $837k as calculated in the G to H Columns.

I Summarized a "Simple Interest Calc" plus a Rate of Return Calc.

Yes, this property returned a 2889% total ROI, an equivalent of a 161% ROI/YR over 18 Years and the Equivalent of a 21% Rate of Return (RoR).

There are some things that weren't added to the Calculations such as Renovations (around $50k) and Positive Cash Flows (but it was Negative Cash Flow the 1st 3 years), rent Increases, Expense Increases, etc.

We would need a much more comprehensive Spreadsheet to do all the calculations appropriately.

Needless to say, this is a very BASIC analysis of a REAL purchase that I made. The only difference is that I sold this to one of my Students in 2013, and reinvested the Proceeds to a much more lucrative Bed-Stuy property. My ROI would actually be higher than calculated above if I take everything into account.

To a lot of Bigger Pocket Members, this kind of Calculations is very foreign to them. In fact, these kinds of Calculations is Foreign even to the people who have read a lot of books and taken Guru classes.

There are real reasons why sophisticated Math is not a part of Best Selling Investment Books. The Majority of Investors don't have the Math literacy to really understand these kinds of Financial Calculations. Therefore, the books which really brings sophisticated calculations to the reader, like this book: What Every Real Estate Investor Needs to Know About Cash Flow

will NEVER be on a best seller's list.

To come full circle, the above is a hindsight analysis. It's done to show the Reader how these calculations work.

We would need to make some conservative assumptions based on the Economics of the Property that is targeted and then work it forward into the future. I've merely changed a few numbers around and converted the Spreadsheet to a 17 year pro-Forma Business Plan:

We made the assumption of a $1 Million Purchase, Investment of $200k, Appreciation Rate of 5% (very low for this Property, however), and kept all the formulas the same.

We can see it's a profit of $1.497 Million but it's only a 749% Total Return in 18 years for a simple Rate of 42% Annualized and a RoR of 13%. This is still a pretty good Investment and we were Conservative on the Appreciation Rate!

Again, we did not put in Renovations nor Cash Flow.

I want to reiterate that this is by far not a sophisticated pro-forma calculation. It's just used here in a Posting as an Example. However, I suspect from my previous teachings that the 90% of Mom and Pop Investors have never been exposed nor have they absorbed these kinds of calculations.

I hope those Readers of this post who do not use Future Calculations can see the benefits of it and steer the Investment Vehicle safely.

@Laura Moreno

@Justin S.

@Adam K.

LAURA: Someone recently told me the next investable area in Brooklyn is Brownsville. What are your thoughts?

I fully believe that NYC, including Brooklyn basically consists of Micro-Neighborhoods. Even within those Micro-Neighborhoods, there will be pockets of Blocks that will vary with how well they do, from extremely poor to extremely well.

As an Example, if you take Bed-Stuy, some of those pockets that did extremely well are Stuy Heights and the border closer to Clinton Hill.

While virtually all of Bed-Stuy is doing great, some areas will not appreciate as fast. Those will be the areas that are closer to the large housing projects where Crime is higher than the other areas.

There are a few neighborhoods that did even better than Bed-Stuy. Williamsburg was just a fantastic Investment since 2000. The appreciation you would have gotten there would far outstrip the other neighborhoods in NYC for the past 17 years. It's a transformation.

On the pessimistic side of appreciation, I had a friend, Marshall, that invested in a coop in the Bronx in a neighborhood called Westchester Square near East Parkchester.

In Feb 2007, Marshall purchased the coop for $70k. He thought because it was cheap in those days  it was a phenomenal deal.

In order to judge whether or not Marshall's coop did well, we need a Comparison. In May 2007, I purchased a 4 Family building for $1.2 Million and renovated it for another $450k, total is $1.65 Million.

Let's fast forward to today.

TODAY, Marshall's coop cannot sell for even his purchase price. He might have to take a loss as it's probably worth only about $60k.

On the other hand, my $1.65 Million ARV is worth approximately $2.8 Million CONSERVATIVELY. A Gain of $1.15 Million over the same approximate time.

Luckily for Marshall, he met me in one of my Investment Speeches at Queens College back in 2010.

I helped him change his investment philosophy about Investing in General.

A low Price doesn't mean it's a Great Investment. What matters is BOTH the Buy Price and the Sell Price and all the cash flow in-between. We normally call that the Total Return or more technically, the Internal Rate of Return (IRR).

The Reality is that you cannot know if an Investment is Great until you have the following 3 things: 1) The Purchase Price, 2) the Future Cash Flows and 3) The Selling Price.

I also like to say that the best investments are the most predictable ones. In other words, If you CAN PREDICT IT, you can PROFIT from it.

If you cannot Predict the Future Cash Flows and the Selling Price, the ROI is just a blind guess.

I would also like to give a second example, one which will redeem Marshall as he finally understood the power of a full Financial Education, learning about Future Value and the Internal Rate of Return.

In 2013, Marshall purchased one of my buildings in an area called Windsor Terrace, Brooklyn. It was a small 2 Family by Prospect Park. I took the proceeds and purchased a Bed-Stuy property right after for $900k but needed $375k for renovations.

For a lot of reasons, Marshall understood why Windsor Terrace was going to do well. In Particular, people just couldn't afford Park Slope (a very pricey adjacent neighborhood). They spilled over to Windsor Terrace.

Today, Marshall's Windsor Terrace Property is worth over $1 Million.

The same property I purchased in Bed-Stuy is now worth $2 Million at least.

There really is a lesson to be learned here.

I don't know enough about Brownsville to tell you where in Brownsville to buy or if you should buy anywhere there at all.

However, there is a trade off. We call it the cost of opportunity. If you buy where there is less future value, then over time your cost of opportunity goes up.

That's the lesson that Marshall had learned in his 2007 Coop Purchase and had corrected with his 2013 Windsor Terrace Purchase.

You will have to do enough research to know if you are going to suffer too high a cost of opportunity in the next 10 years.

BTW, I also have a cost of opportunity since I didn't invest in Williamsburg. BUT, my cost of opportunity is acceptable. Had I invested in Zero or Negative appreciating neighborhoods, I can't imagine what my life would be today. I'm so happy I fully understood Future Value and cost of opportunity to make sure I invested correctly.

You can probably save a lot of time in your research by looking for Franchises or other things that will already do the Future Demographics for you.

Look for Franchises like medium to upscale coffee shops, for instance. Before a Starbucks, there will probably be a lot of Entrepreneurial Coffee shops, then small franchises will open up like Connecticut Muffins, etc.

There are a lot of hints which you can get, including major projects which you can find on the City Websites or just by scanning the Internet.

There are a lot of people on BP that will tell you that you should not depend on Appreciation. Those people should understand that by excluding a conservative calculation of Appreciation, they may very well have a high cost of opportunity.

@Justin S.

@Alexander Monnin

Thanks for mentioning me Justin and Alex.

Justin, you have fulfilled my first requirement in Investing.

If you plan on living for a long time in a very high quality City in a location which is desirable and will continue to be desirable, you MUST buy your primary residence there or you may become priced out eventually.

That has happened to a LOT of my friends and relatives.

Now you can live in Brooklyn without the fear of having to move because you cannot any longer afford the rent.

The next step in your strategy depends on what you need.

If you were like me when I started out, house hacking in Brooklyn 20 years ago, but with a very good Salary, there was no point in making anymore cash flow than my professional job.

The great thing about Appreciation plays is that you don't pay Taxes on the Capital Gains until you Sell.

Even then you can do a 1031 Exchange.

If you can keep the properties until you die, then you never pay taxes (but your Estate might).

There is even a really great Tax Loophole which will allow your children to inherit your Property Tax Free and then step up the basis! I'm sure CPAs on BP can comment on that if they would like.

Anyway, there was no point on me pursuing extra cash flow which would be Taxed immediately. It was better that I not get taxed and reinvest any extra money into more Real Estate.

The funny part is that because NYC Rents moved up tremendously in the last 20 years, for instance, a 550 sqft apt I rented in the year 2000 was $500 per month. That same apt is now $1,850 per month, my cash flow has moved up incredibly well too.

I shouldn't say it's funny because when that same property moved up from $140k in the year 2000 to $1 Million today, it does so because of the increase in Rentals as a major factor.

I'm sure this was the same for you in your Bed-Stuy property you bought 3 years ago. I have bought two properties in Bed-Stuy in 2014 and 2015. Both have done incredibly well and the cash flow is crazy.

I'm not going to beat a dead horse.

So, the next step depends on whether or not you need the cash flow today and don't want to wait until the Rents appreciate.

If you don't want to wait, then seek out cash flow now properties.

If you were like me, then continue to buy in these high appreciating areas and wait for the Cash Flow.

Another benefit that is generally overlooked is the Mortgage Balance reduction when it is entirely paid by the tenants.

If you financed the building with a $1 Million fixed rate Mortgage and the tenants paid it down in 30 years to zero, you effectively made $1 Million in 30 years. That works out to be $33,333 per year. Buy 10 of these buildings and you will make $333,333 per year.

Again, the funny thing is that these properties can break even in cash flow and never appreciate and you can still make a lot of money on just Mortgage reduction.

I think these kinds of strategies are generally overlooked because there are a vast amount more Investors that need cash flow NOW than there are Investors like me that could wait.

Another reason why I think that expanding your Career to get more seed money is a great and very safe Strategy.

I know there is a lot of others that believe investors should get out of their day jobs to be full time RE Investors. I don't believe that at all. It's too risky until you finally have stability and consistent cash flow or become independently wealthy in your Investments.

Why throw away what you have learned instead of being the best at what you do for work? Then in the meantime, grow your Investments so that you can have the choice to switch Careers once your Investments can support your lifestyle.

When I got started, it only took me 6 years to be financially free. From what you have mentioned above, it looks like you will follow in the same footsteps!

I remember the awful feeling when I was living in an apt with a really bad Landlord. She basically kicked my roommate and I out because we asked for some heat in the winter. She didn't like any complaints and just asked us to leave.

I decided that not only is RE a great Investment, but I would be fair, honest and give my residents the best Landlord they have or will every have.

An example of that is one of my tenants almost got abducted coming home from the subway. She fought back and was beat up very badly.

She wound up at the hospital for a while.

I immediately set up a collection for her and asked my other Business Partners to contribute.

I then got one of my very experienced Medical Doctor friends to come visit her when she returned home to make sure she had good treatment.

Lastly, I decided to offer her a renewal with zero rental increase which is not very typical in NYC.

I believe in being the best at you you are doing and it will reward you in other ways.

Doing a great job as a Landlord is not necessarily about the money. There are things that are priceless and helping the unfortunate when you can is one of them.

I know I'm in control of the living situation of my tenants. I do NOT take that responsibility lightly. Money will always be secondary to the safety and comfort of my tenants.

My WHY is that I can positively impact a lot of lives. I have around 50 tenants and I know each of them personally.

I treat them especially well for they are both a Customer and a human being.

Of course I know not everyone is a good tenant and I have had bad ones. However, I would err in being kind and this has not impacted my wealth growth.

I use Rentalusions: Rentalutions

I have been incredibly happy with it once you understand the system.

They charge a monthly fee, depending on the amount of your Apts. In my case I'm paying around $58 per month for 19 Apts. Each Apt has roommates and some of them 4 Roommates. The total Roommates are 36. So for $58 / 36 Roommates, that boils down to $1.61 per payments.

The Interface is basic but good.

I would really urge Landlords to use some form of electronic payments.

My preference is to use a program like Rentalutions in order to put the onus on the Tenant to pay their rent. It really takes a way the excuses, including:

- Check is in the mail

- I forgot to authorize my ACH7

- I was on vacation

This gives both your and your tenant their rental history. Even if a tenant has bad Credit, having their rental history is much more important as you can prove you pay your rent on time no matter what.

In NYC, I am VERY strict when it comes to due diligence because of the strong Tenant biased laws.

In many cases, prospective tenants that fall below 700 will be asked to send me their rental history. If they cannot show me either in canceled checks, bank statements , or electronically like from a program like Rentalutions, I will just move on.

As a result, I haven't had to do any evictions in the past 15 years of my 20 year history as a Landlord.

Getting back on track, I certainly would recommend using Rentalutions. It's work very well for me.

@Alexander Monnin

Hi Alexander! Glad you are really thinking about this!

I find the best way to understand economics so you can gauge how things are going is to look through Economic Calendars.

Here is a great one: Bloomberg Economic Calendar

You will see that it gives you a lot of good information and an explanation. Afterward, you can further enhance your knowledge by using Investopedia or other resources on the Web.

Here is a snap shot on the Personal Income:

It's most likely 95% of most people here will not pay attention to this kind of information.

That's fine when everything is going up.

But when it's turning around, this is exactly why I study all of the indicators. I need to know when the Economics will fall and protect myself from it.

I would say you won't be able to learn what you need in just a short time. It takes time to understand the Business Cycle and how Economics affect it.

Also, there are layers in between things. For instance, there are two different kinds of rates to pay attention to. There is short term rates which is generally dictated by Bank to Bank Lending and then there is long term rates which are done at Auctions. Both are really needed so that you can gauge what is happening to short term rates like Variable Rates on HELOCs, Credit Cards, etc. and Long term rates such as 15 and 30 year fixed rate mortgages.

When you are tying everything together, you'll be a much more sophisticated Investor.

@Mike Dymski

Hi Mike,

I didn't want to go off-topic but I'll answer your question in regards to forced appreciation or market appreciation.

1) Forced Appreciation

Generally, I don't actually take this into account in my calculations because while it is a real value increase, I'm going to instead gauge how it affects the rent roll. The higher the rent roll, the more I can determine the value of the Investment. The Cap Rate Calculation helps me with this. As I'm sure you know, so this is more for the readers of this post, Cap Rate = NOI / Purchase Price. Generally, I know the Cap Rate in the specific place I invest, including the neighborhood and even the block. The more dense the population, and Brooklyn is VERY dense, even the block may have a specific Cap Rate.

Once I understand that Cap Rate, say, 5%, I then can apply the NOI after adjusting for the renovations that I have done.

I take the Formula, Cap Rate = NOI / Purchase Price (PP) and plug in the numbers. Let's say the pre-renovation NOI was $100k. After Renovation, it's $120k. Now I plug in that info to the formula and it looks like this: 5% = $120k / PP. I solve for PP = $120k / 5% = $2.4 Million.

(As a side note, a lot of Investors can't really solve these simple equations because they have been out of school for so long. In my former classes, you MUST re-learn these equations and take a test.)

That then gives me what the Fair Market Value (FMV) would be, in this case, $2.4 Million, what you would call the Forced Appreciation Price. Then that leads me into the next topic, Appreciation Rate.

2) Appreciation Rate

Once I calculate the Forced Appreciation Price, in this case, $2.4 Million, I apply an Appreciation Rate that is conservative for the neighborhood, block and any future developments that are happening. For instance, there might be a new Train Station or Public Park being built. Even a well know store can have an impact (such as Whole Foods). I generally look for at least 3 future projects that are starting up just in case any or should take longer than expected or just not get off the ground.

Depending on what is happening, I can use a conservative, normal or optimistic appreciation rate. Let's say there are 2 major projects (in my case, Barclay's Stadium and the new World Financial Centers are very close by), then I would use 3 projected appreciation rates to arrive at a future price.

Let's say, conservative is 5%, normal is 7%, and optimistic is 9% over a 10 year basis.

Now I take my FMV determined by the calculation in 1) and carry that forwards for each 10 year projections:

So the 10 year pro forma tells me my $2.4 Million Investment will be worth either a Conservative $3.9 Million, a Normal $4.7 Million or an Optimistic $5.7 Million.

I will tell you that even my most optimistic assumptions have been way too low.

I generally use the conservative projection in my Internal Rate Calculations.

Anyway, this is actually a real example as I am planning on being in contract with a $2 Million property soon.

I think for many of the Investors here, this is new math for them. They have never seen it. I wish it was not the case, but I'm afraid so. We haven't even touched on stuff like DCF and IRR and NPV.

Really, all investments should be boiled down to either an IRR or a NPV and then you should understand when to pull the trigger.

BTW, for the readers of this post, I just want to point out that a 5% Cap Rate property, in my case, really gives me a lot of profit. Many of you will turn down this kind of property. I don't.

@Alexander Monnin

Alex:

There are a lot of my former students that entered into Real Estate because of the Rich Dad series.

I think they are the best "Motivational" books out there and so I give it a lot of Credit for that.

Probably without this book, there wouldn't be so many people that became RE Investors.

However, this is a two edged sword.

Prior to the Financial Crisis of 2007/8, there was a huge army of RE Investors that came into because of these kinds of books.

Right after the crisis, there were a lot of them that lost a LOT of money.

I've been investing for 2 decades. When I started teaching, it was during the Financial Crisis to try to convince people to stay away before the house of cards fell. I couldn't convince them despite the obvious situation that if you breathed, you got a mortgage.

The funny thing about RE Motivational books is that they are really GREAT when times are going well.... but they are the worst to be convinced when the Economy is looking over the edge of a cliff, just before it is about to crash and burn.

That's where the Real Education comes in.

If you only do calculations that are geared towards the present, such as Cash on Cash Return (CoCR), Gross Rent Multiplier (GRM) or even Cap Rates but you don't do any Future Calculations such as Internal Rates of Return for a pro forma 10 year projection, you will not think about what is going to happen in the next 10 years. You are at the mercy of the Economy.

The reality is that if you were to Invest in the best times, say the year 2000, you didn't even need to have any education. NOTHING and you would have made a lot of money by 2007.

The only problem here is that by 2007, you needed the real education, one that looks toward predicting the future Economics, which would have led you to project your profits, in order for you to save yourself.

There are only a few books that have these kinds of Calculations. On happens to be this one: 

What Every Real Estate Investor Needs to Know about Cashflow

However, it will be a vastly different book than what you would have read with Rich Dad series.

To be honest, while there is a lot of interesting things in Rich Dad series of books, I wouldn't teach a course on solely the contents of it and call it a Real Estate course.

If I were to draw an Analogy in Engineering, I would say that it's giving you enough information to draw you to become an Engineer without giving you all the knowledge that you need to perform well as an Engineer. Does that make sense?

I think most people will have a problem with the Book I linked above. That's because the book is more like a Text Book and by Chapter 4, you will be doing calculations on Internal Rates of Return (IRR).

The Average RE Investor may in fact not have the Math Knowledge to understand the concepts fully. But the Book does as best of a job trying to explain it to a layman as much as any I have seen without a one on one mentor from someone like me.

Another issue I have is that there is not enough Economic Fundamentals that are discussed and Analyzed for you to be able to predict the future. For instance, what happens when prices rise and how do you know they are in general? That's called CPI. CPI has both Core and headline CPI. How does this affect Mortgages and Home Prices? These are very relevant issues to discuss.

But since the vast majority of people don't really do future calculations, they would never ask those questions.

There is also another Calculation that is not in these series of books. The Mortgage Amortization Calculation.

It's really relevant.

Consider that, as in my case, the Mortgages will be in the Millions.

If you were to get a 30 year fixed rate $1 Million Mortgage and your Investment Property breaks even on Cash flow, meaning that the rents pay all the expenses as well as the Mortgage Payment, then your $1 Million Mortgage disappears in 30 years.

If we do a simple calculation, take $1 Million divide it by 30 years, you get $33,333 per YEAR and $2,777 per month.

If you don't see the value in this calculation, I think this has been a very missed opportunity merely because it's not emphasized in any of these books. Part of that may be due to the general Audience of the Rich Dad books being Mathaphobic.

One of the first few months you would learn from any one of my classes when I taught it is to understand basic financial calculations. However, if books were to do that, they would never wind up on the best seller's list.

I personally believe that the better way to judge the education of a series of books is by the success that had been attained solely through the education of that book.

I've taught Real Estate between 2007 to 2015 in order to teach beginning Investors how to really understand the Financials in a much more sophisticated way and apply it to ANY investment, not just Real Estate.

You would learn things like Discounted Cash Flows (DCF), Internal Rates of Return (IRR), Mortgage Analysis and Amortization, etc.

Unfortunately, many of the students who read Books like these wound up investing in higher Cash Flow / Lower Appreciation Areas while they lived in the very high Appreciation Cities and neighborhoods.

The results are that a lot of the Students completely missed the boat in areas that skyrocketed.

For example, while I and several of my personal students bought a 3 Unit Brownstone in Bed-Stuy for $900k, put in $300k or renovations, the building today is worth $2.2 Million.

We purchased with an 80% LTV Mortgage of $720k so our down payment was $180k. The total Investment is $555k which included the $180k down, $300k renovations and $75k closing costs.

The current Equity in the building is now ($2.2 Million minus the Mortgage of $700k current Balance) = $1.55 Million.

In other words, we turned $555k invested into $1.55 Million in 3 Years.

To increase our returns from that, we also took out a 2nd Lien for other purchases.

Additionally, we are receiving around $3k per month in positive cash flow.

For most readers of these kinds of books, they would not have bought an Investment like this for multiple reasons.

The first is that it won't cash flow on day one.

The second is that they don't want to partner, they only want to do it themselves. The returns for the Investment is equal for all Partners but this kind of math seems to be non-existent in their minds. It's really a compelling reason to Partner if you can get returns like the above. 

The third is that they don't understand how to calculate future values including Appreciation.

The fourth is that they don't understand how a fixed rate mortgage balance contributes towards your net worth.

Now, you can say that this was a lucky buy.

I would say that I own 8 multi-family properties, bought in the same way with very similar returns.

There is a famous Coach that once said that Luck is a factor of two things, 1) Preparation and 2) Recognizing the Opportunities.

Most of the readers of these kinds of books seem not to recognize this kind of opportunity.

I don't blame the books. I'm just making an observation.