All Forum Posts by: Matthew McNeil

Do I need to own a business or something to start investing? Or can I just take out a loan in my name and just own units independently?

An ideal investment will have both (and there are markets where these unicorns roam free like here in CO). But if I had to choose one over the other I'd go with a quality property in a market with good fundamentals (jobs and population growth) even if cash flow on purchase was negligible over a building with high cash flow in a flat market.  

When I first started investing I was focused primarily on cash flow (my goal has been $500/door). Within a few years of tracking numbers I realize now that, go figure, the properties I forecasted lower cash flow from actually performed much better overall compared to the ones with higher pro forma cash flow estimates. 

Actually the one property I picked up that was basically breaking even in the beginning (significantly negative the first year due to repairs actually) has produced the best overall returns. It's a nice property in a great location where rents have increased significantly with little effort. As a result cash flow has improved quickly and is now $500/door, meanwhile vacancy rate is 0, headache factor is very low, and by far most importantly appreciation on this property has been the equivalent of $500 PER DAY. 

So armed with this knowledge having seen firsthand how cash flow is basically insignificant compared to appreciation in terms of making real money, I have learned to focus on overall QUALITY. I'd much rather have negative cash flow and seven figure appreciation than $200, 500, $1k per door each month with flat appreciation... who cares about that pocket change, it would take many lifetimes to accrue enough cash flow at that rate to equal what a high appreciation property can achieve in a decade. 

I also don't believe cash flow is always more dependable than appreciation. A good investor with sound market knowledge can make an educated guess on which areas will see appreciation, it's not a blind gamble or speculation any more than investing only for cash flow is. Rents go up and down along with property values so cash flow isn't isolated from a down economy. Properties with high cash flow/high cap rates are actually higher risk overall. 

I would also wager that most new investors are overly optimistic or just plain inaccurate in general at estimating cash flow anyway, and overlook a host of expenses associated with high cap rate properties. Cheap is expensive as they say. I know I've had my share of surprises that have eaten into cash flow from properties that looked real great on paper. 

So I'd recommend buying the highest overall quality property you can find, don't just chase cash flow which might not materialize anyway. 

As others have said there are several ways to make money in real estate and each one is important: 

1. Appreciation (buy low, sell high same basic principle as any investment with forced appreciation being probably the number one way to make big chunks of money)

2. Cash Flow (doesn't have to be immediate, can be achieved over time by making improvements that allow you to raise rent or by buying in a market with naturally increasing rents and of course by managing the asset well)

3. Debt reduction (higher rent= more significant equity in shorter timeframe)

4. Depreciation Tax Benefits

Look for each of these and focus on overall return not just cash flow or appreciation and you'll be investing wisely. 

@Matthew McNeil Check out the article below. Boise has officially approved changes to the code for ADUs. An ADU can now be 700 sf total and be up to 2 bedrooms (prior limit was 600 sf and 1 bedroom). The prior standard required parking - now additional parking is only required if you go to 2 bedrooms.

The downside is that they left the requirement in that the owner must reside on-site (in the main house), so it limits usability as a pure investment/flip approach.

As @Teri Feeney Styers says, it may be better to try and convert to a true duplex.  The code in Boise allows for a duplex on any lot zoned for single family (there is no need for a rezone, etc.).  The challenge is often more physical - how to split the house; do you add-on or just carve-up, and of course, is there sufficient space for all of this.

https://www.idahopress.com/news/local/boise-city-council-reduces-regulations-on-mother-in-law-suites/article_af524d2d-8bd7-5479-818b-c2ea3c67dc7f.html

View report

*This link comes directly from our calculators, based on information input by the member who posted.

@Samuel Viscio Most folks in Idaho are very military supportive and I think Boise is the perfect storm for residential price appreciation and investment. And thank you for your service!

Thank you for this.   My only concern is the type of people coming into Idaho.  I'm sorry to bring in politics, but I understand a lot of people from California are moving into Idaho.  I'm under the impression they've gutted California with unsustainable taxes, hence why everyone is moving out.  Do you see the same thing happening to Idaho?

You are right about Boise being more expensive these days.  We are still "affordable" but prices and rents are both going up.  It all depends on your strategy - there is a lot of potential growth here but you'll be challenged to find some of the high income potential in lower cost areas.  

It has been discussed over and over on this site but it is really a trade off on income and capital appreciation.  Right now the Boise area is poised to be the next big growth city in the west, so appreciation is what many are targeting.

I'd also second the mention of Nampa (and add Caldwell).  Canyon County was the other side of the tracks in the last up-market but with prices going up, freeways being widened and companies moving westward, the rent to price ratio in these areas is far better.