All Forum Posts by: Ryan Rogers

That's what I was eluding too in my post. If you're not negatively cash flowing too hard, and the demand appreciation is solid enough for you and you're willing to wait to sell it so you can see those capital gains later on then you'll be fine.

Plus, if you do hold the property long enough for you to hold it free & clear, you suddenly turn a negative cash flowing property to a positive flow, and you have all the demand appreciation built up year over year from holding the property for however long you did.  

@Ryan Rogers, another great strategy comes to mind from a BP blog post I read. Buy 3 income properties, rent them out for a few years, do any work necessary, and then sell 2 to fully pay off the 3rd. Then, you would own the 3rd one free and clear and could pull in the type of monthly income that @Reed Sasamura is talking about.

Here's the post from Chad Carson (who's also on podcast #84): https://www.biggerpockets.com/blogs/4712/39107-the...

@Ryan Rogers, I personally think your plan is sound. I know several others in the Boston RE industry that do something similar. They have renters pay off all their monthly expenses and cash flow little to nothing, but once they own the property free and clear (rent increases aside) should be pulling in $10K+ each month. That's nice income to retire on, especially if you're in your 40s or 50s. And even if the property was cash flow negative, provided it's not "too negative", if the renter is paying off the interest on the mortgage, property taxes, and HOA fees (if applicable), you're paying into your own equity while using the bank's money to yield greater returns on appreciation. (3% appreciation on $50K in your bank account is much lower than 3% appreciation on a $500K property.)

To best maximize your long-term ROI I'd definitely stick with neighborhoods surrounding the universities or burgeoning neighborhoods like Eastie, JP or certain areas of Roxbury. Neighborhoods like South End, North End, Back Bay etc.. (in my opinion) are tapped-out at this point for an effective buy/hold strategy. Just make sure you keep your unit on the 9/1 or 6/1 rental cycles to maximize return.

I don't have experience, but I monitor this market a lot. t's extremely hard to find any piece a real estate near those campuses that actually works out financially.

 Sorry to be mean here...but this is one of the most absurd statements I've ever read.  On my own properties I get about 9 out of 10 offers I make. If you are only getting 1 out of 10 accepted or less....then you simply do not know how to operate in the market place and you are just wasting your own time writing fruitless offers and other peoples time too.

Yeah, Demand Appreciation can really be your secret to finding an ROI; however, you have to do your research as stated up above by the other posters in this thread.

You can look at the yearly statistics on appreciation in the boston areas and try to get as specific (neighborhood by neighborhood) that you can get with those stats. I'm not sure exactly where to look but that's what you'll want to look for.

When you get an appreciation percentage per year, you can easily apply that to the purchase price of the house that fits your buying criteria and get an estimated equity gain from demand appreciation.

You can also do some more in-depth research, house by house after solidfying your buying criteria for a house, then using the local MLS data to find previous sales on houses, calculate the difference in the sales prices and then "project" that appreciation number on your current deal / house that you're looking at. So even though you'll know you'll have negative x cash flow per year, you know that you should generally have about X amount of dollars next year or two years from now, b/c of demand appreciation.

That's a quick and dirty (n00b) look at demand appreciation and using it to help you decide if you should get into a negative cash flowing situation. I can send you some scans of sections that talk about demand appreciation on this book I'm reading about residential multi-family units. It has some good information on really picks apart the difference between demand appreciation and forced appreciation.

Forced appreciation, you can't calculate how I just suggested up above. You'll have to dig deeper to find out if the current owner did any renovating of the property before they listed it for sale, and how much they are asking for in relation to those renovations. The renovations cause the forced appreciation. So if I buy a house in your area for 500k, do about 25k worth of work to it and I'm now listing it for 600k, I'm estimating that my renovations added an additional 75k in equity for me (100k-25k spent on the renovations=75k equity gain). For home sellers in your area that aren't investors, and just lived in the house like "normal" people do, than there isn't any forced appreciation involved, the appreciation and the "current market value" needle would be pushed up only by demand appreciation alone.

Nevertheless, if this is your first deal, do you really want to bank on appreciation to get your ROI? You'll have to wait for at least a year to be able to cash in on those capital gains, while being able to cover the difference on your negative monthly cash flow (if you are cash flowing negatively). A lot to think about here... but I hope you all the best. Would love to know what you come up with. Keep in touch. Message me if you want me to scan those parts of the book I'm reading and send it to you. I can do that for you easy, no problem.

@Ryan Rogers I would be careful about buying in the downtown market in the hopes of continued appreciation. You said it your self that buying at negative cash flow in the hopes of appreciation is a speculative move. That is they type of thinking that got a lot of investors in trouble in 2008. I would look at some rent to income ratios in certain areas around downtown. People have to be able to afford to live near by and work in lower service sector jobs to tend to all of those people living in these high priced properties. In every city you will see emerging pockets that are worth investing in. I recommend Dave Lindahl's book Emerging Real Estate markets to get an idea on what you should be looking for. One of the things he talks about that real sits with me in the path of development and investing on the fringe of that path and letting it wash over you, to get that rapid appreciation. Look at where development is in boston and see what might be adjacent to it that would be a promising area. Boston.com, Bostonherald.com, and boston.curbed.com are good sources in their real estate sections to see where development is happening.