All Forum Posts by: Sean Gallagher

Quote from @Michael Smythe:

@Sean Gallagher you should try to get the tenant to sign your lease anyways, which you should be more familiar with!

 Maybe there was a misunderstanding, I'm taking over a property with an existing tenant / existing lease.  I can't just get rid of the lease and have them sign mine.  

@Sean Gallagher you should try to get the tenant to sign your lease anyways, which you should be more familiar with!

It's impossible to answer this question with the information you provided...

Quote from @Sean Gallagher:

Quote from @Bob S.:

Quote from @Hassan Asif:

Quote from @Saad D.:

Hi All,

I was wondering are you still using the 1% rule when doing quick and dirty new deal analysis? Is anyone out there still able to achieve the 1% rule and in which markets?

Recently I noticed I get to 0.7 or 0.8% at best (i.e. 100k purchase price, $700-800 rent per month). 

Excited to learn from you all!

The 1% rule is still a useful benchmark for quickly evaluating deals, but in today's market, it's becoming harder to achieve, especially in competitive or appreciating areas. That said, you should adapt your strategy based on the market conditions.

In lower-cost markets or areas with less competition, you might still be able to hit 1%. However, with rising property prices and rents not keeping pace, it’s becoming more common to see 0.7% to 0.8%. In those situations, focus on value-add opportunities—like rehab, repositioning, or optimizing expenses—that can increase the return on your investment.

Keep in mind, the 1% rule is just a quick filter. Always dig deeper into the numbers (cash flow, CapEx, etc.) before making any decisions.

 2% is my norm :) 

Are these section 8?  Pretty tough to get a B home in a nice neighborhood to meet the 2% rule.  Most likely going to be a C / section 8?

 I never bought into the BS ABCD area thing . Makes zero sense . A areas is where you n I would live , can't make money there . So eveything starts with a B . The are not terrible war zone areas . All in full Reno 76kish, value 125-135k 1700 rent . Great deal . 

Quote from @Sean Gallagher:

Quote from @Stetson Oates:

Quote from @Sean Gallagher:

Quote from @Nick C.:

There is no correct answer.  Everyone’s risk tolerance is different. I know investors who leverage 100%, and ones that purchase all cash, and plenty in between. 
COC return is a horrible metric. Here's an extreme example to illustrate - if you 100% leverage a purchase for $300k and it's worth $100k and you're cash flowing $5/mo, your COC return is infinite. Sounds good. But the deal is still horrible.

I guess the trouble I'm having is... if I want to maximize cash flow.. analyzing the deal to make a cash offer.  I'll keep digging   

It's great to buy all cash and maximize the cash flow. It's even better to leverage 25% and still cash flow a ton. Debt is a deterrent for lawsuits too. I'm good with a portfolio being 25% to 45% LTV. Still cashflows a lot and uses debt responsibly to expand a little faster.

I'm curious what you are looking at when doing a deal similar to this to make the right cash offer of not too little but also not too much when thinking strictly in terms of cashflow.

My analysis must cover the payment plus $1,000/month if I'm using leverage. The $1,000/month is a gross number and doesn't include Insurance, vacancy, maintenance, or any other expenses.  My thoughts are that the $1,000 cash flow will cover all of these in excess. Now I do know my cash flow number with all expenses, including the ones listed, and I typically end up with a net of $400-$500 per month even though I'm collecting the excess as well.  I also do not spend any of the net and reinvest it in RE or equities.

Quote from @Sean Gallagher:

Quote from @Nick C.:

There is no correct answer.  Everyone’s risk tolerance is different. I know investors who leverage 100%, and ones that purchase all cash, and plenty in between. 
COC return is a horrible metric. Here's an extreme example to illustrate - if you 100% leverage a purchase for $300k and it's worth $100k and you're cash flowing $5/mo, your COC return is infinite. Sounds good. But the deal is still horrible.

I guess the trouble I'm having is... if I want to maximize cash flow.. analyzing the deal to make a cash offer.  I'll keep digging   

It's great to buy all cash and maximize the cash flow. It's even better to leverage 25% and still cash flow a ton. Debt is a deterrent for lawsuits too. I'm good with a portfolio being 25% to 45% LTV. Still cashflows a lot and uses debt responsibly to expand a little faster.

There is no correct answer.  Everyone’s risk tolerance is different. I know investors who leverage 100%, and ones that purchase all cash, and plenty in between. 
COC return is a horrible metric. Here's an extreme example to illustrate - if you 100% leverage a purchase for $300k and it's worth $100k and you're cash flowing $5/mo, your COC return is infinite. Sounds good. But the deal is still horrible.

Real estate makes us money several ways; cashflow is only one.  If given a choice between one paid-in-full property and two identical properties with 50% leverage, the latter will always out perform in the long run.  

The other problem with unlevered properties is that more of the cashflow is exposed to income tax. It is fairly easy for depreciation to shield 100% of the cashflow from leveraged properties. If you do the math on after-tax cashflow, there is a strong case for leverage.

Returns aside, leverage is a deterrent against frivolous lawsuits and title scams.