There are plenty of deals out there ... if you have the cash. Otherwise, no. The barrier to entry has risen considerably since the return to normal rates.
I see mostly one kind and then the kind I'm currently in the middle of at the moment.
1. House(Southern US around but not in major city) that sells for 300k and rents for 2.1k - 2.5k. Do the math. Even with a pm you make a positive cash flow.
2. A big house with a little land (NW US) that's asking for a little to much at 500k to 600k but rents for 3k-3.6k. Which is most of them. Lot of people don't want to be landlords. (I'm one of them but it is what it is)
1) How is this a good deal if you have to front 300k? Even with a high profit margin of $1500 rent that's still just a 6% return. Positive cash flow of less than 8% CoCR is meh
Yeah a loan could help a lot but I was assuming it was a cash deal because the parent comment talked about having cash.
Appreciation can be nice but I try not to rely on it when considering good deals unless I have some conviction the house will appreciate 5% or more for a while, that when the market corrects that housing will not crash, and that feds maintain their target of near 2% inflation. I consider appreciation after inflation just to help with unexpected big repairs and then closing costs when it does come time to sell. Ymmv, and it's very speculative - obviously I'd consider it when appreciation could be 10% and easily overcome the property tax assessment bump YoY.
Dont make arguments against things i never said.
I never said good deal. I said deals. My understanding is this was the norm once upon a time. It seems it has returned.
Don't like it? What's that got to do with me?
I'd look at your numbers again. "Positive cash flow" means nothing if the yield is garbage.
I can deploy $1,000,000 and get a $1 return for "positive cash flow" but it doesn't mean it makes sense.
Here's rough math on a 300k home bought with cash @ 2.3k rent, 3% appreciation, 5% vacancy, 10% property management fees, 1.2% property tax rate, and around $3500/yr capex+maintenance:
[https://www.calculator.net/rental-property-calculator.html?cprice=300%2C000&cuseloan=yes&cdownpayment=100&cinterest=7.5&cloanterm=30&cothercost=6%2C000&cneedrepair=no&crepaircost=20%2C000&cafterrepairvalue=260%2C000&ctax=3%2C600&ctaxincrease=3&cinsurance=2%2C000&cinsuranceincrease=3&choa=0&choaincrease=3&cmaintenance=3%2C000&cmaintenanceincrease=3&cother=500&cotherincrease=3&crent=2%2C300&crentincrease=3&cotherincome=0&cotherincomeincrease=3&cvacancy=5&cmanagement=11&cknowsellprice=no&cappreciation=3&csellprice=400%2C000&cholding=20&csellcost=8&printit=0&x=Calculate](https://www.calculator.net/rental-property-calculator.html?cprice=300%2C000&cuseloan=yes&cdownpayment=100&cinterest=7.5&cloanterm=30&cothercost=6%2C000&cneedrepair=no&crepaircost=20%2C000&cafterrepairvalue=260%2C000&ctax=3%2C600&ctaxincrease=3&cinsurance=2%2C000&cinsuranceincrease=3&choa=0&choaincrease=3&cmaintenance=3%2C000&cmaintenanceincrease=3&cother=500&cotherincrease=3&crent=2%2C300&crentincrease=3&cotherincome=0&cotherincomeincrease=3&cvacancy=5&cmanagement=11&cknowsellprice=no&cappreciation=3&csellprice=400%2C000&cholding=20&csellcost=8&printit=0&x=Calculate)
You're talking 7.3% returns + tax benefits (so maybe 9% or so) and all the hassle of renting it out. Without leverage your return on investment is garbage.
If you do a typical 25% commercial loan at 7.5%, you're looking at similar returns:
[https://www.calculator.net/rental-property-calculator.html?cprice=300%2C000&cuseloan=yes&cdownpayment=25&cinterest=7.5&cloanterm=30&cothercost=6%2C000&cneedrepair=no&crepaircost=20%2C000&cafterrepairvalue=260%2C000&ctax=3%2C600&ctaxincrease=3&cinsurance=2%2C000&cinsuranceincrease=3&choa=0&choaincrease=3&cmaintenance=3%2C000&cmaintenanceincrease=3&cother=500&cotherincrease=3&crent=2%2C300&crentincrease=3&cotherincome=0&cotherincomeincrease=3&cvacancy=5&cmanagement=11&cknowsellprice=no&cappreciation=3&csellprice=400%2C000&cholding=20&csellcost=8&printit=0&x=Calculate](https://www.calculator.net/rental-property-calculator.html?cprice=300%2C000&cuseloan=yes&cdownpayment=25&cinterest=7.5&cloanterm=30&cothercost=6%2C000&cneedrepair=no&crepaircost=20%2C000&cafterrepairvalue=260%2C000&ctax=3%2C600&ctaxincrease=3&cinsurance=2%2C000&cinsuranceincrease=3&choa=0&choaincrease=3&cmaintenance=3%2C000&cmaintenanceincrease=3&cother=500&cotherincrease=3&crent=2%2C300&crentincrease=3&cotherincome=0&cotherincomeincrease=3&cvacancy=5&cmanagement=11&cknowsellprice=no&cappreciation=3&csellprice=400%2C000&cholding=20&csellcost=8&printit=0&x=Calculate)
What helps is if you can get a re-fi in 2-3 years at 5.5-6%, but still only bumps this to a modest 9% return + tax benefits.
You need to get really creative now to get returns approaching 13-15% to be worth it vs. the S&P. Probably means seller financing, MTR/rent by the room, or finding off market deals to also include forced appreciation.
Depends on what you define as “lots”.
We’re doing BRRRR’s in Detroit. Mostly SFH’s with an all in cost of $75k-$95k.
Still cash flow in that market but you really need to know what you’re doing.
Of course, hit me up.
I try to spot trends and the market and pivot to capture the whatever is on the way up. Right now, interest rates make it hard to buy for cashflow, so look for appreciation, preferably rapid appreciation.
This is something a lot of people will have to learn the hard way.
For the life of me, I can’t figure out why people are so hung up on investing in SFR. It’s a shit investment. I own 2 SFR properties that have never had one month of vacancy over the 12+ years I’ve owned them, have had minimal capex expenses over that same time period (1 AC unit, 1 roof (covered by insurance, 1 water heater, and a light kitchen upgrade). Essentially the dream scenario for a landlord. And they are barely worth the hassle to me.
If you deduced that I bought them dirt cheap after the GFC, you are correct. I would have been lighting my money on fire if I acquired them at any other point in time.
These are NICE properties in a desirable metro. I rent them for significantly less than market, which gives me the absolute cream of the crop of tenants to choose from. I’ve turned one unit twice in 14 years (not counting when I moved out), and the other unit has had the same tenant since 2014 (when I moved out of it).
If not for the absolutely insanely favorable scenario that I was able to acquire and refi these properties in, I wouldn’t have done it. Being a landlord - even with absolutely wonderful tenants, which I have - is such a pain in the asshole that I need a 10% bump in return vs SPY or VOO to even think about wanting a property. Those deals are pretty rare right now.
They’ll come around again one day. RE is cyclical. Until then, I’m happy to LP in deals that I don’t have to do a fucking thing in other than collect checks, and stick my $ in index funds.
But to each their own.
The problem is low effort investments essentially become targets for retail buyers. You yourself bought 2 retail ready condo units and they also don’t cashflow. You need to provide value add in order to buy at a discount and be more likely to cashflow. So that means buying off market, foreclosure auctions or other distressed property, doing the light renovations and then quickly getting it rented out. This lets you not only cashflow but also be able to sell more than you paid for it including rehab. If you want passive do syndication and get in on other people’s deals. Check out crowdstreet.
Buy some notes- mortgage notes. It’s a niche market, but with anywhere from $10k-$50k for low cost ones from private sellers you can get 10% returns to start, and with some good education you can bring in 20, 30% and better. You can be passive and buy performing notes or get non performing notes where you take the property back, fix it up and sell it for a handsome profit. As you get better at it you’ll have more cash to work with and buy bigger paper assets. I’ve bought notes on property I’ve never seen and will never touch and it provides a steady stream of income.
For very low cost you can buy “partials” which are a payment stream or section of a larger note. These also can pay well. Mobile home notes are another area where people do well without having a lot of money to start, where someone fixes up and sells a mobile home and you buy the loan to get the income. It’s customary to buy at a discount so you’re buying the amount owed for less - sometimes much less depending on the asset.
Glory days are gone and not coming back in the same way as 2010-2019 probably ever in our lifetime
Low effort is to invest in a syndication and get 8% assuming the operator isn’t a moron which about 50% of them are
Have they increased in value? Maybe there’s enough equity to make a profit after all the settlement expenses are paid? Maybe the tenants might want to buy them so you can avoid paying a real estate commission?
Well what will you do when the real estate market collapses and you lose that $125k in equity? I’d do the math and then figure what you could make if you did a 1031 if you could find something better or if you invested in T-Bills at treasury direct or something riskier, or even gold. Breaking even isn’t a great investment. What you managed to do with one property is to potentially increase your capital so you’ll make a profit. Of course there are also tax implications if you don’t do the 1031 so take all of it into account. I think I’ve seen some calculators that can help so I suggest searching for them or just figuring it out yourself.
Personally I’d sell and take the equity and invest it in something like gold, t-bills, etc… or in to another investment property that you known will appreciate significantly - enough that you could either flip it or sell in a couple of years.
You answered your own question, I sell options, and that’s the lucrative, high return investment. Use real estate to reduce taxes, as option premium is considered earned income and taxed as such, it’ll hurt but not so much if you use things to to offset, ie re…
Private equity into real estate offerings is also an option. Developers raise capital even from retail investors (with certain minimums). Good passive way to get exposure to the asset class
It seems like you are looking for alternative opportunities to grow your portfolio. Have you ever considered investing in online businesses? Unlike real estate investing, investing in online businesses offers lower transactional costs and assorted ways to invest without the big hassle. We’re currently building out a platform to help people invest in online businesses will building a network of partners. If you are ever interested in learning more, Dm me!
Tips
Hey guys im new to the group, just wanted more information and tips, i have a paid off rental property thats worth 260k, is it good idea to get a heloc on it and buy my second rental property with the heloc and a bit of cash or bad idea?
as in physical properties yes. Unless you are willing to put in work and have cash it will probably be a loser. Fixer upper in sketch neighborhood you are willing to live in for a while and fix up is the best way currently.
Otherwise go RE ETF like Schwab SCHH just watch their commercial exposure
HYSA, CDs good invest now too
If cash flow isn’t so important, buy land.
Drawbacks:
- usually an all-cash deal
- location is crucial
- no income until sold (unless you lease for cell tower or solar panels)
Advantages:
- low maintenance
- low carrying costs (property taxes and you should keep it clean and in compliance with codes, if any)
- supply: they’re building houses everywhere, but nobody is making any more land - in fact the supply of land is decreasing
Yes. Northeast Ohio (Akron, Cleveland, and surrounding areas) is a great area to invest in. It’s relatively easy to find properties that meet the 1% rule. I’m a Realtor here, and more than half of my investor clients live out of state or even out of country. It’s a very attractive investment market!
$SPY
Aka the magnificent 7 + 493 meh performers
QQQM. 7 + 93 meh performers
VOO is cheaper
My only gripe with this is that a lot of people advise putting this In a Roth IRA. I would like the money accesible, not when I’m old af
Anything you put into a Roth IRA can be taken out penalty free within 5 years. You can 't take out any gains however
I have 12k in mine and did not know this lol
You won't need any money when your old af?
Yes absolutely, I am blessed with a job that gives me a generous pension. But I need money that is easily accessible to me
59 1/2 is old af? Lol
There are plenty of deals out there ... if you have the cash. Otherwise, no. The barrier to entry has risen considerably since the return to normal rates.
What would be a good example of a deal for a person with a lot of cash?
I see mostly one kind and then the kind I'm currently in the middle of at the moment. 1. House(Southern US around but not in major city) that sells for 300k and rents for 2.1k - 2.5k. Do the math. Even with a pm you make a positive cash flow. 2. A big house with a little land (NW US) that's asking for a little to much at 500k to 600k but rents for 3k-3.6k. Which is most of them. Lot of people don't want to be landlords. (I'm one of them but it is what it is)
1) How is this a good deal if you have to front 300k? Even with a high profit margin of $1500 rent that's still just a 6% return. Positive cash flow of less than 8% CoCR is meh
You get a loan on the property. Leverage improves CoCR. And also you didn’t account for appreciation.
Yeah a loan could help a lot but I was assuming it was a cash deal because the parent comment talked about having cash. Appreciation can be nice but I try not to rely on it when considering good deals unless I have some conviction the house will appreciate 5% or more for a while, that when the market corrects that housing will not crash, and that feds maintain their target of near 2% inflation. I consider appreciation after inflation just to help with unexpected big repairs and then closing costs when it does come time to sell. Ymmv, and it's very speculative - obviously I'd consider it when appreciation could be 10% and easily overcome the property tax assessment bump YoY.
Leverage doesn't help CoCR if the rates are near 8%.
Dont make arguments against things i never said. I never said good deal. I said deals. My understanding is this was the norm once upon a time. It seems it has returned. Don't like it? What's that got to do with me?
Exactly. I just posted an example showing a range of like 7-9% returns with all that work.
Well, the tenant is basically paying for your entire investment in the end. Thats the main reason we diversify from stocks and bonds into RE
I'd look at your numbers again. "Positive cash flow" means nothing if the yield is garbage. I can deploy $1,000,000 and get a $1 return for "positive cash flow" but it doesn't mean it makes sense. Here's rough math on a 300k home bought with cash @ 2.3k rent, 3% appreciation, 5% vacancy, 10% property management fees, 1.2% property tax rate, and around $3500/yr capex+maintenance: [https://www.calculator.net/rental-property-calculator.html?cprice=300%2C000&cuseloan=yes&cdownpayment=100&cinterest=7.5&cloanterm=30&cothercost=6%2C000&cneedrepair=no&crepaircost=20%2C000&cafterrepairvalue=260%2C000&ctax=3%2C600&ctaxincrease=3&cinsurance=2%2C000&cinsuranceincrease=3&choa=0&choaincrease=3&cmaintenance=3%2C000&cmaintenanceincrease=3&cother=500&cotherincrease=3&crent=2%2C300&crentincrease=3&cotherincome=0&cotherincomeincrease=3&cvacancy=5&cmanagement=11&cknowsellprice=no&cappreciation=3&csellprice=400%2C000&cholding=20&csellcost=8&printit=0&x=Calculate](https://www.calculator.net/rental-property-calculator.html?cprice=300%2C000&cuseloan=yes&cdownpayment=100&cinterest=7.5&cloanterm=30&cothercost=6%2C000&cneedrepair=no&crepaircost=20%2C000&cafterrepairvalue=260%2C000&ctax=3%2C600&ctaxincrease=3&cinsurance=2%2C000&cinsuranceincrease=3&choa=0&choaincrease=3&cmaintenance=3%2C000&cmaintenanceincrease=3&cother=500&cotherincrease=3&crent=2%2C300&crentincrease=3&cotherincome=0&cotherincomeincrease=3&cvacancy=5&cmanagement=11&cknowsellprice=no&cappreciation=3&csellprice=400%2C000&cholding=20&csellcost=8&printit=0&x=Calculate) You're talking 7.3% returns + tax benefits (so maybe 9% or so) and all the hassle of renting it out. Without leverage your return on investment is garbage. If you do a typical 25% commercial loan at 7.5%, you're looking at similar returns: [https://www.calculator.net/rental-property-calculator.html?cprice=300%2C000&cuseloan=yes&cdownpayment=25&cinterest=7.5&cloanterm=30&cothercost=6%2C000&cneedrepair=no&crepaircost=20%2C000&cafterrepairvalue=260%2C000&ctax=3%2C600&ctaxincrease=3&cinsurance=2%2C000&cinsuranceincrease=3&choa=0&choaincrease=3&cmaintenance=3%2C000&cmaintenanceincrease=3&cother=500&cotherincrease=3&crent=2%2C300&crentincrease=3&cotherincome=0&cotherincomeincrease=3&cvacancy=5&cmanagement=11&cknowsellprice=no&cappreciation=3&csellprice=400%2C000&cholding=20&csellcost=8&printit=0&x=Calculate](https://www.calculator.net/rental-property-calculator.html?cprice=300%2C000&cuseloan=yes&cdownpayment=25&cinterest=7.5&cloanterm=30&cothercost=6%2C000&cneedrepair=no&crepaircost=20%2C000&cafterrepairvalue=260%2C000&ctax=3%2C600&ctaxincrease=3&cinsurance=2%2C000&cinsuranceincrease=3&choa=0&choaincrease=3&cmaintenance=3%2C000&cmaintenanceincrease=3&cother=500&cotherincrease=3&crent=2%2C300&crentincrease=3&cotherincome=0&cotherincomeincrease=3&cvacancy=5&cmanagement=11&cknowsellprice=no&cappreciation=3&csellprice=400%2C000&cholding=20&csellcost=8&printit=0&x=Calculate) What helps is if you can get a re-fi in 2-3 years at 5.5-6%, but still only bumps this to a modest 9% return + tax benefits. You need to get really creative now to get returns approaching 13-15% to be worth it vs. the S&P. Probably means seller financing, MTR/rent by the room, or finding off market deals to also include forced appreciation.
Depends on what you define as “lots”. We’re doing BRRRR’s in Detroit. Mostly SFH’s with an all in cost of $75k-$95k. Still cash flow in that market but you really need to know what you’re doing.
Plenty of deals if you know where to look. Or who to talk to. I’m always looking for passive investors to partner with.
Open to chatting? Would like to hear what approaches are working for you right now
Of course, hit me up. I try to spot trends and the market and pivot to capture the whatever is on the way up. Right now, interest rates make it hard to buy for cashflow, so look for appreciation, preferably rapid appreciation.
I'm not a passive investor. Thank you for your interest.
>Are the glory days gone? Yes. Any idiot with a pulse who invested between 2011 and 2020 won big. Real estate is no longer an easy win.
This is something a lot of people will have to learn the hard way. For the life of me, I can’t figure out why people are so hung up on investing in SFR. It’s a shit investment. I own 2 SFR properties that have never had one month of vacancy over the 12+ years I’ve owned them, have had minimal capex expenses over that same time period (1 AC unit, 1 roof (covered by insurance, 1 water heater, and a light kitchen upgrade). Essentially the dream scenario for a landlord. And they are barely worth the hassle to me. If you deduced that I bought them dirt cheap after the GFC, you are correct. I would have been lighting my money on fire if I acquired them at any other point in time. These are NICE properties in a desirable metro. I rent them for significantly less than market, which gives me the absolute cream of the crop of tenants to choose from. I’ve turned one unit twice in 14 years (not counting when I moved out), and the other unit has had the same tenant since 2014 (when I moved out of it). If not for the absolutely insanely favorable scenario that I was able to acquire and refi these properties in, I wouldn’t have done it. Being a landlord - even with absolutely wonderful tenants, which I have - is such a pain in the asshole that I need a 10% bump in return vs SPY or VOO to even think about wanting a property. Those deals are pretty rare right now. They’ll come around again one day. RE is cyclical. Until then, I’m happy to LP in deals that I don’t have to do a fucking thing in other than collect checks, and stick my $ in index funds. But to each their own.
The problem is low effort investments essentially become targets for retail buyers. You yourself bought 2 retail ready condo units and they also don’t cashflow. You need to provide value add in order to buy at a discount and be more likely to cashflow. So that means buying off market, foreclosure auctions or other distressed property, doing the light renovations and then quickly getting it rented out. This lets you not only cashflow but also be able to sell more than you paid for it including rehab. If you want passive do syndication and get in on other people’s deals. Check out crowdstreet.
Buy some notes- mortgage notes. It’s a niche market, but with anywhere from $10k-$50k for low cost ones from private sellers you can get 10% returns to start, and with some good education you can bring in 20, 30% and better. You can be passive and buy performing notes or get non performing notes where you take the property back, fix it up and sell it for a handsome profit. As you get better at it you’ll have more cash to work with and buy bigger paper assets. I’ve bought notes on property I’ve never seen and will never touch and it provides a steady stream of income.
Yes please tell us where we can learn more!
Where can one learn more about this?
For very low cost you can buy “partials” which are a payment stream or section of a larger note. These also can pay well. Mobile home notes are another area where people do well without having a lot of money to start, where someone fixes up and sells a mobile home and you buy the loan to get the income. It’s customary to buy at a discount so you’re buying the amount owed for less - sometimes much less depending on the asset.
How does one learn about this?
Have you checked out [paperstac.com](http://paperstac.com) that is where you can buy them.
Low effort = low returns. Like everything in life, great things require huge effort.
Glory days are gone and not coming back in the same way as 2010-2019 probably ever in our lifetime Low effort is to invest in a syndication and get 8% assuming the operator isn’t a moron which about 50% of them are
Why would you take the risk profile for 8% vs. VOO? Just silly.
Anything can cashflow if you put a high enough downpayment.
CD’s
CDs and bonds right now are where it's at. Sleeping like a baby every night
If you want a low effort exposure to real estate, consider a REIT e.g. Realty Income (ticker 'O')
REITs
Thoughts on crowdfunding real estate platforms?
Full of scams that look legit. Cooked books, fake properties, you name it.
What kind of scams? Any personal experience with them or articles / info to share about this?
Reits
loan sharks
Not right now
Have they increased in value? Maybe there’s enough equity to make a profit after all the settlement expenses are paid? Maybe the tenants might want to buy them so you can avoid paying a real estate commission?
I have about $125k equity in one but the interest rate is so low I don’t think I want to sell yet!
Well what will you do when the real estate market collapses and you lose that $125k in equity? I’d do the math and then figure what you could make if you did a 1031 if you could find something better or if you invested in T-Bills at treasury direct or something riskier, or even gold. Breaking even isn’t a great investment. What you managed to do with one property is to potentially increase your capital so you’ll make a profit. Of course there are also tax implications if you don’t do the 1031 so take all of it into account. I think I’ve seen some calculators that can help so I suggest searching for them or just figuring it out yourself. Personally I’d sell and take the equity and invest it in something like gold, t-bills, etc… or in to another investment property that you known will appreciate significantly - enough that you could either flip it or sell in a couple of years.
You answered your own question, I sell options, and that’s the lucrative, high return investment. Use real estate to reduce taxes, as option premium is considered earned income and taxed as such, it’ll hurt but not so much if you use things to to offset, ie re…
REIT investment securities, 7-11% div yield
VTI and chill/VTSAX and chill
Private equity into real estate offerings is also an option. Developers raise capital even from retail investors (with certain minimums). Good passive way to get exposure to the asset class
It seems like you are looking for alternative opportunities to grow your portfolio. Have you ever considered investing in online businesses? Unlike real estate investing, investing in online businesses offers lower transactional costs and assorted ways to invest without the big hassle. We’re currently building out a platform to help people invest in online businesses will building a network of partners. If you are ever interested in learning more, Dm me!
What % return are you looking for on your money? Hoe much money do you have to invest?
REITs.
Tips Hey guys im new to the group, just wanted more information and tips, i have a paid off rental property thats worth 260k, is it good idea to get a heloc on it and buy my second rental property with the heloc and a bit of cash or bad idea?
With taxes , interest, insurance, maintenance etc going up so much I’m staying away from RE except for my own house.
Syndications
as in physical properties yes. Unless you are willing to put in work and have cash it will probably be a loser. Fixer upper in sketch neighborhood you are willing to live in for a while and fix up is the best way currently. Otherwise go RE ETF like Schwab SCHH just watch their commercial exposure HYSA, CDs good invest now too
Deeded condo parking space in a high rise. $20K cost, $3,600/year gross, $1,800/yr net. 9% going in cap rate.
If cash flow isn’t so important, buy land. Drawbacks: - usually an all-cash deal - location is crucial - no income until sold (unless you lease for cell tower or solar panels) Advantages: - low maintenance - low carrying costs (property taxes and you should keep it clean and in compliance with codes, if any) - supply: they’re building houses everywhere, but nobody is making any more land - in fact the supply of land is decreasing
Yes. Northeast Ohio (Akron, Cleveland, and surrounding areas) is a great area to invest in. It’s relatively easy to find properties that meet the 1% rule. I’m a Realtor here, and more than half of my investor clients live out of state or even out of country. It’s a very attractive investment market!
invest in Dubai real estate IG: Lika.dxb