Frustrated by lack of cash flow properties in our region

[James Burrow]

Hello all. My name is Scott. My wife and I are just beginning our investment journey in real estate. I just turned 50, so I feel some pressure to get started quickly given we are late in the game. Our local market, Enterprise, AL, is relatively strong and the market close by in Panama City Beach, FL is booming. That being said, I have looked on the MLS and reviewed several properties(practicing the evaluation process). These are newly rehabilitated/flipped and some are 1970 vintage, but all asking prices essentially eliminate cash flow. As others have stated, I do not want to rely on appreciation and taxes as my only wealth building platforms. I'm probably making some fatal flaw in cost estimation but I am using the tools here on the website. Is it the general practice of this group to simply offer the numbers that work for you and move on if no agreement is reached, or are there any suggestion out there that I might utilize moving forward? I had not to this point considered looking at distant properties since we are just starting. Maybe that is the right approach. My head is swimming a bit. Forgive the rant. Nervous but eager. Thanks for any help in advance

[George Azita]

I look for properties every day, crunch the numbers and have not found a property with good numbers for the past three years. Of course, everyone has a different opinion in regards to what good numbers are.

I started purchasing apartment buildings in 2001 when units were $67,000. For the past few years, those same units have been selling for $300k to $350k. About 7 years ago, I purchase 11 units for $125k each and as far as profit goes the property has been more of a dog and a burden. Last year, I purchase 6 units for $291k each and the profits as so low it is no longer any fun nor rewarding to invest in real estate.

As far as your looking out of your area, you will find that properties are often less-expensive, but the rents are usually too low and the appreciation is near zero. The big money is earned from appreciation and investing for cashflow from rental income barely keeps up with inflation and major repairs can put you in the hole. When investing out of your area you inherit additional expenses and problems that can cause you to break even or even lose money in today's market. 

I am keeping my money in a stock trading account so if the market crashes I will make tons of money like during the 2020 COVID crisis, or I will have the cash if a good property falls in my lap. I am always looking at live auctions for good deals, but it takes a massive amount of time to go to 40 or 50 auctions to get a good deal because almost every good property gets removed from the auction block only seconds before being auctioned, but there are some great deals.

When I go to live auctions I bid on the $1 million+ properties because the profit spread is always better than lower-priced properties. I went to the auction two years ago with $1 million in cash to bid on a property worth $2.4 million and did not get the property because it auctioned for $1,025,000 and I didn't bring enough cashier checks that day, but the best deals I ever got for the past 20+ years has always been from live auctions. Stay away from online auctions and do a lot of internet research to see why.