Is Losing Money Normal In the Beginning?

[Ross Kline]

I've been analyzing deals for a couple weeks now. A mix of single-family, small multi-family, BRRRR, and even a 20-unit apartment.

I'm a numbers guy, so I've done my research and believe I am using accurate numbers when calculating NOI and cap rates.

What I've found is that on-market deals typically have a cap rate of 5% or less, and after debt service cash flow is often negative, especially at current loan rates.

So do investors just have the income and cash to buy and wait for spreads to widen as rents increase?

Would love to hear your thoughts!!

[Tim Johnson]

@Ross Kline Hi, and welcome to the forums.

No, investors (if they're smart) know that they make their money "going in" , i.e., when buying. Of course, crazy market appreciation and dumb luck can occasionally work in our favor. But that's no strategy. The numbers you're seeing are common in many markets today. But you still don't buy negative cash flowing properties with the hope that something will happen. You dig in deeper looking for those true value-add deals - these will mostly be off-market in many areas. Best wishes and stay patient.......