Facing newbie burnout - anyone finding deals?

Question

Hey everyone! I’m a new investor, I’ve soaked up as much as I can from books and podcasts and this website and was finally ready to invest. I’m new to Atlanta and decided to go with a rental property as my first investment. But after months of working with multiple agents and analyzing literally hundreds of deals, nothing seems to get close to cash flowing. And after no success in this market with these high interest rates, I’m quickly feeling burnout. I’m curious if anyone out there is making deals on rental properties that come close to cash flowing and have any numbers to give as an example.

Right now I’m using these numbers and being as generous as I can with the estimates I get from BP: 25% down, 7.75% interest rate, 5% maintenance, 3% vacancy, 5% cap ex, 7% management.

Every realtor seems to keep saying now is the time to buy but they all push towards house hacking as that doesn’t need to produce cash flow and so they can market it as a good deal. Unfortunately that’s not an option for me right now.

So the big question is, other than house hacking or “just searching harder outside the box” is anyone finding it possible to buy a rental property in todays market? Thanks in advance for the answers and advice!

Scott E. · Answer

Right now it's tough finding a deal that cash flows because rates are too high. But 18 months ago it was tough finding a deal that cash flowed because prices were too high.

The hardest part about this business is finding a deal. That is whether you are a house flipper, a wholesaler, a long term rental investor, a short term rental investor, a commercial developer, etc. The hardest part is finding a deal.

You're feeling a bit discouraged and burnt out. That's normal, and that's a good thing. You need to condition yourself to deal with rejection. Accept that if you look at 300 deals, you will probably only find a few that you can make an offer on.

Also remember to not fixate too much on their asking price. If you find a property that you want to buy but they are asking too much for it... just offer what you can afford to pay. You'll get turned down a LOT. You'll get countered some. And every once in a while, you'll get an offer accepted.

Chris Clothier · Answer

@Zachary Floto,

Kudos for jumping in here with your first post!  BP can be a great site.  It can also be very confusing with a plethora of ideas, strategies and suggestions and often they are conflicting.  The fact that you are posting on here looking for feedback is excellent. Best of luck.

I really like @Nicholas L. post especially the be patient part!  Don't jump just because you are feeling like your missing out and expected to have already found a property.  However, I would also caution on getting caught up on cash flow.  I don't want you to share any information that you are not comfortable sharing, but sometimes our own paper math can be an obstacle.  I would suggest reviewing what properties you are looking at and how you are coming up with the data you are using.  Values, rents, possible work to be done, holding cost while renting, etc.  What is your ideal investment outcome?

Atlanta is a strong market and there are many, many ways to profit from a long-term buy and hold rental property.  Cash flow is just one and often times, investors define cash flow as whats left over after they account for unknown future expenses.  That's not cash flow.  That is a return and calculated after expenses are realized and not before.

So, what are you actually after?  $400-$700 in true cash flow each month to put off to the side for a rainy day fund?  Are you trying to earn some extra spending cash each month for bills?  Are you trying to start down the path of building wealth and hoping to acquire appreciating assets?  Do you have an income that allows or you to cover investment property expenses for 6 months without spending any of the true cash flow you've put off to the side?

I don't expect you to answer any of these in public, I'm just pointing out that once you figure out exactly why you are investing and what outcome you want (as you may have already done), then it helps to evaluate what you're looking at and make sure they are congruent.  If after all of that, you still cannot find a property that meets your needs, hit up the REIA meetings, ask Atlanta investors here on BP to grab a cup of coffee, keep posting here on BP.  The hardest property is always the first.  For those that are determined to get started, it will eventually make sense and you will get rolling.

Nicholas L. · Answer

@Zachary Floto

as others noted that is how the market is right now.  so i would actually compliment you on figuring this out, and not buying a bad deal just to "have a door."

i am curious though on whether you made any offers.

lots of things to do and it's going to take some work and some time.  i wanted a seller finance deal and it took me 3 years to find my first.  go to REIA meetings.  join local FB groups.  expand your search radius.  make an offer a week at the price you would want the property at.  learn about creative strategies.

a lot of people get to the point you are at and give up.

Obed Calixte · Answer

With the high rates and prices it does require thinking a bit more outside of the box.

Are the properties you are looking at able to allow for rent by the room (some areas have regulations on number of unrelated occupants)? Is Medium term rental and option? Are there opportunities to add sheds etc for additional rental income? Are there spaces on the property improperly or underutilized that can be repositioned for better use (garage conversion/ lot subdivide/ add adu etc)?

Do the numbers work better if you use portion of the 25% down to buy down rate instead?

Also are you burnt out from running numbers or from submitting offers at numbers that work for you but ultimately are getting rejected?

Travis Biziorek · Answer

Hey Zachary, it's definitely a lot harder to find cash flow than it was previously.

The days of plucking stuff off the MLS are dead... at least for now.

I invest in Detroit and you can still find deals there on the MLS if you know what you're doing. If you can source stuff off-market you can do extremely well there.

Beyond that, investors are going to have to get a lot more creative. The last 10 or so years have made people quite complacent.

Chris Seveney · Answer

@Zachary Floto

If you are looking for assets in the mls then you will have a very hard time finding a deal.

You need to find something off market or have some niche that differentiates you from competition

Lisa H. · Answer

Very true.  I guess I want to know what areas will eventually be gentrified in the next 5-10 years.  So I can buy cheap, maybe cashflow a little and then capitalize off the equity. lol. Doesn't everyone, right?!?

15 years ago, I had the opportunity to buy new construction ($120K) in Austin (Round Rock) that would immediately cash flow. Now look at Austin. Same house is about $420K.

Brian Penter · Answer

Our rental is in Alabama but a lot of the midwest can still cash flow. There tends to be an inverse relationship with cash flow and appreciation so it just depends on what your top priority is.

Brian Penter · Answer

Atlanta is a tough market to make the numbers work to positively cash flow right off the bat. Our primary is in the Atlanta suburbs but we bought our first rental out of state for this exact reason. That said, our primary has appreciated ~ 75% over the last five years.

You probably have to get creative to make something work- seller financing could be an option. Look at properties that have been on the market 45+ days and offer something like 70% of asking. They may be insulted but worst they can say is no.

If you want cash flow, you could also look out of state. Read David Green's book on how to do it. There's lot of markets in the midwest where you can buy pretty turnkey rentals to start cashflowing.

Good luck!

Ali Nichols · Answer

Hey @zachary let me know if you would ever like to connect. You are going about everything in the right way. Finding cash flow is difficult right now. Our team has been focused on mid-west small multifamily and we are finding some success.

Facing newbie burnout - anyone finding deals?

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