Huge down payment in hot markets?

[Vierra Wong]

I'm looking into my first multi-family property. I don't need immediate cashflow and prefer a market that has strong appreciation with potential cashflow in a couple years. Safe neighborbood. I've looked at several hot markets (Austin, Dallas, Sacramento, Southern CA) but almost everything would require about 40% down to break even. I can do 40% down but don't think that's a wise use of my cash. I've done the calculations on turnkey properties as well as fixers where there's opportunity for forced appreciation, but the rents never cover an 80% loan in addition to the other expenses. Can any investors in the CA or hot TX markets chime in if they've had the same experience? BRRR doesn't work when the rents don't cover the refi loan on the ARV. Thanks in advance for your input!

[Harrison Sharp]

You need to change your investment strategy. BRRR in the sense that is blasted on the BP forums and podcasts where you can pull all of your money out and reinvest WHILE getting cash yield is not going to exist in any major metro with population growth because of what has happened from an appreciation perspective in the last few years. You're a little late to the party. You're going to have to look at other cities or other locations within major metros and suburbs like Brooke mentioned above.

You're correct 40% is down is not a great use of cash but there are still investment properties in DFW that will get you 6% cash on cash with 20-30% down. And putting down higher cash into a rental that is going to cash flow/appreciate/get the debt paid down at a 3-4% cash yield is infinitely better than waiting on the sidelines for a year while prices get higher and yields get squeezed even more. It might make sense to do something like that as opposed to going BRRR on your first investment (assumption) and wait for the market to turn.