Real Estate Wealth only come from motivated sellers?

Question

In order for the cash flow and wealth to come from a property, must it be purchased at substantial discount? (Whether it be for buy/hold, flip or wholesale) Can RE wealth and cash flow come from "retail" prices? Is a fair price for good asset really provide cashflow and wealth?

*Excluding dramatic appreciation increases

Jonathan Napper · Answer

Essentially, I need to change where I find deals. Zillow, Trulia and Loopnet are retail outlets, I need to work the deliquent tax list and connect with some wholesalers.

Jay Hinrichs · Answer

@Jonathan Napper

sure time case in point SF bay area.. I bought my first house in Palo Alto for 185k in 1984 ... its worth conservatively today 2.5 million.. and this is not a mansion far from it 1800 sq ft 3 and 2 built post WW2  .. on 7k lot.

So yes ,,, but if your talking mid west or other markets that really never go anywhere in the mean.. by the mean,,,, I mean the average prices for average homes then maybe not.

Joe Villeneuve · Answer

@Jonathan Napper The answer is yes...all day and every day.  Cash flow has more to do with the market/zipcode, and the actual price of the property, and rent, and taxes, and so on.  It has little to do with profit, so getting a great deal isn't a requirement to cash flow....BUT, since part of cash flow is the financing, which is a direct result of the cost of the property, a better deal would make better cash flow.  If you are all cash in and leave all your cash in (no debt) for some reason, your CCR is enhanced by a lower cost to buy.  So, for cash flow, deals off the MLS work all day, but better deals make better CF and like @Roy N. says, the better deals never make it to the MLS.

Roy N. · Answer

@Jonathan Napper

Under the right set of conditions, in certain markets, you will find listed properties which will throw-off good cash-flow at the listed price - this is more common with residential (1-4 units) than commercial property.   However, I will still content that, even under these market conditions, the best deals will never make it to listing: they will be sold privately or out-of-pocket, before they hit the street.

Those cash-flowing properties you do find listed (MLS, Loopnet); there is usually a reason they get make it to listing and sit.  While they may not be overpriced, they may not really cash-flow (rose-coloured pro-forma).  Alternatively, they may suffer from deferred maintenance or {partial} functional obsolescence or, they may have an issue (asbestus, mould, etc) which scares off the average buyer.

In these latter instances the property will require additional investment from you to bring it into performance and will enable you to force appreciation of the property ... just be certain you adequately allow for the issues when purchasing.

Jonathan Napper · Answer

Let me rephrase my question, can you buy properties that cash flow at retail prices, like off of LoopNet and such?

Jay Hinrichs · Answer

@Richard C.

yes my point was buy and hold in certain markets will create plenty of true wealth based on appreciation alone and many times with negative cash flow

Richard C. · Answer

That is the opposite of what Jay is saying.

Joe Villeneuve · Answer

You need to find a RE Agent that is truly an REI agent.

Joe Villeneuve · Answer

@Jay Hinrichs is correct when he mentions the effect different markets have on the answer.  In areas outside the midwest, you really do need to buy at a discount.  The midwest typical cash flow, at AP, will work for most investors.

Mark Freeman · Answer

@Jonathan Napper

A fair price is established when both sides agree on a price and neither side is coerced in any way. I buy all of my properties at substantial discounts and they are all at fair prices.  Wealth and cash flow will come much faster if you consistently buy at substantially discounted fair prices!

Real Estate Wealth only come from motivated sellers?

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