Is there any decent market left to still get a decent return?

[Ryan Zaninovich]

Hi Everyone,

My wife and I have been buy/hold investors for going on 15 years now. For most of that time you could find an okay deal as long as you did your homework and were willing to look outside your local market. I think it is sort of funny watching through the years as everyone's criteria for what they call a good deal keeps changing as the market keeps going up.

I guess each person's idea of a good deal is going to be shaped by their local market, so at one time when things were really good our criteria was that we netted out a 12% return with a rental purchased with cash. My defeinition of net usually ends up assuming costs of 50% of rent so that was a pretty good deal! It's been a long time since we've achieved anything close to that. We did make some large SFR investments recently and I hope to end up close to 10% on those, but it was in a very risky market and we sort of got lucky.

I'm writing this post because I'm curious what all the other buy/hold cash investors are doing these days? At this point I'd be willing to accept a 7.5% return on a house purchased with cash and assuming 50% costs. I'm not finding anything close to that anywhere (other than maybe Detroit and we are already heavy in that area). The other thing is I'm not really talking about finding one house and fixing it up. I'm sure with some effort and time I could find that sort of return on one house. I'm more talking we have quite a bit of money sitting and wanting to purchase a lot of houses and average out to that return. I've spoken to several of the turn key type businesses but by the time they take their cut almost all of them are in the 5% range. Oh they will tell you it's right up at 10% but conveniently leave out some major cost center or use anticipated appreciation or something else to arrive at that number. I find that their rents are almost always inflated as well. Even the foreclosure prices are too high, at the point where by the time you get them fixed up there goes your return.

What is everyone doing? Just accepting the low returns? Refusing to buy? Going to war zones like Detroit and taking their chances? To make matters worse, I have a 1031 exchange coming that is a result of something outside of my control so one way or another I am buying something! The last year or two is the only time in the 15 years I've been doing this where I really am starting to think it's just not a good investment any more.

[Michael Swan]

Hi all,

I have traded in all my pricey San Diego rental properties cash flowing at $50,000 a year for 4 apartment complexes and soon to be 7 apartment complexes, currently cash flowing at $160,000 in NE Ohio. I have significantly increased NOI on each of our apartment complexes. In a 2 year period, I will have increased the value of these apartment complexes exponentially. The small community I have over 80 front doors has been increasing population consistently since 2000. There are emerging markets, in blue collar neighborhoods available to all with just a little research. When I read David Lindahl's emerging markets book and his Multifamily Millions book too, I decided to sell my outrageously high RE in San Diego.

Although, my wife won't allow me to sell our personal residence in San Diego. I have about $200,000 dead equity in this money pit and I don't want to refinance it, just in case we have a housing correction again. It is not if, it is when.

Don't get me wrong, I did make a few mistakes along the way and learned my lesson the hard way on the first two 1031 exchanges and sold those 2 dogs 3 months ago and have another 34 units that we have an LOI signed and I should be back off to the races soon. If I wouldn't have made those first two mistakes, I would have been at $200,000 cash flow by now.

However, not too bad after only investing in my first little single family rental property in San Diego in May of 2011, only about 7 years ago.

"If you change the way you look at things, the things you look at change right before your eyes."

Swanny