How do people make large real estate profitable?

[Patrick Philip]

I just can't seem to make the numbers work to make any sort of ROI that compares to the 100+% you can get with residential rehabs. I realize you can get infinite ROI with BRRRR, but I don't think that's what the big players do. I'm asking about people that construct or purchase large apartment complexes, condominiums, commercial buildings, hotels, etc.

How do they make them cash flow in an amount that is worth all the trouble it takes to build and manage them?

For example, I was looking at a condo complex nearby, and they're selling for about $108/sq. ft. That is less than a quote I got on residential construction.

I have no problem sticking with residential rehabs if that's the best ROI, but if I could do a condo conversion, etc. that would be cool, too.

Just as an example, I've attached a picture of a building I watched being constructed from ground up over the last couple years. Now, it is being rented out. How do these investors make the numbers work?

https://www.dropbox.com/s/21pv5k60gtuwa17/0416180617a.jpg?dl=0

[Nick B.]

You are looking at this from a wrong perspective.

Initial NOI is important but almost irrelevant in the long run. When you buy an apartment complex you look for ways to increase that NOI which in turn increases the value of the property (AKA forced appreciation).

Once the property value increases sufficiently you either refinance or sell. In case of refinance, it is not unusual to get all of the initial capital out. This is essentially the same BRRRR strategy.

Virtually nobody holds these properties for 30 years with an intent to pay it off. 5 to 10 years is the usual hold time.