Predicting Real Estate Forecasts

[Devon Spooner]

Recently me and my partner decided to dig into multifamily real estate because we think the advantages and leverage it provides, is more tailored to what we wish to accomplish. Then more specifically, we decided that the Seattle, WA, area looked to be a rapidly growing market we wanted to get into so we moved on it. Talking with associates of Bigger Pockets we came to find out our goals were centered more around markets that Cashflow and not so much around markets that Appreciate. Further more, we found that Seattle is more of an appreciation market. I want to know what processes sophisticated investors use to identify a cash flowing market?

[Andrew Kniffin]

Is your question "how do I determine if a market can provide cashflowing multifamily properties?" 

If so, the answer is simple:

Step 1: See if rents achieve the 1% rule.  In Seattle, MFs (dups, tris, and Quads) do NOT.

Step 2: Model cashflow after using the 50% rule and then your financing structure.  Answer this question: can you achieve $100 CF per door with 20% down or less?

In Seattle, the properties tend to be priced so high that it does not cashflow, and thus buyers are banking on increased value to make up for lack of CF.  That's not my game, and I'd encourage you to consider whether you want it to be yours.