Flipper/Rehabber · Miami, FL · Member since 2019 · 24 posts · 6 votes
Hello BP, real quick question for a seasoned investor with experience investing into rental apartments. Would 9%-11% be considered a win for an investor who is investing into an apartment.. 1 bed 1 bath preferably. After analyzing deals I came up with those ROI's. Just need an example of a good ROI or if there is someone with experience in investing in rental apartments to spread some knowledge. Thanks
@Derek Cespedes, yes we are in sellers market. There's more demand than supply. Being persistent in your search is key. Consistency usually separates the weak from the strong. Good luck on your journey
@Greg Dickerson hey Greg yeah man I’m thinking the same. Yet, as you’ve stated 20% seems to be the hammer to the nail. I’m in South Florida where 20% seems nearly like an astronomical number. So based of my market 8%-12% is a win.
@davidabbate ah I just re-read what he wrote. Thanks for pointing that out. So IRR is calculated differently and since you've pointed that out I'm guessing you know how to calculate it. Do you mind just giving me an example of a formula on finding a good IRR. thanks
@Account Closed wow thanks for the feedback on that. This is especially good to know when wholesaling to an investor who is savvy. I'll take the advice and apply accordingly.
@Derek Cespedes the IRR is really only relevant if you expect to sell the property over some horizon, but as the previous person mentioned you'd need the time horizon and exit price...there are IRR calculators on google but I can email you and example too if that's helpful...the formula provided is correct but my guess is an example would illustrate how it works.
Also, back to your original question I would look at similar properties in your area and use those to compare. While 9-11% isn’t super high, you also need to consider the associated risk of the investment.
@Vincent McClendon Vincent thanks for the feedback. Yeah if you want to send an example over to my email anything helps. I’ll definitely look into that. I’ll send you a direct message.
@Derek Cespedes, a 9-11% ROI sounds great to a person who has their money sitting in a CD or MMA account. But to the seasoned investor, considering that person is more savy may be happy with a 15% return or higher.
@Tj Hines exactly my thoughts. But those cash on cash returns if 20% in South Florida is like finding a needle in a hay stack. Or just a distressed seller who has to leave due to auctions. As I’m getting more experience in wholesaling I’m starting to see the numbers have to make sense.
@Derek Cespedes, yes we are in sellers market. There's more demand than supply. Being persistent in your search is key. Consistency usually separates the weak from the strong. Good luck on your journey
@Derek Cespedes I'd recommend you check out the book "What Every Real Estate Investor Needs to Know about Cash Flow". It's basically a reference book for all types of financial calculations used in real estate. Like everyone has said, there are big differences when talking about ROI, Cash-on-Cash, NPV, DCF, or IRR. Knowing each of their strengths and weaknesses will really go a long way understanding a deal and when speaking with more sophisticated investors. It's a great book that I reference back to all the time.
@Scott Runyan greatly appreciate the feedback Scott I’ll look into that. As stated knowing these numbers makes you very savvy and eliminates properties that just aren’t hitting the numbers you need.
No I would not take a deal for a 10% return. If you are talking cash-on-cash I am seeing over 20%. The last BRRR I did is at 15% and I haven't even refinanced yet
@Frank Maratta today I've spent nearly 8 hours going over BRRRR method. Awesome method and fairly simple to execute just need the right deal and numbers ahead of going all in. Now 15% is amazing man. You're definitely on the right path. I'm still searching for those returns on cash on cash investments out here in south Florida.
@Derek Cespedes I have been investing in apartments for many years. In today's environment, I am still achieving 7-10% annualized ROI on MF syndications. There are obviously a lot more factors to this such, but that's my simple straightforward answer. Best of luck!