Would you settle?

[Cory Lader]

Hey BP! I'm wondering what you all think about this question.

Would you settle for 5-10% CoC ROI in this high interest rate environment if the asset was located in an appreciating market?

[Dan H.]

Quote from @Jonathan Greene:

No one can answer that because there are no details, and we have no idea if you really know what an appreciating market is. A lot of new investors are told the cash flow is low, but the appreciation is high (in a stagnant market) and they believe it. Toss in some more details.

I will add that a lot of new investors, and some not so new investors, under allocate expenses. Most COC estimates are $hit. I am not beeping harsh as she requested additional eyes which was good and she was receptive to inputs… I consulted on one today that had 95% LTV OO but no PMI, 2% vacancy as self managed including delinquent rent and tenant turnover, a maintenance/cap ex that was based on percentage but was a quad and her allocation was ~50% of my estimate, and no PM even though she intends to move away in a year or so.

If I could get 5% to 10% COC at high LTV with my underwriting in a market I considered likely to have strong appreciation, I would consider acquisition if it was rent ready. If I need to value add, I will expect better for my efforts.

Good luck