Should I give up on buy and hold?
Investor · Ewa Beach, HI · Member since 2016 · 68 posts · 26 votes
So we've spent the last 7 months looking at deals daily. We have run the calculator on this site to the point I don't even need to think to put in the numbers...but literally nothing has panned out. 5 cities, 600+ properties looked at, ~50 offers made using numbers that make sense (~10 at full asking) and literally nothing.
What to do now? I am all for "keep on trying" but something isn't right. Am i being naive or are others having the same issue? I go to meet ups or listen to podcasts and webinars and see all of these deals out there everyone is getting but not one has worked out using realistic numbers for us.
Money is also not an issue for us as it is for some...at this point we have enough to pay cash for some of these places we offer on but obviously that doesn't make sense for an investment property...
At this point I am wanting to give up on the buy and hold option and find something else...thoughts?
So we've spent the last 7 months looking at deals daily. We have run the calculator on this site to the point I don't even need to think to put in the numbers...but literally nothing has panned out. 5 cities, 600+ properties looked at, ~50 offers made using numbers that make sense (~10 at full asking) and literally nothing.
What to do now? I am all for "keep on trying" but something isn't right. Am i being naive or are others having the same issue? I go to meet ups or listen to podcasts and webinars and see all of these deals out there everyone is getting but not one has worked out using realistic numbers for us.
Money is also not an issue for us as it is for some...at this point we have enough to pay cash for some of these places we offer on but obviously that doesn't make sense for an investment property...
At this point I am wanting to give up on the buy and hold option and find something else...thoughts?
It sounds to me like your expectations need an adjustment.
What are your goals when it comes to owning rental property? Is it to quit your day job or to leverage additional capital to build long term wealth?
You won't be raking in cash by buying a few rental properties. Instead you will benefit long term by building wealth and lowering your tax burden in the process. Think long term, think OPM
OPM (Other People's Money)
You can obtain up to 10 30yr mortgages in your name. If you are married that's 10 for you & 10 for your wife. Assuming you both live in your own home that puts you as a couple at 19 residential mortgages. You will need to put down between 15-25%. The rest will be lent to you by the bank and the bank will be paid by your tenants.
Assuming you purchased 19 single family homes at 100k a piece that would be a capital output of $285,000 to own a portfolio valued at $1.9M. When you are ready to retire assuming zero appreciation & zero rental cash flow throughout the years you will still clear $1.6M+ more than what you paid.
After reading though all of this I'm still unclear as to what your specific requirements/goals are for a deal. Are your expectations realistic?
@Carolyn Morales Hawaii is like Los Angeles, it doesn't make sense ever...however we have been primarily looking in Ft Collins/Loveland area of CO, Denver, CO, Colorado Springs, CO, Pueblo, CO, Kansas City Metro (Missouri side), Springfield, MO, Satellite Beach, FL (up and down the space coast).
I haven't read through the whole post but if you can't pick up something in Springfield, MO something isn't right... You should be able to pick something up there fairly quick and cheap. That being said if you do buy there, find a good property manager as there's a lot of rentals on the market in the 400-800 range.
So we've spent the last 7 months looking at deals daily. We have run the calculator on this site to the point I don't even need to think to put in the numbers...but literally nothing has panned out. 5 cities, 600+ properties looked at, ~50 offers made using numbers that make sense (~10 at full asking) and literally nothing.
What to do now? I am all for "keep on trying" but something isn't right. Am i being naive or are others having the same issue? I go to meet ups or listen to podcasts and webinars and see all of these deals out there everyone is getting but not one has worked out using realistic numbers for us.
Money is also not an issue for us as it is for some...at this point we have enough to pay cash for some of these places we offer on but obviously that doesn't make sense for an investment property...
At this point I am wanting to give up on the buy and hold option and find something else...thoughts?
You are not in the best place for investment. For someone like you, I would suggest you invest in market outside of your own, even if you have never invested before. A plane ride to some place in US where properties are cheaper would be a must for you to succeed. AZ, NV, Parts of WA.
I wouldn't just keep trying and hoping to find something. You might get lucky after about 100 attempts, but that's just fluke. In life and in real estate, you need a system to succeed - not fluke.
@Farakh Zaman I'm from the space coast area and I spend time in the area each winter.
I spent a little time looking at properties there last winter and found the market to be EXTREMELY competitive. We decided to focus our efforts in Akron where we live most of the year and we've been able to close on 21 units since August. Maybe try some different areas.
I'm in Vero, same problem. We had a big run-up over the past two years. Now, IMO we're actually at a plateau, but Sellers think it's still a Seller's market and are priced high and don't want to negotiate. So, many of them just sit... right now, here, a house that doesn't sell within a month or two is over-priced... five or six months on market it crazy over-priced but they just don't want to budge. Now that we're at the "end of season"... maybe we'll start to see some reductions. (I'm seeing reductions in my in-box in Fort Lauderdale daily.) For the most part, it's a tough, tough market here to find anything where the numbers work, especially when financing, and that's as useful a generalization as all are. Condo fees throw me off every time for buy and hold. The only saving grace right now in Vero is that rentals are in short supply, so the rents are going up, which should begin to help. I'm having to dig deep to find flip properties, older listings that are vacant... I check the tax records to see how long ago they purchased and if they own it right so I know they can come down, especially the ugly ones that just need a little paint. If I had the option of a different market like you do, I'd be thrilled. I'd say best of luck, but clearly you've already got it. Nice! (Envious!)
Make cash offer then finance after to make yourself competitive, close the deal and then line if credit will win yourself deals.
Agreed. Cash sitting is doing nothing, use it as leverage, then pay yourself back.
@Carolyn Morales Hawaii is like Los Angeles, it doesn't make sense ever...however we have been primarily looking in Ft Collins/Loveland area of CO, Denver, CO, Colorado Springs, CO, Pueblo, CO, Kansas City Metro (Missouri side), Springfield, MO, Satellite Beach, FL (up and down the space coast).
You are looking in the wrong places. Hawaii is a fantastic market for buy and hold, even better for flipping. Most of my portfolio is in Hawaii, rent growth every year and a dream to manage! Why are you looking in Denver, when you live in paradise?
@Farakh Zaman You are over thinking it. Joint Venture with someone who is doing what you want to do or find someone to buy the properties in the city of your choice. You said money isn't holding you back.
It seems that a savvy investor leading the way will get you where you want to go.
Please see the blog I just posted on Bigger Pockets entitled "Expectations - Reality = Disappointment"
I think the issue is the markets you are trying to buy and hold. Also remember, the day will come when RE is on sale and you need to be ready to jump in when people are leaving the market in droves. History shows this will happen repeatedly so you just have to be patient!
Hi Farakh,
There are several ways to get the houses you want. If you are paying cash, usually your offer should be more enticing than an offer with a loan.
You can find a neighborhood you want to buy in and either offer people to buy it directly or use an agent to help them sell to you.
There are also ways to get houses that are on the market. A great realtor can help you with these things. Good luck in your search.
Adversity just makes us stronger. Don't quit the benefits outweigh the stresses.
As a professional I can tell you I make 1 or 2 bids always get it in the most competitive market (west coast around San Francisco). If you made 50 offers you are probably not doing it right.
No offense I do not think it is even worth your time. Suggest you come back later with better idea what it takes to win. Lose 50 times is a record.
Great that you can succeed in getting an offer accepted after only one or two tries. Now try to do something constructive by telling the poster exactly how you manage to get such results.
Farakh Zaman
N.E Florida is a good market Jacksonville, Orange Park. Duval and Clay County.
@Farakh Zaman I don't know much about the CO market but I do know red hot market. In the SF Bay Area, it's not uncommon to have people looking/making offers for 1+ years with no purchase. And these are people buying primary homes and are desperate to get in. They go to open houses every week and many can pay cash. Sometimes, even cash buyers need to pay full price. So, don't be discouraged. This is just how red hot market works.
Don't be discouraged?? How can he or anyone in similar circumstances not be? He's clearly being screwed over by unreal competition, and the only solution is probably to focus on a less competitive market where the odds are more in his favor. For him to continue "banging his head against the wall" while trying to remain optimistic is completely silly advice.
@Farakh Zaman speaking specifically to the CO markets, what sticks out to me is you are making offers. I can't remember the last property I purchased that I made an offer on. You need to purchase from wholesalers or direct from owners. Our market is competitive enough being here, I couldn't imagine doing it from a distance.
@Travis Sperr, Thanks for the input. I have not looked at wholesales however had a mail campaign in Denver going.
FZ
Thanks for all of the input everyone. Just a couple other data points for you to help complete the picture of my situation.
- For those that asked why not just stick w/ Hawaii; it is because I'm active duty and will be moving in the next 12 months or so. Due to travel/ops tempo, I don't have time to manage a flip here on island which is why we decided the buy and hold strategy.
- The reason we are focusing on the front range of CO is because we have a property there already, our family is there and we know people on the ground there to help us look at things when we need someone to go on an inspection or drive by at the very least. We also will most likely retire there after 8 more years of active duty. Kansas City was the same reason; we have family and friends there. Everything we found in KC was either killed by taxes or needed extreme rehab.
- For those asking what my expectations have been, I have been looking for the following:
8-12%CoC ROI (I started out at 12% and have come to realize that is not possible in CO)
$100/door for multi-families
The rationale for these numbers was based on some of the bigger pockets books and webinars.
I have used the bigger pockets calculator exclusively to evaluate deals. I assume 3-5% vacancies, 4-5% repairs, 5-10% CAPEX depending on condition, 10% PM. I get insurance quotes form USAA, have a mortgage broker who gives me the current rates (4.875-5%), look up the taxes on the county site (except FL because that county's website is atrocious so my RE agent gives me the data).
- The deals I that have fallen through, I actually go back and run the numbers using the BP calc with the purchase price and it literally is negative every time, which is why I am frustrated. I feel like either the calculator I'm using is so conservative that I'm missing deals, or I'm dealing with absolute absurdity and in that case there is no reasonable way to win against that.
Again, I appreciate everyones inputs. I will continue to trudge on because CO is where we really want to invest in, but it may come down to just sitting and waiting until we are actually in a place where it doesn't take 8 hours and $1500 a person to fly in for a weekend.
Don't be discouraged?? How can he or anyone in similar circumstances not be? He's clearly being screwed over by unreal competition, and the only solution is probably to focus on a less competitive market where the odds are more in his favor. For him to continue "banging his head against the wall" while trying to remain optimistic is completely silly advice.
Thank you for the empathy and capturing my frustration...that is exactly what I am feeling. As you stated, I'm going to look at other markets to see how that works out.
@Carolyn Morales Hawaii is like Los Angeles, it doesn't make sense ever...however we have been primarily looking in Ft Collins/Loveland area of CO, Denver, CO, Colorado Springs, CO, Pueblo, CO, Kansas City Metro (Missouri side), Springfield, MO, Satellite Beach, FL (up and down the space coast).
You are looking in the wrong places. Hawaii is a fantastic market for buy and hold, even better for flipping. Most of my portfolio is in Hawaii, rent growth every year and a dream to manage! Why are you looking in Denver, when you live in paradise?
Because I am active duty and only in HI for another 12 months. I can't work on a flip with the amount I travel and literally nothing I have run in HI has come out with more than a -8% CoC ROI
Farakh Zaman
N.E Florida is a good market Jacksonville, Orange Park. Duval and Clay County.
Thanks @Carolyn, I have been looking south of there, but will look in those areas as well.
FZ
Please see the blog I just posted on Bigger Pockets entitled "Expectations - Reality = Disappointment"
I think the issue is the markets you are trying to buy and hold. Also remember, the day will come when RE is on sale and you need to be ready to jump in when people are leaving the market in droves. History shows this will happen repeatedly so you just have to be patient!
Thanks @David Vernich, I will check that one out.
FZ
Change strategies, look at different markets, but don't give up. It doesn't matter how many times it doesn't work as long as it DOES work in the end.
So hard to feel like it will work, but thank you for the encouragement. Will keep pressing on.
FZ
After reading though all of this I'm still unclear as to what your specific requirements/goals are for a deal. Are your expectations realistic?
@Gregory, see my post above that has my expectations in it. 8-12%CoC ROI & 100/per door.
Fort Collins and most of the Front Range is extremely hot!
Have you attempted to get deals in markets with a bit less pressure? And have you availed your self of the services of any wholesalers? There are a ton of deals out there, esp if you have cash to close/rehab, and wholesalers do all the marketing necessary for you for an small fee. Just make sure you get some first hand knowledge of markets you want to invest in long distance and talk to other investors there! There are some whole salers who are extremely good at what they do and will even run comparables for you or make a package showing rents ROI etc.