Reality of todays investing

Steve Reutzel · 2024-09-26T20:04:58-07:00

I’m seeking insights from those actively involved in current-day real estate deals—not those in the planning or preparatory stages, and not from those who are trying to sell me anything. The current market environment is markedly different from five years ago, and while many of us wish we could go back to 2019 and purchase beachfront properties, that's not possible. With today's inflated prices, higher interest rates (which may fluctuate over the next year or two), and the likelihood of slower property appreciation in the coming decade, is profitable real estate investing still feasible for the average investor with no insider connections? Specifically, I'm curious about which market segments, if any, offer opportunities for building cash flow and equity that can break even immediately. For context, we recently purchased a beachfront short-term rental condo for around $350k, and while we're hopeful to break even, it's going to be a challenge in the short term. We also own a couple of small commercial properties purchased in 2017 and 2019 that are generating solid cash flow. With around $100k to invest, I’m struggling to find opportunities that appear breakeven or better over the next few years. I'd love to hear from anyone who is achieving immediate positive cash flow without relying on extraordinary insider deals. Are there viable opportunities out there, or am I simply missing them? If so... what market segments are best with today's circumstances: STR, LTR, small commercial, small apartment... I look at all the above and nothing feels good to me.

Drago Stanimirovic

New to Real Estate · Miami, FL · Member since 2024 · 1k+ posts · 478 votes

2y

Hi Steve,

The real estate market today is undeniably tougher for average investors, but profitable opportunities do exist. With higher interest rates and inflated prices, immediate positive cash flow is harder to find, especially in prime markets like beachfront properties. However, long-term rentals (LTRs) in secondary markets offer better cash flow potential, as demand for affordable housing remains strong. Small commercial properties, which you’ve had success with, continue to be reliable cash flow generators, especially in local markets with stable demand.

Short-term rentals (STRs) are riskier due to market saturation and regulatory issues. Breaking even on STRs today often requires targeting less saturated areas with year-round demand, but they generally offer less stability than LTRs or commercial properties.

Success in this environment requires careful market selection, solid underwriting, and perhaps shifting focus to smaller multifamily or commercial properties where rents and demand are more predictable.

If you need help with financing or strategy, give me a call, I’m happy to assist.

Best,

Drago

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Timothy Harstead

Chicago, IL · Member since 2024 · 17 posts · 9 votes

2y

The last five years it was really easy to eat, unfortunately, that is not the norm and shouldn't be for a lot of reasons, with that being said real estate has always been a much harder investment to get into and maintain than say the stock market, with that being said if you take the work to learn it and find the gold inside the rocks, you'll make far more than you could on a stock, if it was easy to do everyone would be doing it and no one would be making money.

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Danny Gonzalez

Real Estate Broker · Member since 2024 · 134 posts · 62 votes

2y

Hey Steve,

Yes, the market is definitely more challenging than it was 5 years ago, but there are still deals that cash flow with the right strategy. What I’ve found to strike the best balance between return and stability is investing in secondary and tertiary markets out of state. Markets like Birmingham, AL, still offer opportunities where properties can either cash flow or break even, with less competition compared to primary markets.

The key is finding good deals and building a strong local team. Value-add properties in the $70k to $100k purchase range, that require rehabs until $40k, with an ARV under $200k, can still cash flow even with 6.5% interest rates, especially when rents range from $1,300 to $1,600+.

If you have any questions or want to learn more, feel free to reach out—glad to help!

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Steve Reutzel

OP

Member since 2022 · 5 posts · 0 votes

2y

Thanks Danny, I appreciate it... I'm all about OOS, but I'm not into the 70-100k properties. I've read a few of your posts and I believe (correct me if I'm wrong) you have a focus on Section 8 properties. I've known some people who have done well in it, but pre-2008 I bought about 10 units and rented largely S8 and it nearly ruined me. Financially set me back a decade or more. The tenants just destroyed the properties... so if I made $150/month in positive rent, I'd lose it while waiting for new tenanats (the turnover was huge.... lot's of 1-2 year tenants) and I had to spend thousands with each turnover. So... though I love the idea of anything with cash flow, that scares me.
Also, to clarify my post... when I said I have about 100k to invest (could do more, could do less...but that's comfortable and quick to access) I'm thinking for a down payment into something, not as a total purchase price.
Obviously you're doing well with this approach... my failure was due to my poor choices and lack of experience / poor self-management... but the sting is still there.

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Bradley BuxtonBusiness Member

Real Estate Agent · NV · Member since 2023 · 1k+ posts · 720 votes

2y

@Steve Reutzel

Real estate is a long game with delayed gratification. The last 5-10 years that payoff was much shorter. All the gurus that bought in the last 5-10 made it seem easy and are now selling their "knowledge" of how to get rich quick by having others put in the hard work of finding those diamonds in the rough. Yes there are still good investments to be made and every deal will be different. A bad deal for one person is an opportunity for someone else that has the skill set to add value to the investment and how that piece of the portfolio puzzle fits into their goals. You have some cash flow coming in and that can offset a purchase in a high appreciation market where the cashflow might me break even. For example in my market there are properties with low rents below market in desirable areas. Year 1 the cashflow will be terrible, after the rents are raised to market and because of the above average appreciation and rent growth in 2-5 years the investment looks a lot better. If a deal doesn't fit your goals in your market you can look elsewhere are start to explore new strategies, like rent by the room, STR, MTR, venues, etc...

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Brad S.

Investor · Pasadena, CA · Member since 2017 · 613 posts · 523 votes

2y

What it sounds like you are asking is, how to get above average returns in today's RE market. And as Robert Kiyosaki once said when asked how to get above returns ... "Don't be average."

The average investor is probably looking at the past 4-5 or even 10 years and thinking that is how the market works and why isn't it still working the same way. The experienced investor sees the cycles and how, especially the past 5 years, was an unnatural anomaly semi-manufactured by the powers that be, which has altered those current cycles somewhat. The good investors learn to pivot and see where the opportunities are in current markets, or decide to sit-out or be patient, while preparing for their preferred market conditions.

Some of the strategies which are still working today seem to be: value-adds - finding a way to add value to properties (rehabbing, additions, repositioning it in the market, etc). Building/new construction - learning how to build reasonably and source properties which can be razed or find empty buildable lots for a reasonable price. That's a start and I am sure there are others.

I personally have a couple of buildable lots in a very competitive market, that pencil out to good cashflow after completion, even if I am able to pull all my money out, and also have the potential or good profit to exchange into a better cashflow market, if I choose.

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Lindsay DavisBusiness Member

Real Estate Broker · Birmingham, AL · Member since 2019 · 327 posts · 203 votes

1y

@Steve Reutzel,

I hear you—the same deals that penciled out in 2019 just won’t work in 2024. But there are still opportunities out there. I’m personally having good success with single-family rentals in the Sunbelt.

A good number of markets in that region are very affordable. 3-bed, 2-bath single families in B/C neighborhoods in Montgomery, for example, can be had for $130,000 or so. Monthly gross rents in those same areas hover around $1,000, so “immediate positive cash flow” could be possible if you identify a good property that doesn’t have immediate capex needs or deferred maintenance issues that need to be addressed.

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Leo Gregoire

Real Estate Agent · Worcester county · Member since 2024 · 33 posts · 24 votes

1y

investing is certainly not what it was five years ago. We have seen unprecedented growth over the last few year which is not the norm.

There are definitely deals to be had/ made but it does depend on your market.

i work with a lot of investors in the central ma area and deals have gotten tougher to find as units trade for more and more but they're still out there.

I suggest house hacking often times. i think it's the easier way into real estate investing with the lowest cost of entry.

If that's not something you are intersted in, have you looked into syndications at all?

I'm not sure where you are located but it sounds like you might need to start looking in markets for longer term plays and not the str beach front game?

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Reality of todays investing

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