Strategies for High Equity Growth Properties: Risk Mitigation, Value-Add, Cash Flow

[Sidney Duquette]

I am a moderately experienced RE investor looking for advice on investing in high-equity growth opportunities. I understand that at my age, focusing on properties with strong equity growth potential (even if cash flow isn't immediate) is a solid strategy. However, I’m running into a few challenges I’d love some insights on.

Background:

I'm considering purchasing a lakehouse in the Finger Lakes area, which I believe has significant potential for long-term equity growth. The downside is that these types of properties come with high property values, meaning a large mortgage. Even if I were to rent it out on Airbnb, the cash-on-cash return isn't very attractive.

Specifically, I’m concerned about:

• High mortgage payments and the financial strain it could cause if the property doesn't generate sufficient cash flow.
• Cash-on-cash return is low, even with high-revenue short-term rentals.

My Questions:

1. Risk Mitigation:
   • Any strategies I can use to mitigate the risks associated with owning a high-value property with a large mortgage?
2. Value-Add Property Option:
   • Should I consider looking for a value-add property in a high equity growth area instead? This could give me an option as a house flip if the numbers don't work out in my favor for positive cash flow.
3. Target Returns:
   • Given the higher risk, what cash-on-cash return or annualized return should I be aiming for? What’s considered a reasonable target for a property in a high equity growth market like this?

Looking forward to hearing thoughts from you all!

Thanks!