New investor from Hawai'i

[Travis Carvalho]

Hello I am a RE Investor rookie from the Big Island of Hawaii. I am following my beginning steps from the help of BiggerPockets. If anyone from Hawai'i or from anywhere would take some time of their day to help a fellow real estate investor with a small chat, it would be greatly appreciated. I've learned the BiggerPockets members benefit from the use of "Networking" and this is a step in the forums for me to maybe help you and others someday in Real Estate! Thank you for your time.

[Lane Kawaoka]

@Travis Carvalho

San Francisco, Hawaii, Los Angeles, Seattle, Boston are examples of primary markets which are NOT ideal for cashflow investing.

It could appreciate but I consider that gambling. Sophisticated investors invest on cashflow where the rents exceed the mortgage plus expenses (and enough money to pay for professional property manage to do our dirty work).

Sophisticated investors look at the Rent-to-Value Ratio and look for at least 1% or more to be able to cashflow after expenses. You find the Rent-to-Value Ratio by taking the monthly rent dividing by the purchase price. For example a $100,000 home that rents for 1,000 a month would have a Rent-to-Value Ratio of 1%. Most people I work with live in primary markets (as opposed to Birmingham, Atlanta, Indianapolis, Kansas City, Memphis, Little Rock, Jacksonville, Ohio, or other secondary or tertiary markets) where the Rent-to-Value Ratios are under 1%.

Most investors don’t follow this prospectus but then again most investors only own a few rental properties at most. Why is it most sophisticated investors who invest for cashflow own over 20–50–1000+ units?