Hi All, I am a newbie in this investing world. I have been waiting to invest for the past 6 months and was told by my agent that it was not the right time back in June 2021 and now got a green signal to move forward with investing since it cooled off. My strategy is buy and hold for long term so would like to hear your thoughts and suggestions since the price is so high on the properties when compared to June 2021 and worried about the rents people will be willing to pay going forward. So as veterans, I would like to hear your opinions and suggestions about which area is best for long term gain even if the Cash on Cash return is less in initial year. Thanks in advance and wish you all successful year ahead :)
Houston, TX · Member since 2011 · 115 posts · 70 votes
4y
For a 50k investment why not purchase distressed homes from wholesalers, rehab then refinance. Try working two deals 20-25k deal out of pocket. Capture no less than 20k each deal. Make you $ work harder for you.
Investor · Member since 2019 · 145 posts · 131 votes
4y
There's going to be deals, albeit harder to find than years prior. If there are wage increases, it will support a higher rent base going forward, which I think will be the case. What is the minimum cash on cash return that you are looking for?
Thanks Jeff. I am looking anything above 8% cash on cash return for initial investment of $50K. The challenge is most of the homes built after 2000 are selling between $210K to $240K. So I have to pump more money as initial investment and forced to rent it out for around $1800 which puts me in tough spot. Here are my other questions after the investment.
FYI, I am concentrating on Millard, Gretna and Elkhorn areas due to great school district.
1. What if the home prices drops in a year or two since things can get back to normal after pandemic?
2. Rental demand may also reduce since people may get into buying mode than renting mode due to affordable home prices?
Houston, TX · Member since 2011 · 115 posts · 70 votes
4y
For a 50k investment why not purchase distressed homes from wholesalers, rehab then refinance. Try working two deals 20-25k deal out of pocket. Capture no less than 20k each deal. Make you $ work harder for you.
Hi Krishna, for long term buy and hold... I say, the time to buy is yesterday! Timing the real estate market is hard to do and best left to "experts." It'll have it's ups and downs, but lets say you overpay a bit... 250k on a 30 year fixed, at 4% will cost you something like $1200 a month. With mortgage rates near historic lows and inflation at around 7%, money is cheap. Do you think your going to regret that purchase in 10 years, 20 years, 30 years? As to the areas, I think you are in the right places. You might want to consider La Vista in Sarpy County too - relatively close to all the major employers and good schools too.
Going forward, I would not worry so much about what you think people are willing to pay for rent. I have a 5 bed, 3500+ sq ft house in La Vista, NE that I thought I would not be able to rent out and was about to sell it, until another RE investor convinced me not to. I didn't think it would cashflow because Zillow, Trulia, and others suggested the most likely rent I could get would be in the 2500k range and less than 1% of homes were renting for over 3k a month. We ended up renting that house for about $1 a sq foot. It's been 4 years now and it has been vacant for only 2 months during that time.
About cash flow, in my experience, the best SFH cashflowing deals in Nebraska, since COVID, have been extremely competitive (especially in the best school districts). We have lost most of our offers to all cash offers w/ zero contingencies. If you are set on investing in Gretna, Elkhorn, and Millard, you could try to find a lender that will make you look like an all cash offer too. To maximize cashflow, we opted to expand our investment area, skip the turnkey traditional rental, and go with an old home to BRRRR into an Airbnb, near Dundee.
As to home prices dropping post COVID, don't worry too much about it... I'm no expert, but I don't see home prices dropping anytime soon. When they raise interest rates, instead of a home getting say 10 offers, they'll get 5. The demand will be less, but it'll still be there. There are simply not enough homes to go around... it'll be a few years before builders meet demand as they've been under building for the last decade. Anyway, I could ramble on and on... hoped that helped. Good luck to you!
Realtor · Cleveland, OH · Member since 2021 · 1k+ posts · 1k+ votes
4y
This looks like a great recipe for the BRRRR strategy! Find a way to source your deals. You can either do the work yourself, or use someone who is already bringing in deals on a consistent basis that works with investors. I would advise finding an investor friendly realtor. You really want someone that invests in their market themselves and understands the numbers. They should be able to determine the COC, annualized return, estimated ARV of a BRRRR, accurate rent comps and more. The valuation and market value of a multi family property differs from a single family and you want someone that understands the distinctions if you go that route. If they just represent first time single family home buyers and aren't constantly finding off market properties and reviewing deals, you'll find a better investment through someone else.
Rental Property Investor · Waterville, NY · Member since 2020 · 26 posts · 26 votes
4y
In my area SFH prices have skyrocketed. Multi-family homes are sitting in the market at slightly inflated prices. Folk are gun shy about taking on rentals right now due to the eviction moratoriums that just expired. It's been impossible to find empty houses and there has been no way of getting the tenants out when purchasing. I bought a 4-plex in Nov 2019 and was able to file an eviction petition in court this week finally. Other investors in my area have hotness the brakes. There have been virtually no rehab opportunities since you can't get the tenants out.
I’m looking forward to the next few months when evictions are possible again.