Real Estate Investor · San Francisco Bay Area, CA · Member since 2016 · 66 posts · 36 votes
Hi everyone, I'm an aspiring investor and while I read and learn as much as I can on Biggerpockets, one thing I realized quickly was the drastic difference in each market. For example, 1% rule is highly unrealistic where I am in the Bay Area. But that doesn't mean there's no deal to be had.
I always heard about different rules or guidelines that people would use to evaluate their deal, or to say No to a deal. For example:
- 1% rule
- $100 cashflow per door
- $300 cashflow per door in 3 years
- Cashflow positive even if it was 100% financing
- and so on…
All these guidelines don't apply to all markets. I'd love to hear from you what is your rough guideline and which city or neighborhood it applies to. I understand there are many other factors but I think we all have some generic threshold in mind to quickly weed out bad deals. Let's share your number and help us all understand the state of different markets.
Lender · Milpitas, CA · Member since 2016 · 376 posts · 248 votes
10y
Hi @Chatree C. I understand your pain and I agree with you wholeheartedly. Investing in the Bay Area is rough and it's definitely difficult to fit the rules that a lot of people are talking about. People have been buying here because of the appreciation potential due to the amazing job market and constant influx of people from all over the world. Chinese investors are buying properties for cash and leaving the properties vacant! They have that much faith in their investment here.
However, there are some people in the area who are doing amazing things with their properties. I know guys are doing deals in the Bay Area that are still meeting the 1% rule! They're buying distressed properties that were managed poorly, upgraded all of the units, increased the rents, and cashed out all of their initial investment. That's why I think it's more important to knowing how to structure a deal than to worry about guidelines for each neighborhood.
Real Estate Investor · San Francisco Bay Area, CA · Member since 2016 · 66 posts · 36 votes
10y
Hi @Account Closed great point about learning how to structure a deal is a better way to go. I have a long way to go. I should have included that I didn't mean to find guidelines or good numbers to follow. Just more on the curious side that I want to see how big a difference among different markets. Also would be interesting to learn about criteria that's not commonly used (for example, $X cashflow in 3 years - this one value growth in addition to the current number)