All Forum Posts by: Andrea G.

My cash flow has been slowly and regularly increasing during the years thanks to the cap on property tax increase in these 2 States (IE proposition 13 in CA and 10% cap on investment properties in FL).

Recently I started to analyze deals in Texas and Indiana for my next rental property.

Reading some posts on this platform and talking to some investors, I quickly realized that, during the years, all the rent increases will be eaten up by the regular property tax reassessments.

I think many investors often underestimate this issue.

Am I missing anything?

Thanks!

3 Votes

Quote from @Michael Stoyanov:

Hi Becca,

I am sorry to hear about your situation. It seems that it is not working well for you.

I see that with a LOT of " investors" - buying a property with debt to cash flow $200 per month, banking on appreciation. It rarely works, and unless we get a lalapalooza in the real estate market, like we got in 2020-2022 , when the value of real estate increased dramatically, you will always be struggling.

You should always buy for CASH FLOW - nothing else. The appreciation will be an added bonus and since you can not predict it and control it, do not account for it. It is nice to have, but you will not be able to pay your property taxes, or replace your roof with appreciation.

Here is what I think you should do - sell all 3 properties ( 1031 them), get the equity out of them and purchase 1 property CASH. Depending on the equity you have in them, you can look at different markets, as some are less expensive than others. Possibly look into FL ( that is where I am currently operating and can give you more inside info if needed), as prices are lower in some areas and there is not State Income Tax on the income generated from Fl. You can expect to get 8-10% CAP RATE here for a brand new property if purchased cash.

When you purchase the property cash, please get BRAND NEW construction, with warranty and do not buy anything with HOA. That way you will insure you have warranty on the property, it is nice and desirable and built up to the new codes and has what the consumers like nowadays. It will be also highly unlikely that in the next 10 years, you will have to worry about roofs, AC issues, etc, so your cash flow will be substantial. Keep the home for 7-12 years, then sell it ( 1031) and get another brand new home after that. You will save yourself a lot of headaches, it will be easier for you to find tenants and will not have to deal with renovations and expensive repairs. You will also be able to generate substantial cash flow , which you can use to purchase another property after that. Remember - it s not about the quantity of properties you have, it is about the quality.

Let me know if I can answer more questions for you.

It's not possible nowdays to get 8/10% cap rate buying a brand new property in Florida

0 Votes

San Francisco, California

@Tom Shallcross can you share your IIR spreadsheet with me? I was planning to make my own one but it would be very helpful to have yours. Thank you

0 Votes

@Ingrid J.

I have reviewed the contract by myself.

It is not too difficult. You just need to read everything carefully and ask your realtor where you do not understand. I did not have any problem.

0 Votes

All Forum Posts by: Andrea G.

Andrea G. has started 1 posts and replied 4 times.

Post: Why regular property tax reassessments are overlooked when underwriting a deal?

Post: Overleveraging, net worth, cash flow and headache factor

Post: Should you buy a rental property with cash?

Post: Will a title company suffice, or do you need a RE lawyer?