All Forum Posts by: Behzad Sharifi

Okay here are some LTR basics: you make money 4 ways:

1.) Cash Flow
2.) Appreciation
3.) De-leveraging your loan
4.) Taxes

Cash flow is controversial: your business needs cash flow to survive, but the source does not matter, could be your W2 if you have one. But cash flow does not make you wealthy. Look at the break down after 30 years on the BP rental calculator.

Appreciation works often times better for medium priced properties that do not cashflow well. It's a percentage. Hood properties often do not appreciate at all, but they cash flow well.

Loan pay down: the bigger the loan, the more you make. On average about 3% of property value p.a., that's typically a 9-12% guaranteeded ROI on your down payment.

Tax write offs: the more the better.

The more you focus on cash flow, the more the other 3 will shrink and vice versa. So it's basically a strategic choice you make. The unicorn years of cash flow galore are over: we are back to normal and real estate is a long term investment, not a quick way to fund your life while you are travelling the world. The time tested combination is to build a buiness and funnel the cash flow into real estate investments. It does not matter if that business is in real estate, a coffee shop or a shopify account.

I am lucky to live and invest in Milwaukee, which has become one of the hottest markets in recent years, which extremely high rental demand (#3 in US per rentcafe) and a chonic housing shortage. And we buy 300k properties, because of what I just outlined. Yeah cash flow is not great, but we put 30% down and that makes it cashflow alright with todays rents, but we expect rents to go up at least with the rate of inflation (2-3% per year) and that compounds over a few years and translates into more cash flow. I am a firm believer of investing in quality properties, good locations that are desireable. The worst thing you can IMO do is to buy an odd listing nobody wanted, just because your numbers said so. Do you have to go 300k? No, but I would start out by looking around the median price for the city you want to invest (and don't go much below the median)

I had another agent tell me "You can cash flow anything depending on how much down payment you make" a while back and was a little taken aback when I heard it.  He was 100% right though.

You can try to cashflow a property in NOVA with a minimal downpayment on one hand and crap in the other and see what fills up faster.  See which fills up faster.  We have a hard time cash flowing even in Central Virginia.

I was a big cash flow guy like 7 years ago but that strategy doesn't work in 2024 in 95% of the markets w/o a super funded down payment.  B:P has all kinds of calculators, etc but no one will tell you the truth.  The main bulk of my net worth has come from appreciation and not cash flow. Hot water tanks, roofs, turnovers, Covid, etc ... all crushed my cash flow but appreciation marches on. 

If you asked ten investors what their biggest regret was you'd get ten saying "i should have bought more back in X year !!!"   The first trip around the Monopoly board ... you pick up as much property as you can afford and if you can't pay cash, you mortgage it.  75 of the last 80 years real estate has appreciated.

If you can't afford it, the bank most likely won't loan on it based on their guidelines.  If you can't afford it, don't buy it but the "Cashflow" strategy is like WWI trench warfare strategy in 2024.

@Behzad Sharifi

What area are you in? I wasn’t making much off mine when I first started 9 years ago but kept planting trees and enjoying all the mailbox $ now as market rent goes way up while my mortgages are fixed and seem really low now compared to rent. Huge yourself 10 years and you’ll be set for life. Most people can’t wait that long, but if you have patience you’ll make a killing with RE after about 10 years and create generational wealth. If you can’t wait 5-10 years then try something else the younger impatient generations are investing in like crypto and BTC and hope for the best.

In most markets, make sure the property works as an LTR. this is because STRs are under attack from multiple directions. Quotas, bans outrageous taxes. OTAs that continuously become less owner friendly. AirBnB is advocating owners pick up the fees that are currently paid by the guests. Even some vacation markets are implementing outrageous STR taxes/fees.

STR can make more money, but requires more effort and has the risks from the various attackers. Best to be sure any purchase can work as an LTR.

by the way lowering LTV is purchasing cash flow at too high a price as the difference between 80% LTV and 70% LTV reduces the return significantly. In terms of return, in most markets you are better off having the negative cash flow than lowering the LTV to obtain cash flow. At 80% LTV, 10% appreciation results in 50% return from appreciation. At 70% LTV, the same 10% appreciation results in 33% return from appreciation.

Good luck

No....a well run STR will make 2-3 times the money of a LTR.....You are new to this right?

North Virginia is a really tough market. I live southwest of Richmond and work in an office in Reston (or did before the pandemic moved us to work from home).

I tried to find a way to make the numbers work in north virginia and gave up. I am sure there are workable deals but in that area you are simply going to have to work with larger numbers.

I recommend you look at Leesburg or other areas west of Fairfax if you are hooked on the area. Otherwise, you might want to consider investing as a remote owner in areas further away

I would ignore those search results. You can find better neighborhoods, put down more $$, change your strategy, etc......