All Forum Posts by: Ryan Byrne

Multifamily is top of the cycle for most markets.

Sellers touting 4% or more rent growth, 3% vacancy, 40% opex on a 6.5 cap. Those are bubble numbers and not sustainable.

If you look over decades vacancy is closer to 10% average, rent at 2 to 2.5%, and opex runs about 50% and even 60% of gross expected rents if landlord pays water and sewer.

When you underwrite properly you are now looking at a cap rate in the 5's. Might as well buy single tenant net lease and do nothing but collect a check for those returns. Multifamily across the country tax assessors for the city and county and ramping up tax bills. The tenants do not reimburse  you like with some commercial properties.

I don't want to load  up on a multifamily property with a low cap rate and high debt that is frothy.

I am not against multifamily it's much harder to find a deal these days that works for that asset class and everyone is trying to chase it now.

When people call me looking for a 10 cap in a high quality area for multifamily I tell them you are about 4 years late to that party. Everyone wants a bottom market price in today's market. Good luck with that one.

Some are deciding to build new over buying existing. Example if you can build for an all in 9 cap instead of buying an older 30 year old building someone put lipstick on for a 7 cap it can make sense.  

@KC Zhang I would never use the Proforma as the final basis of an offer. I totally understand that a Seller want to paint the best possible picture of their property and get the highest possible price. Their agent would be violating their duty if they got 1 cent less then they could.

Having said that, as the Buyer, I have to; 

• Know what I am getting (use the correct numbers / reasonable assumptions)
• Understand the local market (local comparisons; what are similar properties trading for)
• Be satisfied with the risk return calculus (what is the current return and what may happen down the road)

Ryan,

That's the reason I'm really wanting to get into the CA market.  There is so much upside potential.  I just can't justify buying a property that will have negative cashflow right off the bat.  What if rent doesn't increase for 5 or more years and I end up spending a decade paying out of my own pocket?

It looks like you work with investors in the CA market?  How do most of your investors finance their deals?  I could probably have positive CF if I put more down (maybe 40% instead of 20%?).  Is it common for investors to put more down to force positive CF and then pull the equity out once rents have increased enough?  Or do they typically just take negative CF in the beginning?

Thanks Ryan!

My wife, @Sara Hodge, and I have been on BP for around 6 months now. We own our primary residence in Orange County, California, but due to the high prices, we decided to invest out of state. We now own two rentals (SFR) in the Midwest that we purchased through turnkey providers. We are really excited about our purchases and have great expectations, but after reading some real estate investing books, I feel like we might be missing out on something more. These books, as well as a number of people on BP, make it clear that you make your money when you buy and that buying either below market, or forcing appreciation, is key to true wealth building.  Obviously this isn't possible when you buy a 100% turnkey property since you're buying retail.

Since we live in CA, I don't believe I can buy rentals that will cash flow from day one.  I'm writing this because I want to meet with someone who can prove me wrong.  I am dead set on creating passive income and wealth through rental properties, and I'd really like to be able to do this where I live (Southern California).  Is this possible?  If you are successfully buying and renting cash-flowing properties in Southern California, I would love to meet up for breakfast or coffee (on me!).