All Forum Posts by: David Lund

I shoot for 27% return 

Quote from @David Lund:

Been analyzing a bunch of properties to see which ones around me cash flow (honestly not many unless I low ball an offer), but curious to know what cash flow value you all pull the trigger on? Just trying to figure out in general what's a good value to aim for. I take into consideration the mortgage payment, taxes, insurance, 8% vacancy rate, $150/month in repairs & maintenance, $150/month in CapEx, a small property management fee since I'll subscribe to pro on here to use their resources ($32/month). Still unsure if I want to house hack a duplex or get a SFH and rent it out after a year.

Any advice or insight is appreciated. Thank you

For us it’s a minimum of $300/door/month after PITI and a maintenance reserve. So a duplex would be $600/month.  Below that it isn’t worth the hassle.  We have found much better deals on occasion.  We have some units that we are at $800/month (rare - but it happened - and we were giddy!)  

The key is really to buy right.  How have we done it?  We’ve bought from wholesalers, off Craigslist more than once (seriously)! Referrals from friends for a few as well - but many more just off of MLS.  The deals are out there… few and far between, but you can find them.

Here’s one of my better tips on how to search… Redfin’s website lets you sort their listings by $$$/square foot.  This is one of the keys to quickly searching for an undervalued property - but there is a secret to making it work - you can’t be really zoomed out on the map - you need to be zoomed in pretty close to be able to sort on the $/sf column.  If you are zoomed out to far that column isn’t sortable.  Very quickly you can find the cheapest properties with the best $/sf pricing.  After that it’s about sorting through the trashed properties at the bottom of the list to find the ones that will meet your requirements as to condition and value.  We started out buying C class properties that needed less than $3,000-$5,000 work to be rentable.  

hope it helps!

Randy

Cashflow numbers will be highly dependent on the geographic location.  

There are cities you can throw a dart at a map and hit a cash flowing property, and other cities where positive cash flow of any kind can be challenging during year 1.

Personally I prioritize buying homes in areas that are reasonably expected to outperform the overall market in terms of price appreciation.  Using this strategy you will certainly cashflow less during year 1, but fast forward to year 10 and you will almost certainly significantly outperform the average in terms of both current cashflow, as well as total cashflow generated during those 10 years due to regular rent raises.

Cashflow is required to pay the bills, but appreciation is the primary driver in building wealth.  And when there is significant price appreciation, there is almost always a corresponding significant increase in rent rates which leads to large cashflow.

I like netting at least $200 per door. 

For the new year I hope to have my investment group set up. I have people who I have done deals with ask me for this, so we can pool our money. So I am working on setting this up and I am hoping to find a mentor in Los Angeles that knows about syndication, so I don't lose our money.

Those are my goals for 2023 and get at least 2 properties for us and we all make a profit.

To stop buying rentals. Lol. I keep telling myself I’m done