Quote from @Jonathan Greene:
Quote from @Elizabeth Leb:
@Jonathan Greene
Thank you. I'm sorry I didn't clarify, however I do know the answers to your questions. We are not looking to buy in class c or d. So cash flow isn't the biggest concern. Although it would be nice! We would rather buy in a higher class and have less cash flow/come out even and focus on appreciation and long term. We look at things like safety, unemployment, schools. We have been looking in Florida. We try to get the DSCR to 1.2 before really diving deep into it. However, the road block I face is getting to a point where I think it's an "ok" deal (meaning it's not fulfilling the 1% rule, but more like 0.75% and little to no immediate renovation cost/typically a new build townhome) and then I start to question whether I could find a BETTER deal if I just keep looking. However, been going through this now for years and it causes me to never make the leap. I have more to put down than 20k. More like 150k. Just not sure best way to make use of it. Thank you!
The 1% rule is an old metric. It really doesn't apply as much anymore in most markets because rates are too high and homes are selling for too much. .75% rule is more viable and would be the new 1% rule in this market. From what you said, you have been stuck in analysis paralysis because you are too spreadsheet-centric. If all you do is crunch numbers, it's easy to make anything not perfect. How many properties have you seen in person during these years you've been looking, but not buying? Usually, the confidence comes from more reps (seeing more homes and being more of an asset hunter not a spreadsheet warrior) and going to local meetups so you can meet all the other people nearby who are doing what you can't get yourself to do.
Ok Elizabeth, Ready for it?
Do LESS....
Lol, yup, LESS is more in this case.
Picture this, your driving down the road and come to a 4-way stop, what do you do? You have a few choices, right.
Ok, so what your doing right now is your driving down the road of "I wanna invest" and your coming to a 42,427 way stop...... Yeah, kinda paralyzing isn't it.
Youre with WAY too many options and decisions at one gulp. So you need to do LESS.
So best next action is to start removing things off the table, take away options, start eliminating things.
First off, all high skill requiring items let's remove those. So bye-bye all the Brrr's and Multi's and what not, we need SIMPLE, right, a good simple SOLID base-hit, right.
Ok, next let's remove all the high risk; bye-bye sec8, D/C class, per room rentals, STRs, all that big variables stuff GONE.
Now, let's adjust structure type as that alone will get some really good focus right. With SIMPLE in mind were going to focus on Townhomes. Why? Because with an HOA in tow that means your not doing it alone, you have active "partners" who will be taking care of a slew of things so think of it like training wheels.
Also, townhomes are a great bridge property, it's a common trend that those in townhomes are aspiring for home ownership meaning credit sensitive and with that right mindset.
Now the details, price, condition etc..
We want to remain within a 20% deviation of the median 3/4br home price. And 20% is a HUGE birth so call that the outter fences.
Ideally, no more than 5% over median and no lower than 15% under median. That is a great price target if you map that.
Condition we want is move-in ready, and ideally no more than 10yrs but go ahead and put that fence at 15.
See, now we removed arguably 90% of those overwhelming potentials.
We have a target segment. One that is pretty dang reliable for performance. Now for how to pick the market, well that's simple. Pick a market that:
(a) meets this above, (b) is a place people want to live, (c) you have the resources to do what you do there ie PM's and quality agents.
We use all these fancy numbers and metrics to say whats a good or bad market but end of day, all that jazz is just our way of trying to put "where people want to live" into math. You can just answer it without the jazz, and I bet you know a few places right off top of head where people WANT to live, right.
No, not places you heard people want to live, or were told, or think, no-no-no, where you KNOW people want to live.
When your a housing provider where good decent people want to live, well the rest just has a way of taking care of itself, it really does.
So that's my Rx for you; do LESS, simplify, don't chase grand-slams swing for the bases, focus on the simple obvious, be a good landlord.
It's only as complicated as you want to make it.
