Quote from @Ell Jay Lindsey:
Quote from @Jay Hinrichs:
Quote from @Ell Jay Lindsey:
Quote from @Jay Hinrichs:
Quote from @Travis Biziorek:
The only answers here are you need different markets or better deals.
That said, if you're executing a true, full BRRRR it's a bit unrealistic to expect to get much cash flow after the fact.
If I can get all my capital back (or real close) I'm content with operating at break even. It's essentially a free property and rents will go up over time, etc.
We're still doing plenty of strong cash flowing deals in Detroit but there's a balance. The more cash you end up leaving in it after a BRRRR the less net cash flow is left (generally speaking).
Or god Forbid you put some equity into the deals.. the idea that you can buy reahab and refi and not have any money in the deal works in very specific markets it simply does not work in most though so you dod the deal and maybe you get 70 or 80% of your cash back if you want to break even or cash flow positive.. if you want all your money back then U take negative cash flow until you refi and rents rise both might happen in a few years.. so temporary negative cash flow.
Virtually every investor on the west coast that is paying wholesalers or off MLS etc with all money returned on refi or minimum down will be negative cash flow for a few years.. but then appreciation kicks in and thats were real wealth is created not making 200 a month.
I agree with this. My post was to see what all these people saying they are investing in LTR, BRRR’ing out, having positive cash flow & not leaving any $ in the deal are doing bc I haven’t seen that it’s possible 99% of the time. Some deals pencil out in non appreciating areas but that obviously comes with a risk. But if you are going to do what you said above then it’s not a real “business” that supports itself until time passes.
totally disagree with this statement.
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But if you are going to do what you said above then it’s not a real “business” that supports itself until time passes. "
its a real business might not support it self day one with zero equity in it.. but its real and those that buy those assets are the ones that get wealthy .. far more than those that buy assets that do not appreciate or if they do very little but collect a few bucks a month which you know what happens to that it gets pissed away .
I should have clarified what I mean by “real business”…RE isn’t a business that supports itself immediately like a service based business. It’s a long term investment. I’m just wondering how people seem to be supporting themselves by RE Alone in this environment.
Ell, I think we now hit on one of the factors for your frustrations, that you have a false idea of how the "business" is supposed to go.
No, the vast majority of business's, including service business, start-up's do NOT clear profit day, month, quarter, year 1.
What may be skewing your perception is your think of Self-Employed persons, say a plumber, electrician etc., who strike out on own as a "business". There is a significant difference between a "business" and "self-employed".
It's such a vast majority of start-up business's that DON'T clear a profit for the first several years, that's it's very literally a rule of thumb to consider and account for the start-up YEARS not month's of operating at net-loss.
This is why if you watch Shark Tank it's a question asked every time not of how much they are profiting but first IF they are operating net profit. And notice how the common expression is one of delight when they hear a "yes", because it is more rare in start-up.
If your thought's are aligned to "How can I get asset's under my control, to be operating with 100% levered capital, 0 capital investment held in enterprise, yet a "cash-flow" similar to that of having vested capital in it...... Well that's simply not realistic in any volume sense what so ever.
Yes, it "can" be done, but those are the outliers, the exceptions, the 1-off's.
Reality is it takes INVESTMENT to make a real estate investment "work" in almost every instance. And the above argument is how to have a real estate investment portfolio, without the "investment" portion.
Sure, building that equity via value-add is one measure but fact is getting a property where on can build a 30% equity position. Too many think that if the reno is 30% that's it, NO. Because it's the profit's from the reno, not the entire reno budget, that has to be 30%. So now think on that, if "profit" is a 20% margin from reno, how BIG does reno need to be vs ARV or acquisition price to get landed 30% equity position in the end???? Huge, it needs to be HUGE impacting reno right, not paint n carpet.
So, your model if getting out 100% financed and with great COC performance, it's not a realistic goal in any volume sense. ie non-sustainable business model.
