All Forum Posts by: Dan H.

Quote from @James Hamling:

Quote from @Dan H.:

Quote from @James Hamling:

Quote from @Dan H.:

Quote from @Jeremiah Dunakin:

Quote from @James Wise:

Quote from @Bruce Woodruff:

Here's my take, I believe you are missing some key points (or assuming incorrectly :-)

Put upward pressure on interest rates: Trump's demand that the Fed lower rates will have absolutely no effect.

I disagree. Presidents can, will and do put pressure on the Fed chair. They hire them and can fire them, it's not realistic to think there is no pressure on them. I say Trump puts his size 11s up Powells butt by this summer.

However, the implementation of tariffs, or just the threat of tariffs, is likely to influence rates, by impacting inflation numbers, and this influence may come quickly if prices for many common goods and services and raw materials rise

You are assuming that the typical view of Tariffs that we hear from the Dems and the Media are the way they actually work. If you listen to other economists, there are different views on this. And once the 'Reciprocal Tariffs' go into effeect, that's a whole new game. This whole Tariff thing should be short-lived anyway, I see little effect on the economy overall...

I personally believe it is unlikely that Trump actually deports millions of illegal immigrants who have settled in the United States. This, to me, seems impractical, and a PR nightmare.

I think Mr Trump will indeed deport 'a bunch', probably many millions by the time we are done, but certainly I would see the number in excess of a million, easy. He doesn't care about the PR either, the most recent poll saw 70% approval IIRC. The immigration was a huge reason he was elected.

Just my $.02.......

 This is where so many people on the left miss the boat. The negative PR he's getting for the deportations is only from the left. As Bruce said, his stance on deportations is a major reason why he was elected. Whether you are pro or anti deportation is one thing, but it's wild to me how many on the left fail to read the room. America has spoken and the left's PR stance on open boarders and immigration is no longer something the majority of Americans agree with. What MSNBC says about the deportations does not matter to the majority of Americans as they are in favor of them.

 Agreed, the American people voted for what’s going on. They voted and they voted overwhelmingly to do it. Like the man and his policies or not. The fact remains that his approval numbers are as high as they ever were. He is doing what he voted in to do. It’s amazing (I said this durning the last administration as well ) that people just don’t look at reality. They want to hate (sadly that’s where we are pure unbridled hatered) a party or group of people. Just look at facts. We see policy from both sides. Does it work? Yes or No. doesn’t matter who signs the bill. Does it work

 Overwhelmingly to me would imply at least a majority.  I do not know your definition of overwhelmingly, but they did not vote overwhelmingly for trump even using my fairly low threshold of having the majority of voters vote for him. 

There is this false narrative that there is a clear mandate by the people.  Reality is trump did not get the majority of the vote and the senate and house majorities are very thin. 

The country and the populace are very divided and have been this way for a while.  It is not good.  I wish both parties had nominated more moderate candidates, but I could also wish to win the lottery and it has zero impact. 

@sctot trench I disagree about your direction on prices as labor used for housing will increase.  Material cost is likely to increase.  This will slow new housing and make it more expensive. Supply in desirable areas is already less than demand.  Any deportations will not overcome this imbalance. Land is finite in many of these desirable areas.  So providing housing in these areas is full of challenges. 

It’s going to be a bumpy ride .. 

 Dan.... 73% approval ratings for POTUS Trump as of now...... And as they uncover and disclose more and more of EXACTLY what they campaigned on and said was going on AND what they'd do about it, it's GROWING......

If that doesn't tell you something, nothing will......

 Your response has no relation to the vote.  The comment "They voted and they voted overwhelmingly to do it." would at a minimum indicate he received a majority of votes.  He did not.  I do not consider this arguable unless you believe overwhelming does not, at a minimum, imply a majority.  My own definition of overwhelming is closer to a super majority, but I would hope everyone considers overwhelming to at least imply a majority.

Trump did not get a majority of vote.  He won the popular vote by 1.5% or 1/3 of what Biden won the popular vote by (So Biden was at 3X more "overwhelming" vote).  I would not have referred to Biden victory as "voted overwhelming". The last presidential election that I would classify as was voted overwhelming in one direction was Reagan 2nd term.  Obama won by over 7% in his first term.  Some may consider this over whelming, but it does not meet my criteria.

I think most people would agree that voting overwhelming implies at a least a majority of the vote.  I hope we can agree on at least this much.

The 51st State in the Union..... DENIAL....

 My Definition of overwhelming vote being at least a majority and you think I am the one in denial?  

I am not sure what you think is denial.  Biden won popular vote by 3X trump vote margin (1.5% versus 4.5%) is fact you can look up on any reputable site.  is that the denial?

If Trump was voted overwhelmingly then biden was voted in 3X some low threshold of overwhelming.  In addition, biden won a majority of the vote so using the minimal definition of "voted Overwhelmingly" of being a majority (which is not my definition), biden was "voted overwhelmingly" into office.

I do agree that my definition of overwhelming to be a super majority is somewhat arbitrary, but I believe virtually everyone (except possible James Hamling) believes it has to be at least a majority to be overwhelming.

Whatever ...

Out (I could add disparaging remark but will not to try to keep BP civil beause I enjoy the forums)

Quote from @James Hamling:

Quote from @Dan H.:

Quote from @Jeremiah Dunakin:

Quote from @James Wise:

Quote from @Bruce Woodruff:

Here's my take, I believe you are missing some key points (or assuming incorrectly :-)

Put upward pressure on interest rates: Trump's demand that the Fed lower rates will have absolutely no effect.

I disagree. Presidents can, will and do put pressure on the Fed chair. They hire them and can fire them, it's not realistic to think there is no pressure on them. I say Trump puts his size 11s up Powells butt by this summer.

However, the implementation of tariffs, or just the threat of tariffs, is likely to influence rates, by impacting inflation numbers, and this influence may come quickly if prices for many common goods and services and raw materials rise

You are assuming that the typical view of Tariffs that we hear from the Dems and the Media are the way they actually work. If you listen to other economists, there are different views on this. And once the 'Reciprocal Tariffs' go into effeect, that's a whole new game. This whole Tariff thing should be short-lived anyway, I see little effect on the economy overall...

I personally believe it is unlikely that Trump actually deports millions of illegal immigrants who have settled in the United States. This, to me, seems impractical, and a PR nightmare.

I think Mr Trump will indeed deport 'a bunch', probably many millions by the time we are done, but certainly I would see the number in excess of a million, easy. He doesn't care about the PR either, the most recent poll saw 70% approval IIRC. The immigration was a huge reason he was elected.

Just my $.02.......

 This is where so many people on the left miss the boat. The negative PR he's getting for the deportations is only from the left. As Bruce said, his stance on deportations is a major reason why he was elected. Whether you are pro or anti deportation is one thing, but it's wild to me how many on the left fail to read the room. America has spoken and the left's PR stance on open boarders and immigration is no longer something the majority of Americans agree with. What MSNBC says about the deportations does not matter to the majority of Americans as they are in favor of them.

 Agreed, the American people voted for what’s going on. They voted and they voted overwhelmingly to do it. Like the man and his policies or not. The fact remains that his approval numbers are as high as they ever were. He is doing what he voted in to do. It’s amazing (I said this durning the last administration as well ) that people just don’t look at reality. They want to hate (sadly that’s where we are pure unbridled hatered) a party or group of people. Just look at facts. We see policy from both sides. Does it work? Yes or No. doesn’t matter who signs the bill. Does it work

 Overwhelmingly to me would imply at least a majority.  I do not know your definition of overwhelmingly, but they did not vote overwhelmingly for trump even using my fairly low threshold of having the majority of voters vote for him. 

There is this false narrative that there is a clear mandate by the people.  Reality is trump did not get the majority of the vote and the senate and house majorities are very thin. 

The country and the populace are very divided and have been this way for a while.  It is not good.  I wish both parties had nominated more moderate candidates, but I could also wish to win the lottery and it has zero impact. 

@sctot trench I disagree about your direction on prices as labor used for housing will increase.  Material cost is likely to increase.  This will slow new housing and make it more expensive. Supply in desirable areas is already less than demand.  Any deportations will not overcome this imbalance. Land is finite in many of these desirable areas.  So providing housing in these areas is full of challenges. 

It’s going to be a bumpy ride .. 

 Dan.... 73% approval ratings for POTUS Trump as of now...... And as they uncover and disclose more and more of EXACTLY what they campaigned on and said was going on AND what they'd do about it, it's GROWING......

If that doesn't tell you something, nothing will......

 Your response has no relation to the vote.  The comment "They voted and they voted overwhelmingly to do it." would at a minimum indicate he received a majority of votes.  He did not.  I do not consider this arguable unless you believe overwhelming does not, at a minimum, imply a majority.  My own definition of overwhelming is closer to a super majority, but I would hope everyone considers overwhelming to at least imply a majority.

Trump did not get a majority of vote.  He won the popular vote by 1.5% or 1/3 of what Biden won the popular vote by (So Biden was at 3X more "overwhelming" vote).  I would not have referred to Biden victory as "voted overwhelming". The last presidential election that I would classify as was voted overwhelming in one direction was Reagan 2nd term.  Obama won by over 7% in his first term.  Some may consider this over whelming, but it does not meet my criteria.

I think most people would agree that voting overwhelming implies at a least a majority of the vote.  I hope we can agree on at least this much.

Quote from @Jeremiah Dunakin:

Quote from @James Wise:

Quote from @Bruce Woodruff:

Here's my take, I believe you are missing some key points (or assuming incorrectly :-)

Put upward pressure on interest rates: Trump's demand that the Fed lower rates will have absolutely no effect.

I disagree. Presidents can, will and do put pressure on the Fed chair. They hire them and can fire them, it's not realistic to think there is no pressure on them. I say Trump puts his size 11s up Powells butt by this summer.

However, the implementation of tariffs, or just the threat of tariffs, is likely to influence rates, by impacting inflation numbers, and this influence may come quickly if prices for many common goods and services and raw materials rise

You are assuming that the typical view of Tariffs that we hear from the Dems and the Media are the way they actually work. If you listen to other economists, there are different views on this. And once the 'Reciprocal Tariffs' go into effeect, that's a whole new game. This whole Tariff thing should be short-lived anyway, I see little effect on the economy overall...

I personally believe it is unlikely that Trump actually deports millions of illegal immigrants who have settled in the United States. This, to me, seems impractical, and a PR nightmare.

I think Mr Trump will indeed deport 'a bunch', probably many millions by the time we are done, but certainly I would see the number in excess of a million, easy. He doesn't care about the PR either, the most recent poll saw 70% approval IIRC. The immigration was a huge reason he was elected.

Just my $.02.......

 This is where so many people on the left miss the boat. The negative PR he's getting for the deportations is only from the left. As Bruce said, his stance on deportations is a major reason why he was elected. Whether you are pro or anti deportation is one thing, but it's wild to me how many on the left fail to read the room. America has spoken and the left's PR stance on open boarders and immigration is no longer something the majority of Americans agree with. What MSNBC says about the deportations does not matter to the majority of Americans as they are in favor of them.

 Agreed, the American people voted for what’s going on. They voted and they voted overwhelmingly to do it. Like the man and his policies or not. The fact remains that his approval numbers are as high as they ever were. He is doing what he voted in to do. It’s amazing (I said this durning the last administration as well ) that people just don’t look at reality. They want to hate (sadly that’s where we are pure unbridled hatered) a party or group of people. Just look at facts. We see policy from both sides. Does it work? Yes or No. doesn’t matter who signs the bill. Does it work

 Overwhelmingly to me would imply at least a majority.  I do not know your definition of overwhelmingly, but they did not vote overwhelmingly for trump even using my fairly low threshold of having the majority of voters vote for him. 

There is this false narrative that there is a clear mandate by the people.  Reality is trump did not get the majority of the vote and the senate and house majorities are very thin. 

The country and the populace are very divided and have been this way for a while.  It is not good.  I wish both parties had nominated more moderate candidates, but I could also wish to win the lottery and it has zero impact. 

@sctot trench I disagree about your direction on prices as labor used for housing will increase.  Material cost is likely to increase.  This will slow new housing and make it more expensive. Supply in desirable areas is already less than demand.  Any deportations will not overcome this imbalance. Land is finite in many of these desirable areas.  So providing housing in these areas is full of challenges. 

It’s going to be a bumpy ride .. 

My question is why are you looking at OOS?  I suspect that whatever the reason, CA experienced investors could state why it is BS.

The reality is
- CA RE has on average produced better return than any other state.  The appreciation has been outstanding.  The cash flow over a long hold is tightly coupled to appreciation.  This implies that CA has both great appreciation and great cash flow over long holds.
- CA has larger share of residential units owned by investors than any other state.  Contrary to what various people in Ohio who state that many CA investors are investing there, Ohio is near the lowest percentage of investor owned residential units.
- CA has near fixed property tax.
- There are cheap ways for you to enter your local market due to OO financing that is not available OOS.  Are you aware of NACA, FHA, 95% LtV conventional financing.  Are you aware that rents on MF units count toward income for loan qualifications.  Lets do some math, You have $40K to purchase which likely means $35K when including closing costs.   OOS 80% LTV you have $175K.  In many market this can get you class b unit and OOS I would not suggest going below class B.  not bad but at 96.5% FHA you can purchase $1M OO in your local market.  Lets ignore that the area that costs $175K has not had the same historical appreciation as the area that costs $1M and say they both appreciate a modest 4% the first year.  You make $7K on the $175K property or $40K on the $1M property.  But lets do it as ROI. $4K/$35K = 11.4% from appreciation.  Not bad.  Or $40k/$35k is 117.6% from the appreciation on the $1M asset.  note this is year one with a fairly modest appreciation forecast.  BTW my market in the last dozen years has only has a single year with as poor appreciation as 4% which implies the reality is that virtually every in the last dozen years you would far exceed that projection.  My worse appreciating property has appreciated $2700/month over its long hold.  My best appreciating properties have appreciated over $10K/month over their hold period.  What do you think a property worth $175k has appreciated per month over the last 10 years?  Do you think the appreciation has even kept pace with inflation?  It might be close, but the below $100K properties almost for sure have not kept up with inflation over the last 10 years.
- If doing value add, which market do you think your efforts are going to add more value, the low property cost area or the high property cost area?  In 2024 I added a half bathroom our of existing space in a high cost area (over $2k/ft).  Comp showed it added $50K of value.  What do you think it would add in a cheap market?  Would it even add as much as it cost to add?  probably not because the cheap markets have valuation below build costs.

So ...
Why are you looking to invest OOS?
Something to ponder.

Good luck

I enjoy the challenges of earning money.  Wealth is the scorecard, but somehow gifts have to be accounted for.  The last 3 years I gave away more than half my taxable income and last year I gave away 4 to 5 times my taxable income which perturbs the scorecard.

So for me, I plan to stop when it is no longer fun.  I am torn because I also like to travel, fish, backpack and making money takes some time.  What do you do?  You combine the two.  A trip to look for a good investment or to make some contacts that can potentially be lucrative.  Business travel to interesting places or that includes experiencing interesting events.

You can try have your cake and eat it too.

Best of luck with your investments

How about some numbers derived from @Alan Asriants numbers. 

$200k fully financed with 8% heloc, 30 year term is $1468/month.  Using 50% rule (expenses excluding P&i is 50% of rent) here are the numbers;

1800 (rent) - $900 (expenses) - 1468 (heloc) = negative $568/month

At your rent point with that size unit, your expenses will ve less than depicted by the 50% rule, so let’s use a likely more accurate 40%

1800 - 720 (expenses) - 1468 = negative $388/month

Now let’s imagine you self manage and you time is not worth anything (I strongly recommend believing your time is worth less or worth less than a quality PM would charge) with 8% further reduction so expenses are down to 32%

1800 - 576 (expenses) - 1468 = negative $244/month. 

The cash flow does improve with the hold .   So let’s assume with realistic expense estimates over 1st 5 years you average $250 in today equivalent dollars (it will be a challenge at that starting point).

The ADUs are typically receiving valuations below $100k, but let’s be generous to show the scope of the people and say it adds $150k of value. 

Initial negative equity position is $50k. 

$50k / $250 (cash flow) = 200 months (16 years) to recover the negative position.  

but you will have appreciation and equity paydown, but so would any property you buy with financing. Add the primary structure will be rent controlled if over 15 years old. Add in the effort involved. If you want an ADU, purchase a property with an ADU.

The big issue is building a single small residential unit is the most expensive residential development.

Here is a list of why adding a single ADU in single family zoned areas in my CA market is typically a poor RE investment:
1) The value added by the ADU addition is often significantly less than the cost of adding the ADU. Search the BP for ADU appraisals to encounter numerous examples. This creates a negative initial position. This negative position can consume years of cash flow to recover. Make sure you know the value the ADU will add to the property before building the ADU.
2) the financing on an ADU is typically far worse than for initial investment property acquisition or is often not leveraged by the ADU (HELOC, cash out refi, etc). Leverage magnifies return.
3) The effort involved in adding an ADU is comparable or larger than a rehab associated with a BRRRR. However if I do a BRRRR I can achieve infinite return by extracting all of my investment. Due to item 1, adding an ADU can require years to start achieving any return (once the accumulated cash flow recovers the initial negative position).
4) Adding an ADU is a slow process. It can take a year or more to complete an ADU. During this time you are not generating any return from the money invested in the ADU. This amounts to lost opportunity because if you had purchased RE, at the closing it can start producing return.
5) ADUs detract from the existing structure whether this is privacy, a garage, or just yard space.
6) this is related to number 1, but there are many more buyers looking to purchase homes for their family than there are RE investors looking to purchase small unit count properties. This may affect value or time required to sell.
7) Adding an ADU does not make the property a duplex. For example in many jurisdictions I can STR units in a duplex but cannot STR an ADU (some jurisdictions will let you STR if you owner occupy). Duplex have different zoning that may permit additional units. Duplex can always add additional units via the ADU laws.
8) Related to number 1, purchasing a property with an existing ADU is cheaper than buying a property and adding an ADU. Why add an ADU if it can be purchased cheaper?
9) adding multiple ADUs or adding an ADU to a quad looses F/F conventional financing. This reduces exit options and affects the value.
10) Small number of small units is the most expensive residential development there is. This implies residential units can be built at lower costs and provide better return than building a single ADU.
11) adding an ADU to SFH can make the SFH fall under rent control. In CA currently only MF properties are rent controlled. If the house is older than 15 years old and an ADU is added, it can become rent controlled. Rent control laws are market specific. Make sure you know the impact that adding an ADU will have on any rent control.
12) investors seldom include the land value in the overall ADU costs. The reality is the land has value.

make sure you do accurate and conservative underwriting.   This includes knowing the value that will be added by the ADU.  If you cannot find comps to provide a clear valuation for the ADU addition, underwrite for a poor valuation (no more than 50% of the hands off ADU addition costs).  Understand the 50% expense rule especially as it relates to cap ex.

Good luck

Quote from @Jay Hinrichs:

Quote from @Clayton Silva:

Quote from @Jay Hinrichs:

Quote from @Clayton Silva:

Definitely helps to get quotes from a few places, problem is that options are shrinking as more carriers leave the state of CA.  A lot of investors are jumping to secondary lines of insurance coverage and the problem with those is that the companies are based in the Cayman Islands or the Bahamas a lot of the time, and it is suspect that they would actually pay out if the need arose unfortunately.  

LOL  I would never take insurance from off shore holy cow.. I would not be surprised if banks would not recognize them either.. maybe I dont know enough about insurance.. I guess Loyd's of London is off shore :)  but Caribbean carriers not so sure.

My carrier on our master inventory policy just shut off ALL of CA.. I dont currently have any projects going in CA at the moment but I have been looking for a Summer cabin up by Truckee and I suspect insurance will be an issue although I will pay cash but I will still want some coverage.

 Yeah, I just did a loan for an investor in the North Tahoe area and the insurance was wild, a lot of that is only going to qualify for Cal FAIR unfortunately due to wildfire risk.  Lloyds is offshore and I see them a lot in FL where they have the same issues as we do here in CA.  

while we are talking about it Cal Fair  how much more are they than what had been typical insurance rates  ?? 

 luxury cabin, 3100', 4/3/1, nice finishes including spa and sauna, in high fire risk area with total property value ~$500k with CA FAIR was just over $5K fire only.  My quote expires in 2 days but we have run into a hiccup closing.  If the issues can be resolved, I will need to get another quote but this should give an idea of the CA FAIR.  

Does not get more current as this quote was from just after the LA fires.  their max quote period is 30 days so seems the quote was from Jan 13.

It is not cheap, but the risk it high.  A fire could be unstopable there.  The time to get a large ground suppression there is extensive (it is ~45 minutes from a decent size town).  When I consider the risk and the rebuilding costs, I am surprised the insurance is not even higher price.

We got a referal for our CA FAIR agent from the RE agent and they were real responsive.  PM me if you want the contact (they deserve some business for their great support, but if I do not close I have no need for the insurance).

Good luck

Quote from @Adam King:

Hi @Ila Darafshandar,

@Dan H. has some great insights here, but I will add what I can!

It seems as though your friend is ~700/month behind on rents per unit. The most you are allowed to raise rents on a year over year basis is 10% or 5%+CPI which ever is lower. This past year it is 8.6% as Dan said. If the rents are already nearing market rates, will she be able to go up that much? 

Is she paying a property manager? if so she should be self managing and saving herself the 6-10% on rents.  Depending on her contract she may have to wait out the term.

Is she currently covering utilities? If so, shifting that to the tenants at the time of lease renewal is another great way to decrease her overall debt service.

Other good ways to increase revenue in the mean time:

- Raising washer/dryer prices. this may only equate to $4-$5 per unit per week, but its better than nothing

- If there are any unassigned parking spaces, meaning not attached to any lease, make them paid only any offer them to tenants at a new fee. Again this may only bee in the hundreds every month, but it's better than nothing.

From the outside, it looks as though she will have to nickel and dime her way into being cash flow positive. As Dan said though, there are many tax benefits. I am not a CPA, but I can tell you how I would do it if self managing. I would keep track of of all the losses, and work with a CPA. Depending on her income level, she may be able to write off a portion against her income. At the very least she will be able to carry forward the losses for a very long time, helping her get into cash flow positive status much faster.

 >Is she currently covering utilities? If so, shifting that to the tenants
at the time of lease renewal is another great way to decrease her
overall debt service.

This has already been ruled to be against the substantial change of lease terms.  Switching the utilities over will result in a reduction in maximum rent increase.

>If there are any unassigned parking spaces, meaning not attached to
any lease, make them paid only any offer them to tenants at a new fee.
Again this may only bee in the hundreds every month, but it's better
than nothing.

Same thing if they are currently able to park there.  You cannot charge more  for something that they already have.  This is true of parking spots, sheds, garages, etc.  Pretty much everything.  It has been included in the change of lease part of AB1482.  Similarly if you currently allow smoking you cannot change the least to prohibit smoking.  Similar for pets.

Especially in the city of San Diego, I would be careful about violating the tenant protection act.

>As Dan said though, there are many tax benefits.

I purchased a 4 unit in Dec 2021 in Pt Loma (Worth ~$2.5M then, now worth ~$3.4m).  I used accelerated depreciation and got $200K of accerated tax write offs.  Those in other markets will not be impressed.  The issue is our land value is high, so the structure value is low compared to the overall property cost.  Depending on the worth of the 11 unit, it could do far better than my property or if it is cheaper valuation per unit then maybe only a little better.  Regardless, I would rather have the $200K now than years later.  I suggest the buyer at least get an estimate of the potential tax savings.  The place I used provide cost quote and estimated savings at no cost.  Depending on those estimates, the buyer can determine if it worth pursuing (I suspect it will be worth pursuing).

Good luck

I am under contract on a property that looks like it will not close.

When I got the 3 fireplaces inspected, it was only a few hundred dollars extra to chimney sweep them at the time of inspection so we paid to get them swept.  The owners will benefit from the chimney sweep that we paid for.  We knew it was a risk and would be wasted money if the sale did not close.

We will not be recovering the cost of the inspection or the chimneys being cleaned.

Good luck

Quote from @Andrew Syrios:

The BRRRR strategy is tough these days (I even wrote an article about it that goes into more detail a little while back: https://www.biggerpockets.com/blog/beyond-brrrr-taking-advan...)

In short, high interest rates as well as labor/material costs makes it hard to buy a property with debt and cash flow. Not impossible, but much harder than before. By far your best bet are cheaper markets. Baltimore and Jacksonville are certainly better than say New York or San Francisco. But southeast and midwest cities (not including Chicago or Miami or most of Florida) are your best bet

I agree BRRRR are more challenging than prior to Q2 2022, but I do not agree with your premise as to what market is best. To me, I want a market where the value add generates maximum return. This is not the cheap markets but the higher cost markets.

This year I added a half bathroom out of existing space in a very expensive area.  The comps showed this half bathroom added $50K of value. 

The location that is best for BRRRR? Is it the age old argument what is better appreciation or cash flow. Not in my opinion. There is no doubt that the markets you listed will have better initial cash flow. I think it is just as indisputable that higher cost markets will produce greater value add via a proper rehab.

Next question is does initial cash flow have any correlation to actual cash flow over a long hold.  It is my view it has the exact opposite correlation that most people think.  The higher initial cash flow market will in general have worse cash flow over a long hold than more expensive markets.   This is because RE prices reflect a lot of parameters including anticipated rent growth.  The cheap markets generally project poor rent growth.  Expensive markets generally project high rent growth.  Rent growth has a larger impact on long term cash flow then initial cash flow.

I am confident that on a 10 year hold, the higher cost market BRRRR in most markets will out perform the lower cost market BRRRR. Initially the high cost will have generated more value via the value add. The cheaper market will have the initial better cash flow. Somewhere long before 10 years, the higher cost market is likely to have the better cash flow and that will in general increase each subsequent year. By year 10 the higher cost area is likely to have had the better initial value add, the better cash flow over the hold, and the better appreciation.

BRRRR is meant to be a long strategy. This implies a long hold.

Good luck