All Forum Posts by: Jon Q.

I just ran the numbers using the BRRRR Calculator (estimated a couple of numbers) and it doesn't look good (-80% ROI in the first year -60% in the second). I am not a pro yet, else I would share the pdf.

When I ran the numbers in my own excel sheet, the numbers were a bit different. It had a better outcome, but still bleak.

Long story short, it seems like it is better to buy a good (profitable) deal right of the bat rather than build it (through construction) into a good deal.

Thanks for the input!

It is unlikely you’ll find anything your area that will cash flow. Trust me, I’ve looked.

You’ll need to invest out of state to cash flow.

0 Votes

Provo, Utah

Quote from @Jonathan Bonin:

Hello!

I am looking at buying a house, and it is on the expensive side when I ran the numbers. Right now it is $300,000, 2 beds and 1 bath in Orem Utah. It is a little old, and some new floors and a window or two will have to be put in, so a little repair is needed. Without looking at the price, this is what I am looking for: a residential home that needs a little bit of work to apply the BRRRR method.

When I look at the house, down the road I can picture a small ADU in the back and a finished basement added on to the main house. This can add two or three more rooms, making the numbers look a lot better. So the question I have is: Should I buy this home with the potential that I see? I don't want this to be a purchase solely based on emotion (although I do think it is pretty cool), or bad numbers/estimates on my side.

Any tips and tricks would be greatly appreciated!

Not. No cash flow isn’t a money making strategy.

0 Votes

Provo, Utah

Quote from @Jon Q.:

Quote from @Michael Baum:

Hey @Jon Q., I don't disagree with you, but 3 properties most likely will be more work than one. No not always, but usually. I agree that all things being equal 1 shouldn't be more than 3 as long as you keep up with the systems maintenance. Start letting that go and 3 will always be more than one when you have to repair 3 furnaces or A/C units.

All things being equal, yes. But all things are never equal.

And… MF are often in rental neighborhoods, SFR are not usually.

So, making this generalization does more harm than good… is not useful, but harmful. Understanding why and what variables impact what to invest and not invest in is what matters.

@Marcelle Abel considering the quality of comments being shared on this thread, my suggesting is to consider it only one source of info and not that any info posted is true. Doing that will protect you because relying on comments of some people could cause you problems and cost you serious money.

If interested, I can provide you with a list of books written by experts that provide “facts”.

Comments on here are only as good as the experience of the person providing them, so “trust, but always verify” what you hear/read, even from me.

I’ve been doing this 20+ years, but I’d say I know nothing,… just developed ways to overcome the countless challenges that have come up in markets I’ve operated in throughout the U.S.

1 Vote

Quote from @JD Martin:

Quote from @Jon Q.:

Quote from @JD Martin:

Quote from @Jon Q.:

Quote from @JD Martin:

Quote from @Marcelle Abel:

Running into a wall here and would love your thoughts and insights as I try to scale as a new investor. We have a chunk of cash to work with which I had originally planned to buy three STR properties with (traditional mortgage, 20% down) BUT I found a larger property with a larger price tag that looks to cash flow very well if done right. So my question is...do I spend 2/3 of my cash on this one property or stick to my original plan and look for three properties with a more moderate cash flow? Thanks everyone!

Your title says one big or two smaller, but the writeup says 3 smaller. In general you should buy whatever makes the most financial sense, and one property is less work than 3 if the cash flow is all the same. But there might be multiple opportunities for value increase, and you also get a little diversification with 3 instead of 1.

I would probably go for 3 smaller but that's a preference issue if the cash is all the same.

WRONG.

How much work... depends on quality of property, quality of location, tenant quality, etc. It's good not to make generalizations, so she can actually learn properly.

Well, that's quite obnoxious. Of course it's a generalization, Sherlock. She's not asking for a financial exposition of her portfolio and strategies. She wanted a plethora of opinions, which is what she got.

When we all posted, we didn't realize that you were planning on making an appearance. If we had known, we could have all saved ourselves some time and effort and just let you give her all the answers she needed.

If someone is trying to learn, I think it’s a good idea to give them accurate answers.

Here your “opinion” if that’s what it was IS incorrect: “one property is less work than 3 if the cash flow is all the same.”

That is not true.
How much work one option versus another will be and how much risk associate depends on many variables.

I said "In general". That "in general" is the reason some people prefer one multi-family to several single family homes - one roof, one location to manage, one yard to keep cut, one property to visit. ETC. When I owned one home "in general", it was easier than when I owned two homes. When I owned two homes "in general", it was easier than when I owned 4 homes. Yes, of course if the one home is a slum tenement and the three homes are pristine Bay suburb ranches, it's probably going to be more work managing the tenement.

In any case, get off your high horse. There are virtually no "facts" when it comes to real estate, only opinions and generalizations. Just because YOU say something is wrong doesn't make it so. Who are you? You're a guy on an internet board, just like me. I'd bet we crapped in identical toilets today.

“There are virtually no "facts" when it comes to real estate, only opinions and generalizations. ”

That is wrong.

0 Votes

Quote from @Michael Baum:

All things being equal, yes. But all things are never equal.

And… MF are often in rental neighborhoods, SFR are not usually.

So, making this generalization does more harm than good… is not useful, but harmful. Understanding why and what variables impact what to invest and not invest in is what matters.

0 Votes

Quote from @JD Martin:

Quote from @Jon Q.:

Quote from @JD Martin:

Quote from @Marcelle Abel:

I would probably go for 3 smaller but that's a preference issue if the cash is all the same.

WRONG.

How much work... depends on quality of property, quality of location, tenant quality, etc. It's good not to make generalizations, so she can actually learn properly.

As a group “moderator” and “rockstar”, don’t you think that you should only give info to those starting out that is accurate.

That’s the responsible thing to do. If i were just starting out and you responses how you have, it would take significant time and likely money to learn that what you just said isn’t necessarily true.

I can see you are angry. Imagine that you’re just getting started and “experts” are giving you wrong info. How angry would you be?

0 Votes

Quote from @Kevin Bonner:

Quote from @Jon Q.:

Quote from @Kevin Bonner:

Hi! Finally in a place where I have financing available and motivated to purchase out of state.

Goal is to keep purchase price down (lower risk intro purchase) and secure some connections in the potential market.

Looking at some obvious areas like Cleveland, Memphis, Indianapolis, but understand there are countless markets to consider.

Would love to meet up or have discussion with anyone in SoCal area with some knowledge regarding experience in the matter.

thanks!!

Those markets are higher cash flow, but LOW equity growth markets and you'll generally attract a low tenant quality, which will be management hassles.

Again, what is your specific investment goal?

Cash flow important? Equity growth important? How much money do you want to generate per year?

What is your current profession?

What skills do you have that you can you offer in real estate investing?

Can you build things yourself?

How much free time do you have for growing your RE business?

WHY are you investing in real estate?

BEFORE you buy any investments, I highly suggest you read the top 6 books on this book list:

I currently work in financial planning/portfolio mgmt and have about 10 years experience in remodels/project management. Current house I purchased as a tear-down and rebuilt the whole thing myself- doubled in value since purchase! Have enough sqft here to build a couple adu’s to rent after moving out.

Working with around $200k for down payments and want to start by using as little as I can to test an area and see what kind of team I can build. From there I ultimately want to acquire properties that can cash flow positive.

Open to any suggestions at all or advice on pitfalls to avoid. Been researching and actually read several of those books on the list over last 5 years or so, but had other priorities and just now ready to go all in.

You’ll need a much more specific investment goal. Otherwise, you risk being inefficient with your time and money and not getting any closer to achieving your goal.

0 Votes

Orange County, California

Quote from @JD Martin:

Quote from @Jon Q.:

Quote from @JD Martin:

Quote from @Marcelle Abel:

I would probably go for 3 smaller but that's a preference issue if the cash is all the same.

WRONG.

How much work... depends on quality of property, quality of location, tenant quality, etc. It's good not to make generalizations, so she can actually learn properly.

If someone is trying to learn, I think it’s a good idea to give them accurate answers.

0 Votes

Quote from @Jerry Fung:

Many thanks for your responses.

Is there a reliable source / website to find cap rates for apartment buildings by region (e.g. county, city, town) for each state?

No, but if you look at similarly sized buildings in the same location, they should trade for about the same cap rate… but again you should always find reasons to be negotiate and apply a higher cap rate.

0 Votes

New Haven, Connecticut

Quote from @Jerry Fung:

Many thanks for your responses.

Is there a reliable source / website to find cap rates for apartment buildings by region (e.g. county, city, town) for each state?

No, there is not. Cap rates and price/value of a property is a function of net operating income and the perceived risk and (cap rate) which is the desired return given that NOI and risk associated. It is not always agreed, in fact rarely agreed, which cap rate applies to a given property.

As a buyer, you will argue that the risk of the stream of income of the property you’re buying is higher and therefore your return should be higher (and cap rate/ risk associated with income stream).

The seller will usually argue the opposite.

0 Votes

New Haven, Connecticut

All Forum Posts by: Jon Q.

Jon Q. has started 101 posts and replied 1434 times.

Post: Expensive First House. Buy or Not?

Post: Expensive First House. Buy or Not?

Post: One BIG property or two smaller properties

Post: One BIG property or two smaller properties

Post: One BIG property or two smaller properties

Post: One BIG property or two smaller properties

Post: Motivated for out of state purchase

Post: One BIG property or two smaller properties

Post: Cap Rates for Large Apartment Complex are Lower. Why?

Post: Cap Rates for Large Apartment Complex are Lower. Why?