Originally posted by @Dan H.:
How do you figure you get better returns? The value of any rehab will be greater in Coastal CA than the midwest. Once I extract all or almost all of the investment out, my appreciation will far exceed the midwest.
Questions:
- Why do you think so many of the flipping shows are based in CA? A: Because the profits from the rehab is superior to other locations.
- What cities do you think Case Shiller has as top 3 buy n hold returns for this century? A: 3 coastal CA cities (San Fran, LA, San Diego).
- Where do you think NeighborhoodScout ranks those 3 cities for appreciation for this century? A: Each has a 10 out of 10 in nation score.
Simple fact is rehabs product greater returns in higher value areas (NYC, coastal CA (San Fran, San Jose, LA, OC, San Diego), boston, Seattle, etc.). Therefore, the rehab in coastal CA will be worth more than a rehab in the a Midwest city.
"How do you figure you get better returns? The value of any rehab will be greater in Coastal CA than in the midwest. Once I extract all or almost all of the investment out, my appreciation will far exceed the midwest."
Yes, appreciation will be much better there BUT Remember, We are not talking about flipping but BRRRRing. They are similar but both are two different things. When you BRRRR, you want to buy a house undervalue, rehab it, RENT IT, and then refinance it to pull out the equity from buying undervalue. Then you repeat the process with the refinaced money. When you flip, you do the BR but you don't usually rent it or refinance it. You instead Sell the property for a profit when you Flip. But when you BRRRR, you are not looking to make a ton of money, But instead to get high returns and your initial cash back. That is why I would say to invest in the midwest due to the fact that the rental price ratio (rent divided by the purchase price or the 1% rule) is much higher in the midwest than in CA. If I were to BRRRR in the midwest I could see returns much greater than in CA. Plus I get the added bonus of diversifying my money into multiple units (since property prices are much cheaper in the midwest). This in turn safer to invest in the midwest. Let's say I want to invest in SFH. Instead of investing in CA where I might be able to buy only one SF home worth 500K and only having a single tenant who could mess up my ENTIRE investment, I would have 5 SF Homes worth 100K each with 5 tenants paying 5 mortgages. If one of my tenants doesn't pay, I have 4 others that are still paying me. ALSO, if both places receive 5% price appreciation every year, I will still make the same amount in appreciation in both locations.
So, From a BRRRR perspective, I would much rather have higher returns than profit. After refinancing and making my initial money back, I would like to have high returns and be able to do the BRRRR process over again.
Let me know what you think
