First I'll preface this that I've been practicing in real estate for over 10 years and have sold $120M+ in real estate as an agent. Before that in real estate software. I know how to build models, I know the lending process, and I'm an excel junkie. I'm in the general metro Atlanta area.
So here are my questions with a bit of what I'm seeing...
1. Where are you finding deals? I'm either finding them in tertiary markets that have semi-decent un-leveraged cashflow but low-appreciation potential, or low cashflow in higher appreciation-potential areas.
2. Where are you sourcing deals and where are you buying (if you're in metro Atlanta)? MLS properties don't seem to make any sense from a cashflow or cash-on-cash return standpoint. Wholesaler deals I get from general website where wholesalers send you what they have (like Investorlift) seem to always overstate the ARV or understate the repairs needed.
3. What returns are you seeing and what are your guideposts you stay within when evaluating acceptable returns? This is the biggest thing keeping me on the fence.
3a) I have several million dollars in equities, and another several million in CDs, and the CDs are paying me 5.2% for zero risk. Most of the cash-on-cash returns I'm seeing when calculating even modest management fees and repair/reserve stowaways seem to be consistently in the 4-6% range for COC, and that's assuming no big surprise expenses that affect cashflow.
3b) Even 50 miles outside of Atlanta like Dawsonville, Cumming, Matt areas are expensive for a modest home in areas that have room to grow and don't suffer from being a food desert (you know what areas of the city and metro area I'm talking about). And rents are decreasing in metro Atlanta per my Costar account data -- granted that's multifamily statistics. So are you banking on appreciation of the asset while essentially just above breaking even when you're leveraged on the property?
3c) I'm having a hard time justifying getting into growth areas that probably still have plenty of room to grow but have already seen their values nearly double in the last 3 years, with rents far behind on what they cost for a return. What do you look for to ID different areas where that might not be the case?
Thank you for your time reading my essay! LOL
Mathias
