All Forum Posts by: Phil Sharp

@Account Closed thank you for your detailed response. To clarify, I don't really mean cash flow positive on day one, but rather cash flow positive after stabilization and refi (so, in the first year, as opposed to year 5 or year 10). It sounds like the example you gave definitely was cash flow positive in the first year. Would you mind sharing a few more stats from it? Purchase price, ARV, and monthly rental income after stabilization? As a newbie, these types of examples really help me understand different perspectives.

Another question: Are you mostly dealing in multi-unit properties?  Do you have examples of single-family homes that have worked out in the same fashion (cash flow positive after stabilization and refi)?  Or does the San Jose math tend to only work well for multi-unit properties?

@Russell Brazil I would have loved to have purchased something 15 years ago, but I was in grad school and was not in a position to buy back then.  I understand the power of appreciation, but the advice I read about on BP and in other places is that (when doing buy-and-hold investing) you should consider appreciation icing on the cake, and not go into deals banking on it.  I am sure some would disagree, but I'd like to do my best to ensure cash flow from the start.  (I own a home in Sunnyvale that has has appreciated well over the past couple years, rents out at $5,650/mo, but is no where near cash flow positive.)

@Account Closed It is good to hear there are 1% opportunities to be found.  I guess I am jaded by the prices in and around Sunnyvale.  Vallejo certainly isn't out-of-state, but I guess for everyone there's a driving radius beyond which the opportunities might as well be considered out-of-state.  Vallejo isn't quite there for me, but you've made me realize that I need to think more about my personal radius, the dividing line between local investing and remote investing.

@Account Closed thanks for your advice. I agree that OOS requires great caution to do wisely. With regard to your investing in San Jose, if you are not in a positive cash flow position at purchase, how do you get there in 2-3 years? Are you saying that the rents rise enough in those 2-3 years to cover PITI, maintenance, etc? And if so, you purchase those properties with the goal of having rents rise enough to cover everything in a certain number of years? Would love to see an example of your numbers on a case study, if you're comfortable sharing.

Thanks, @Christopher Lee and @Justin Beides.  I have actually already read David Greene's book - it was very helpful.  But it did not offer much advice on how to pick the out-of-state markets to invest in.  That is my question.   I know it is theoretically possible to get anything to cash flow if the numbers are right, but the premise of David's book is that there are places where it is nearly impossible (like where I live in California) and places that are much, much more favorable (where the 1% rule is common and price-to-rent ratios support buy-and-hold).  How do I go about finding these much easier places to invest, as there are literally 100s of communities across the US that I would need to analyse.  Are there any tools or websites that could help me figure out which cities / geographies are prime candidates?

@Account Closed would you mind sharing an example or case study that has worked for you?  It seems like in my corner of the bay area, the land itself is worth way more than makes sense for buy-and-hold, and you just can't command rents that will come anywhere near covering expenses, even if you found a dump and fixed it up.  It seems like an ideal place for flips, but not positive cash flow.  But if you have an example or two of how the numbers worked out for you, I would be very grateful!

@Brandon Sturgill yes, I agree - each area (and street) is unique, and there's no value in mechanically applying a price-to-rent ratio or 1% rule without considering broader factors.  I certainly don't want to buy-and-hold a headache that looked good on paper but in practice is a mess.

Let me try to clarify my question: if I am looking to buy-and-hold positive cash flow properties (in decent areas that aren't a headache to manage), where can I realistically do this?  It seems to me that I can't do it at all where I currently have roots (the SF bay area) - structurally, it is off the table from a buy-and-hold perspective, as prices are just too high, even for fixer-uppers.  And that I need to find some other area of the country to do this type of investing.  Or am I missing something about how to find cast flow positive buy-and-hold properties in areas like mine?

I am from the San Francisco bay area, where prices make buy-and-hold investing very challenging.  I am interested in investing out of state, in locations where it is more practical to find stuff that can become cash flow positive.  Basically, places that put the 1% rule within reach.  However, finding these geographies seems daunting, as there are 100s of communities that could potentially fit the bill.  Any advice on how to efficiently find or analyse geographies for cash-flow-positive, buy-and-hold investing?

Thanks @Ali Boone.  Yes, my use of price-to-rent or the 1% rule is simply a quick and dirty way to assess cash flow potential of an opportunity or area.  How did you choose the places you've invested in out of state?  Any tips or tricks for finding geographic areas where cash flow is easier to achieve?  

I have lived in the San Francisco bay area for the last 15 or so years, and am anxious to start doing some buy-and-hold investing.  However, it seems that price-to-rent ratios are solidly over 30 in my area, and generally high anywhere in coastal California it seems.  For example, the house I own in Sunnyvale currently has a price-to-rent ratio of 34.  My understanding is that, as a rule of thumb, buy-and-hold investing doesn't make sense unless you can get a price-to-rent around 8 or below (which roughly correlates to the 1% rule).  Assuming that's roughly true, is there any way for me to do buy-and-hold investing in my area, or do I simply need to find other places in the country to invest?  If so, what is the best/simplest way to find places where price-to-rent ratios are in line with buy-and-hold investing?

I am considering quitting my full-time employment to invest in real estate full time.  I have saved up some significant resources to be able to do some all-cash purchases, but I would prefer to finance via mortgages.  However, I am worried I will not be able to qualify for mortgages if I don't have a full-time job.  How do full-time real estate investors (who are just beginning) qualify for traditional mortgages if they don't have a job?  In my case, could I use my saved resources to somehow reassure lenders that I have the resources required to service the mortgage?