All Forum Posts by: Rory Galvin

Hi Mario.. curious to see what you do here. As a newbie to REI, I've observed many people buying and holding multifamily that doesn't cashflow. Good luck with it.

Hi All,

I've been looking for a multifamily property to get my REI career started.

I have analyzed about 100 supposed 'income multifamily properties' in many of the metropolitan areas in the northeast. I have been unsuccessful in finding any that cashflow. None of the properties came close to the 1% or 50% rule. I'm think maybe we are too far into the cycle for this type of investment to make sense as property prices are too high?  I found a fourplex that might have broken even, but was 40 years old and needed a new roof.

Multifamily remains a really popular investment. During the search period, I saw a number of 'income properties' sell (properties I was interested in) that didn't come anywhere near to cash flowing. 

The question is why do people continue to invest in them? Particularly old properties that are a maintenance time bomb? Are these people

- Househackers - living on one floor, renting the others?

- People with lots of cash that need to park it somewhere?

- Interested in main capital appreciation?

- Poorly educated investors?

Love the forum!

Thanks,

Rory

Thanks Joe. As part of the investment process, do you start evaluating the neighborhood or the property or both? For neighborhoods what indicators do you look at?

Hi All,

I was wondering if anyone can share a methodology for scoring a neighborhood? I'm trying to narrow down the best locations to invest in before looking at properties. I'm interested in cashflow and capital growth. Key indicators for me are GDP growth, job creation, population growth, presence of big growing companies, capital projects (training lines, etc), schools (quality of schools), access to highways, access to services etc.. just the tip of the iceberg.

For me, this is absolutely a crucial part of the investment process. Am I right? 

I'm going as far as to hire a research company to provide GDP growth by borough, town etc.

Thanks,

Rory

My sense is there will be changes, but perhaps it will be more subtle than people think. 

Prosperous urban areas - for the most part - have big concentrations of services which make them attractive places to live. Very, often these services have been built up over hundreds of years.. schools, hospitals, art galleries, government agencies, restaurants, coffee shops.. in fact, if people decide to work from home more, these neighborhoods will still be desirable places to live.

That's not to say a lot of people won't choose to move to the burbs and buy a house with a big home office etc instead of a 2-bed apartment in the City. The winners will be properties that offer both...access to services and good home office space.

Thanks Abel. I saw a similar article in the FT on this during the week. Lots of folks moving to upstate NY and Connecticut for the long term.. especially bankers and insurers from Manhattan.

Hey All,

Loving the website!

When it comes to wholesales deals. Is there a way to validate the wholesale offers? Are there experts on the other side of the deal that can help with this?

 As a novice. This is something I'm hoping to use if I go the wholesale route.

Regards,

Rory

Hi All,

Curious to know people's thoughts on how Covid-19 will impact people's desire to live in urban environments over the next 30 years.

Anyone who works at a desk no longer needs to be in the office Monday to Friday.

In a recent Bloomberg survey,  30% of office staff work from home at least 1 day a week. Post-Covid this expected to rise to 50%. A nearly 100% increase. Twitter, Google, and Facebook are letting some staff work from home forever.

 It would be great to hear peoples thoughts on how this will impact the real estate market.

Regards,

Rory

Thanks a lot Brian and Michael! I'll continue researching.

Hi All,

I'm trying to understand cashflow. I'm looking to invest in the Canadian market. There are many articles on the internet that show as little as 1-2% of property investments cashflow. I find that number staggering considering the billions of dollars of both institutional and retail money invested in real estate every year.

I'm trying to understand cashflow a bit better. Let's imagine I have $100k to invest in a $300k property. Over a 20 year period my mortgage + costs is $1600 a month. My rental income is $2000 per month. I'm making $400 in cashflow. Following a similar model, imagine I put 5% down. All of a sudden by mortgage payments are $2200 per month over 20 years. The property is in negative cashflow.

I clearly need to understand this process better. Is cash flow down to the down payment versus debt most of the time? In which case, if you have a wad of cash it makes sense to invest in real estate. Why?

A $400 cashlow, is approximately a 5% yield on your $100k investment or annum. If you put the funds in a savings account with a 5% return, compounded over 20 years, you will get back $270k. Lets take a look at the property investment.. Assuming the property appreciates at a modest 1% a year, the $300k property is now worth $366k. The difference in investing in the savings account versus property is now $96k making the property worthwhile. This is a crazy simple example. I'm trying to understand 1) how is a cash flowing property defined? 2) why so many people invest in real estate given the alternatives.

Thanks all