All Forum Posts by: Sarah McCluskey

@Jonathan Styer thanks! This would be our first investment property and our planned strategy is to buy and hold. So my gut tells me you are right, but my concern is not having an “exit strategy” if prices drop significantly.

I know every market is different, and many people are not buying retail because the properties wouldn’t cash flow at all. But I’d love to hear if people are buying retail at the (current) peak of the market when they do cash flow.

There have been many discussions about this being a sellers market, and prices are high.

In my market (between Chicago and Milwaukee), prices are high, but many of the properties still would cash flow well.

When I run the numbers on properties that are in line with the market rates right now (highest it’s been since 08), I get the following.

- $400-$500 total cash flow on a duplex

- 10-12% cash on cash return

- 8% cap rate

I am taking into consideration property management, 10% for capex, 10% for repairs, insurance and property taxes. 25% down on a conventional 30 year.

These numbers look good to me, but I can’t get over the idea of buying “retail” when the market is high. And worrying about prices dropping again and losing the equity. I also hate the idea of paying full price/retail.

Does it make sense to buy these full priced/retail deals that cash flow well? Or should I keep trying to find an off market deal so that I have more equity in case the market drops?

A little background - I’m a bit more cautious than normal about this because we bought our first personal home in 2009 at the peak of the market, and we were stuck there 3 years longer than we wanted to be because we were so upside down. Still paid $20k just to get out of it....

@Salvatore Lentini

Thanks for opening up for questions! In my markets I can find properties that cash flow, but their prices are at the top of the market so I’m having trouble committing...knowing that a few years ago they were going for $50-$100k less...

@Matt Jennissen normally I calculate 10% for repairs and 10% for cash flow. Because this home has some deferred maintenance issues, that’s why I’m setting aside 20% for capex. Even with that it cash flows over $500.

@James Horner thanks for your comment! We are countering back $40k less. I’m confident he won’t accept, and I’m ok with that!

@Ola Dantis great point. Thanks!

@Robert Herrera great point. Thanks!

@Spence Kal I like that perspective! Thanks!

@Alexander Szikla thanks for your comment. I’m a full time working mom of 3 little kids. While I’d love to self manage. The property is 40 minutes from me and I just don’t have the time. However, I know this property manager very well, and a few of her clients, and they’ve actually experienced cheaper costs through the PM than when they would hire contractors themselves. I know it’s an added cost, but in my situation it’s a necessary one to be able to invest :-)

@Kenneth Garrett great point. Thanks for your comment. We will likely counter much lower, and he will not accept. But I’m 100% okay walking away.