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Eman says

Real estate is about control (the asset) and leverage (OPM). Time will do most of the heavy lifting.

Yeah so you raise the annual rent at least at the housing aggregate of PCE or CPI which annually is about 6.5% ?

Your real property will appreciate at least about 4% a year over 20 years.

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We raise rent 5% annually since they’re way below market. After 5 years of ownership, the average rent on the existing units is $1,205. Didn’t raise rent one year due to the pandemic.

In general, we keep the rent the same, or raise 2.5%, if the tenant renews the lease for another year. We raise 5% if they opt for MTM.

3 natural turnovers so far out of 12 units. The rehabbed units are rented for $1,850. Zillow has FMR of $2.2k/month.

If nothing changes, we should be able to get all our money out of the deal in a couple years through a cash-out refinance. The ROI should be infinity then. If we’re lucky, we’ll get a couple more turnovers between now and then. Then the cash out refinance will be even more lucrative.

Eman says

The ROI should be infinity then

yep, i wish i could borrow money at 5% rate and make at least 15% off of it

residential real estate seems the safest to borrow money as far as leverage

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Eman says

I shared this before. I’ll buy a property with thousands of negative cash flow each month as long as I know I can turn it around within 12 months with supside potential in equity. There must be a reason why we buy.

$5k/month of negative cash flow = $60k/year set aside to service the alligator. If we can get it to cash flow neutral in 6 months, that’s down $30k. If we can turn it $60k/year positive cash flow in 2 years, that’s $1M increase in equity. It’s simple math. The risk is so worth it, but it requires work and the foresight. I love how the outsiders call people like myself “stupid” for buying negative cash flow properties.

I didn’t read everything after this comment so maybe you mentioned it. Tax consequences to your benefit as well. You’re writing off the loss against other gains while getting the equity built up on another property and if you sell in 2 years that’s long term cap gains.

That’s why I’ve never understood short term flips. Unless you get an amazing deal that 30%, if I recall correctly is awful.

Cashflow and all the numbers are key. Don’t forget about the tax man as a reminder. A wrong decision could be a 30% hit on the deal. Depending the value it could be 10’s or 100’s of thousands once you sell. All the other numbers matter in the now, but once a year in April and when you sell is an important factor in the other numbers. I’ve seen people get burned on the back end of deals not thinking of taxes and what looked good turned into a break even situation or sometimes a loss.

Note: typing on the phone if this reads like I’m retarded.