8% annual yield is not even that good…
It is the lowest bar you can set, any of the top indexes will do 8.
Let’s go higher
It is the lowest bar you can set, any of the top indexes will do 8.
Let’s go higher
https://twitter.com/b_buff4/status/1404619224174182402
$2mm building with 12 renters in it…
Building is a 6 cap and NOI is $120k PRE debt service.
Find a building where market supports rent escalation if proper renovations are done.
Reno costs $300k and rent escalations + expense reduction bumps NOI to $200k.
Building is a 6 cap and NOI is $120k PRE debt service.
Find a building where market supports rent escalation if proper renovations are done.
Reno costs $300k and rent escalations + expense reduction bumps NOI to $200k.
Now the building is valued at $3.3m.
Lender gives you 70% of it ($2.3m) and you paid $2m.
Total capital in the deal: $0
Total return: $300k lump sum + $200k/yr
What’s your return ratio now?
Hint: not 8%
♾
Lender gives you 70% of it ($2.3m) and you paid $2m.
Total capital in the deal: $0
Total return: $300k lump sum + $200k/yr
What’s your return ratio now?
Hint: not 8%
♾
$300k reno is a wash with lump sum.
All capital returned for next deal…
Store temporarily in index or etcetera — return against $0 capital tie up is infinite return.
Rinse and repeat.
All capital returned for next deal…
Store temporarily in index or etcetera — return against $0 capital tie up is infinite return.
Rinse and repeat.
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