Why Rental Property ROI Isn't As Important As You Think

[@emmapowell28]

So glad to hear this that I've been doing all along after interviewing everyone I could find who said, "I lost everything in 2008." Cash flow and an emergency fund is INSURANCE: wealth is from debt pay down, tax advantages, and appreciation. Other than active income that can deliver higher returns (flipping, wholesaling, or any other high paying job), passive wealth building isn't from the rent. Now, cash flow is what we live on, and most of the rest we reinvest to keep the cash flow rolling and growing. But none of that can happen if we lose the property during a 1-2 year recession because it's too slim for the debt or the large capital expenses/repairs.

[@gisellmorales5007]

I totally agree with you on cash flow… to be able to live off of it, two, three properties only are too risky… in my case I had my goal and numbers aligned to get to 9 houses…. That will cover my budget X2!! And I did it! So now I cover my budget with half the houses and what I do with the cash flow of the othwr half is keep saving to keep investing.

[@2wyce562]

Congrats! So happy you got to your goal and surpassed it. I'm almost to mine!

[@mikefeir]

Bigger pockets needs to do something about all the scammers in the comments

[@antareschen4451]

Report them

[@darinpeterson2945]

I don't seek out specific areas based on national trends, but do live in a rural area so have a predisposition towards rural communities where ROI tends to be double digits but listening to what Dave saying about ROI second resonated with me.

[@nelly520]

Man that cashflow response was so clear & on the money David!!

[@grouphuff]

David, cashflow is the primary benefit new investors seek. Cashflow creates sustainment dollars and appreciation creates long term wealth. I agree not to be premature and leave the W2 too early. Having a solid foundation of rentals is key!

[@ocarstens6045]

My husband currently has a job that has amazing insurance, generous 401k matching, and great pay. The downside? A lot of OT, a lot of it forced. So our first goal is to get cash flow to make up the difference between an average (not busy times) OT portion of his check. Then once that’s been stable, he’s going to transfer to a 9-5 no OT position. He gets to keep utilizing free 401k money, keep the thousands we save on healthcare out of pocket expenses, AND has more time with the family. I stay at home, so I’m going to be doing the project/property management side. Then we’re also setting up a foundation for long term wealth as well. I couldn’t imagine leaving a W2 without a portfolio with diversity, a hearty reserve, and a lot of experience on top of that!

[@36ParallelNorth]

I have to agree with David on the buy and hold strategy as my option of choice. I have been investing almost five years, my goal is to buy my time and freedom back and be with my family more. I have experienced the $200-$300 NOI/month but yet is it not enough to sustain the level of time and freedom I want. I plan to continue the buy and hold strategy and enjoy the appreciations as well as the depreciations. In the long run I believe I will find and be able to enjoy what I seek even as inflation grows. There is a lot more to learn and I appreciate the BiggerPockets community. Thanks for all the advise

[@sebastianvillacism.8563]

16:46 I identify lots with him. I live in Brooklyn NY. I still work from home. I want to move out from NY to Northern Virginia. Now, I think the only difference is that I know the Northern VA wrea very well since I lived there for around 8 years. David makes a very very smart point. First thing I did was finding a realtor. They will make your life so easy. They referred me to a local lender and got me pre approved. So yes. I'd do that first because you start discovering a lots of things. For instance, I came to know that in northern VA is not easy to find duplex, triplex or any of these type of investment properties. Also, when it comes to the lender, there is one single thing that makes this move a bit complicated and it has to do with the logistics of your move. Lender wants to be 100% sure you have a job wherever it is you are going to live because they want to know you will be paying your mortgage. There are some deadlines you have to meet upon you close the deal as far as moving into the property and have stable job (again this has to be investigated, but this is what I was told). The townhouse idea is becoming more appealing to me because NOVA is expensive and home prices outpace rents very rapidly. I have narrowed down my options to 3 bed 3 bad single family and townhouses. Condos weren't very recommended by my agent because of HOAs restrictions when it comes to rent your property to other (but maybe there are good options) my situation is a bit different because I have a family so I'm looking for a more spacious property. The only condition I have is that my property has to have a basement because thats where my house hacking strategy will be applied. So get an agent and get pre approved so you know what you can afford. Cheers

[@jbpark5019]

Hey I just moved down to Fairfax from Queens. Happy i no longer need to deal with Ny bullshits

[@sebastianvillacism.8563]

@@jbpark5019 very happy for you. I wish I can move out soon.

[@adrianagbayani8471]

Thanks David for all your help. I have the same situation with this Canadian Guy asking you a question and you have answered properly! God bless you and hope you help more people.

[@marckings7275]

Great information provided here…love what you guys are doing keep up the good work 📈‼️‼️

[@Danielg86]

Digesting the cashflow discussion. It sounds like (especially in a market like California) we let the appreciation keep running up the price of the properties, sell or borrow against the equity, and buy more properties that cashflow a little 200/month. You're growing your equity, and eventually you can sell properties to pay off other properties and create big cashflow by doing the work of flipping and BRRRRing properties.

[@antoniostephano]

I dont understand understand the return on equity advice to sell the hypothetical property at 57:40. I didnt hear a discussion of rhe option of getting the equity out with a refi instead of selling.

[@TheTruthseeker707]

Great argument on cash flow. Might not cash flow well now but later it probably will plus appreciation.

[@_simranproductionz_9730]

If we get a property that does not cash flow after all expenses and mortgage payment, would that not hurt our debt to income ratio? Which would be important in able to get another loan for more properties? Great video and thanks in advance for response.

[@The1SimLash]

Did he say *not* to buy a property that cash flows?? *Your* numbers have to work for *you*

[@meagan-2842]

Ha! Shout out from Shreveport Bossier too, I'll have to look Nick up! Nice episode BP!

[@tadabeats4904]

Ayyyoo

[@kevincauto8080]

Seeing Greene is the best BP show right now. Thanks David! NEXT SHOW QUESTION: Many in this community believe landlords provide an important service by providing housing to others. How do you refute someone who is anti-landlord that states landlords are taking away homes other owner occupants could buy? Particularly in single family residents, if landlords buys homes, aren't they taking away opportunity and raising market prices for non-investors looking to live the dream of home ownership?

[@mikeystepback8639]

It is a dog eat dog world..life is a pyramid

[@stillhopeful7048]

Great questions David and such valuable applicable answers. Loved that you explained what type of loan to look for, like DSCR, once conventional lending is not available. Thank you!

[@spaulin2]

Hi guys my name is Sawrys and I'm an agent here in orlando. Thank you for all of your powerful knowledge. It has proven to help me be a better agent and a way better thinker when it comes to real estate. Thank you

[@erinsteward6594]

As a new investor….excellent insight and logic. Thx🇨🇦

[@KidCity1985]

Cash flow keeps you safe, equity creates wealth. We raise rent because - reality. No partnerships.

[@matiasloyola300]

I went to the bathroom then went to the kitchen , washed my hands really good again to make myself a sandwich… ate it and I came back to the show on my ipad and this guy Nick was still working on finishing asking his question haha 😛 Jk great show and thank you guys 👍

[@mannymanny3859]

This open my eyes... I was not thinking that whole picture, thanks.

[@alexandranovikova2329]

What resources would you suggest a college student who knows nothing about real estate should use to learn how to start buying properties after graduating college?

[@gameplayer1980]

That introduction tip/advice is exactly what I'm trying to do with my 10 year rental hold.

[@cretiarose]

Love the real answers and explanations!! Thank you!

[@allinforfun]

Thanks David love the podcast

[@TheForexApostle]

Great video information! Thanks

[@michaelkane7999]

If there is cashflow above (x), go get it. If the Mortgage rates are too high, go around it. If you have the will, you'll find a way.

[@higherspirit1]

Really appreciate your expert advice!! Thank you!

[@jeffmueller9422]

David what is a good ROE on a property I want to buy and hold? 15%?, 35%?

[@yakster87]

Seeing Greene is GOLD! 🤩🤩🤩

[@brandengemmill5306]

Wonderful Episode! Helpful as always~

[@zachshuffield578]

$8000 yearly cash flow / $70,000 in equity = 11.4% Return on equity. Is this considered good or should I pull out the $70,000? What is the threshold percent of ROE where it makes sense to pull out the equity?

[@goldstarsuccess1644]

Good question I am In a similar situation

[@TJ-th9hw]

Great content as always! Thanks

[@dennishowland7495]

Well David Green I think you gave a great perspective on cash flow you gave a reality perspective and some people don’t like the reality perspective check but I like that I’ll like your content I like listen to the big pockets me being a truck driver I have to educate myself in order to get away from the stain wheel that I’ve been hold of for 27 years so I enjoy the content and keep up the good work David Green I’ve been listening to you since the Brandon Turner and no I believe Josh talk and chat on Grant Cardone and that’s when I started listening to so peace out MAU strive to be a billionaire

[@miguelmontrell996]

Hey David great episode and questions from listeners. I JUST WISH (.maybe you can recommend ) THOSE ASKING QUESTIONS CAN GET RIGHT TO THE QUESTION….it seems to take forever just to get back to you to give an answer. Thanks. 😃

[@eduardosalazar3171]

Awesome content! David you mentioned that it’s important to see the whole economy at scale, like where is everybody moving out and towards so how do you figure that out? Thank you!

[@markchamorro8409]

He answers this in the video. He states people utilize Census info or utilize finance news sources.

[@eduardosalazar3171]

@@markchamorro8409 I guess I missed it, I’ll rewatch it but Thank You Mark! 🙏😃

[@2wyce562]

5:49 The 3 things, but you can only get two... It's called the Engineering Triangle (I'm an engineer)

[@RogersMgmtGroup]

Really enjoying your videos even though I’ve been investing in and developing real estate for over 30 years. You should reach out to addy in Vancouver. While they currently only accept Canadians, that will change soon and they have a heck of a system for investing.

[@kylekotecha153]

Thank you! So much really good information here.

[@inmobiliariamodus5836]

Hello David , congratulations for the program. I have a question , I’m from Perú , I have a several properties ( medical offices , comercial stores, residential apartments) and I would like to know if there are groups that invest in properties outside USA. I also dedicate myself to real estate administration and managment. P.D: Example , I would like to invest in Pompano Beach in beachfront apartments for several reasons, I think it will be a place that will appreciate a lot, also another place is West Lafayette , to invest in houses for students near the Pordue university.

[@bloomip]

David I live the content man.. Let me ask you .. when is HELOC better than Refinace interns of not changing your current interest rate.. can you discuss this on your KZbin podcast

[@kylekotecha153]

David, you do a great job. Really great full

[@mordykatsevman8161]

Hi, where in louisiana is he from?

[@loganroca]

Hey David! New investor here, I have my primary residence that is worth $110k as is and I owe $60k. If we had $40k to fix something’s up the comps show it would be worth $200k on the safe side. It’s probably going to take my wife and I another yr to save up that much. I’m worried that in that time the construction cost will go up and it’ll be harder the longer we wait. Is there a loan product out there to get this done in order to pull out max equity to use to kick start investing in more properties? Thank you! Love the episodes!

[@ronhau1542]

What are your thoughts on section 8?

[@Rick0125]

Great advice... thanks

[@JulioZavala83]

I Also live in NY And i started investing in NC and SC and i found one good agent who has introduces me to good resources i Also got a good handy man and a good contractor and a great lender si everything its been going smooth for me. AM actually gonna move over there because i got a good job offer plus i Will reduce My means so that i can invest more .

[@volvo8938]

cash flow is used to maintain the property and save for a rainy day, the real wealth is made from paying down the debt, tax benefits and appreciation

[@michaelwhelan1652]

This advise is only working because you literally can’t lose given these market conditions. Just wait until conditions change. All these over levered small investors are in way over their head.

[@aftech7268]

I have 100k equity on one home and 30k in another …. What would be the best way to invest it?

[@berthajaime5949]

Hi I have duplex in california is paid of and I want refinance and buy a fourplex for cash flow rigth away im 60 y should I buy in other state I can purchase more units or buy in california

[@patrickisboard]

The cryptocurrency spam comments are something to behold.

[@edwinmachado7964]

Is down payment assistance available in the Bay Area 🤫 but amazing content as always 😁

[@josegnova]

These shows are starting to contradict older ones. Now ROI isn’t as important? Cmon man. A toilet with shit in it can’t smell like flowers. An investment without a solid ROI isn’t a good investment, no matter how you look at it.

[@marquette93]

What you mean RE can only go up? …..

[@2SanityAtitsBest2]

“From the people, for the people “ Love it.

[@tureefhalasa9349]

What will happen as the Dollar collapses?

[@lopez122795]

I got so lucky with my first property. Cashflowing $1,600 a month off putting down $42k on a $350k triplex

[@yusted1]

Damn. Mine barely makes 4k a year. Maybe next property can be better

[@lopez122795]

@@yusted1 I got very lucky with a seller financing deal. I think 4k a year is great $300+ a month just repeat it 10x and you're making $3k a month. If you're disciplined you'll just keep reinvesting it instead of spending it

[@oa2621]

No David..you are correct...the problem is most do not use common sense. Seriously, who would buy an investment property that will not cash flow? Maybe in an AMAZING area that know you can bet your life that is going to appreciate ridiculously.

[@dennishowland7495]

Texas I just heard that they got a limit investors and how many properties I can buy in Texas so everybody be aware of Texas if you’re going to invest feel weird they may Passilo weather gonna limit investors in how many houses they can buy if any houses can be bought in Texas by an investor at all

[@rgargesfarm]

💖Love your videos & all the real estate investment info I’m learning from your videos!! Airbnb, first & House Hacking combo, and going to save for my next awesome rental! Also have 2 vintage Airstreams on my property🔥Just need to build up some more savings because my very practical daughter says I should not refinance( my house is paid off paid cash 2 years ago right before Covid)

[@andrewlodge7191]

How can I get started in real estate from 0

[@aftech7268]

Call a lender and see what u qualify for

[@mannymanny3859]

Paying off the mortgage loans and don't take advantage of the equity is a good business idea

[@jtowensbyiii6018]

Horrible plan

[@ryankeenan351]

BP just had a podcast on with someone buying 4 properties and is retired 🤷

[@jeffdorris5321]

😎🙌

[@calebmacdonald6189]

Why are these question askers always in their cars and typically actively driving while speaking? Pull over at least.