저자: Kevin · 외국인
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미국 멀티패밀리 임대료가 도시별로 200~600달러 하락 중이며, 선벨트 지역 신규 공급 과잉으로 임대료 하락 압력이 큼. 2019년 대비 여전히 높지만 하락 추세. 부실 대출(Fannie Mae 승계 가능 대출, 금리 3.5%)을 인수하면 매입 캡레이트 5.9%에 현금수익률 12%가 가능하다는 예시 제시. 단독주택은 매물 부족으로 기회가 적다고 평가. 자신이 하우스해크 펀드 모집을 진행 중임을 언급.
다듬은 글
Holy crap, this is absolutely insane. In this video, I'm going to show you how to get a 12% cash on cash return in real estate in 2024. Now, this is completely nutty that this is even possible and these deals are not the easiest to get, but they're possible and I'm blown away as to them actually being possible.
So, first, why? Why are these deals possible? And then two, give an example and where do you get them? Okay. So, first, why are there deals in real estate right now? Multifamily rents are starting to fall. If you're buying multifamily right now and you are not underwriting that multifamily rents are falling, you're screwing yourself.
You need to go in realizing that multifamily rents are falling. They've already fallen anywhere between 200 to 600 dollars in most cities throughout the entire country. Now, that does not mean they are lower than 2019. 2019 rents could be here. Now, they might be 30% higher. So, a 2000 dollar rent might be somewhere around 2600 dollars.
Maybe it's come down 200 bucks to 2400. So, it's still 20% fatter than what you had in 2019. That sucks as a tenant, but for multifamily, you got to be careful as an investor paying a 20 a 2600 dollar valuation, right? I mean, it's simple. How do you value multifamily real estate? It's very simple. Take 2600 dollars.
Watch the difference. 2600 dollars. Let's say it's a 10 unit apartment building times 12. That gives you gross scheduled rent GSI of 312,000 dollars. Very, very simple, okay? Now, I want you to multiply that by a gross rent multiplier. You don't even need to ask what the expenses are. In fact, your cap rate should align with your gross rent multiplier.
If you use the same expense ratio, it's the same freaking thing, okay? Let's multiply it by 15 times gross. Hit enter. How much is that building worth? 4.6 million dollars. Very simple. 2600. * 10 units * 12 * the 15 * gross. How do you figure out what the gross is? You look at what the other buildings are selling for in the neighborhood.
But what happens if you now have to take that $200 off the rents? And so every time your tenants turn, you lose 200 bucks, so you're down at 2,400. Well, that $4.68 million building loses 300 grand. Boom. Just like that. Down to 432. Yeah. So, you really got to be careful because every dollar makes a big impact on price uh that you're not getting in rent.
And it's amplified by how many units you have. So, what does this mean? Well, this means right now, as there are a lot of new construction multifamily developments that are hitting the market, especially in the Sunbelt area, and you got to be careful of this, okay? The Sunbelt area is saturated with these developments right now, but in my opinion, they're the ones that are going to see the largest pain in rents coming down, which creates an opportunity if you underwrite correctly.
So, Sunbelt areas, easy-to-build areas, Texas, Florida, Tennessee, even quite frankly, Arizona, a lot of folks are still looking at those markets saying, "Wow, the rents are so high." They're not even looking that there were probably 2 months worth of concessions in rents to prop up the rents to get some of these rents.
You got to be very careful about concessions as well. A lot of ways to get scammed in multifamily. I'm trying to give you the warnings here, okay? I mean, think about it. If somebody's like, "Oh, the unit's renting for $3,000." But they had 2 months free, okay? $3,000 is what you think the rent is. Well, * 12, you should be collecting $36,000 a year, right?
But they had 2 months free, so you're really only collecting 30,000, which means you're not getting 3,000 a month. You're getting 2,500 a month. That's a huge difference. So, there's a great way to get screwed on multifamily, again, concessions. Anyway, they mask rent drops, right? Okay, so what do we have?
How do you get good deals in multifamily? Well, first of all, you need to realize that easy-to-build markets, like I said, Texas, Tennessee, Florida, whatever, you're going to get a lot of supply coming on of multifamily apartment units, less so single-family. Single-family is a whole 'nother story.
Quick tangent on single-family, there is so little inventory right now. The worst of the last year, it's gotten worse. Like, October was fantastic, great time to buy. We bought a bunch. November, still a good time to buy. December, became less of a good time to buy. January so far, terrible for single-family.
Because you had all the listings expire at the end of December that got stale and their listings, you know, expired. Now people are waiting for the spring or the first rate cut to actually list their homes because they think people here, oh, rate's down, price is up. Inventory is going to get saturated on SFDs.
So, be careful about that one. But what we are seeing with certainty is multifamily, uh an explosion of multifamily apartment buildings, uh that leads to a greater supply of apartments, which leads to prices coming down. Make sense? You also have less of that migration from the West that you used to have.
Remember during COVID, the idea was, oh, everybody's leaving California to go to Florida, Tennessee, freedom states, whatever. You have less of that migration now. You have more of a reversal of COVID trends. People getting called back into the office, back to San Diego, back to Silicon Valley, whatever it might be.
Back into the cities. So, you have building that was speculating on, yay, rent's skyrocketing. Now you've got that supply dumping on the market at the same time as interest rates are too high for sellers to be able to refinance their loans, what happens? Boom, they default. But they're on assumable loans, folks.
Now, here is the opportunity. You ready for this? This is the kind of stuff we do on a daily basis. People like, "Kevin's over here in a gnome sweater in February talking about the real estate market and opportunities in the real estate market." And you know what I say to that? Correct. So, now I'm going to show you a real deal that we are in escrow on.
I've changed the numbers slightly. The cash on cash return is the same, but I've doinked with some of the numbers, mostly because I don't really want to give away where the deal is or what the deal is yet. I got to keep some competitive advantage, okay? You're getting enough already. All right. We're going to go through these numbers.
And I'm going to show you exactly how this works. And then you'll see what you want to start looking for, okay? All right, here we go. Right here. Let's say somebody has a property with a loan in default worth 9.45 million dollars, okay? That loan is a Fannie Mae assumable interest-only loan due in 2028.
I think ours is 2028 or something seven, something like that. And they're in default because they've over-leveraged on other projects, because their building in certain areas cost of a building went up, uh potential resale value went down. They're in the poopers, okay? And they they can't refinance because rates are crazy.
But, that loan's financeable at, let's call it, 3 and 1/2%. Loans in default. We could buy the building for, let's say, 13 uh 190. It's got a rents per door of about 1890. So, what are we going to do? We're going to take 1890 times however many units we have, 1890 or 1820, rather. 1820 times 50 units or 55 units times 12.
That gives us about, what is that? $1.2 million of gross scheduled income. Yep, there you go. GSI $1.2 million. Now, we're going to take a generic expense ratio, multiply by 65%. What do we get? We get $780,000 of net operating income. Now, be careful. You can't use 65% in a place like Texas because the property taxes are double.
You're going to get reamed. So, you probably be got to be closer to like 0.5. So, be careful where where you're using your expense ratios. Okay, great. Now, we're going to take off our debt service. This is very easy to multiply. We're just going to take the loan and default, multiply it by 3 and 1/2%.
Okay? What are we left with? Cash net $450,000. Okay? Divide that in to your cash outlay. So, how much money did we spend on this building? Only 3.7. Well, wait a minute. If we divide those two, it's 12% cash on cash return. Boom! Why? Because when your cap rate is greater than what you can get on debt or what you pay on debt, you make more money.
Your cash on cash return goes up. So, you can actually buy a lower cap high-quality building and actually get really good rates of return. You know, obviously until the loan comes due and then you got to refinance, you know, what happens if that resets higher, whatever. You got 4 years to figure it out.
Yes, that is a risk. You're being compensated to some extent for that now, but quite frankly, I think the seller is doing most of the compensating. Again, this is why they say money in real estate is made on the buy. So, anyway, let's look at the cash on cash return on this ordinarily, right? Or the cap rate on this.
So, the cap rate on this would be 980 NOI here, and then we're going to divide that into the price. Uh there we go. Yeah. So, your cap rate on this deal would actually be closer. This might be rounded, so it's probably like 5 and 1/2%. percent Oh, 5.9%. So, look at that. Your cap rate on this deal is 5.9% but your cash on cash return is 12.03.
Now one of the reasons for that is because they have such a large loan that's assumable on a building value that's actually low. So you actually have a lot of leverage here. I mean consider this for a moment. You take out a loan of 9450 divided by 13190, you know, you're you're leveraging this up to 71%.
So in our case, I'm going to do my numbers really quick. Yeah, we're at 72%. Kind of wild. So that's why I'm saying these numbers, they're not exactly our deal. Our deal numbers are larger than this but they roughly align with this. And what we're doing is we're buying this with House Hack. So we're able to use the money we raised to negotiate great deals like this.
Then we stabilize the properties if they're not already stabilized. Uh and and then we can, you know, get to phase two which is our mini funds uh phase. Now we're actually going to be raising money for House Hack probably next week. Again, if you're an accredited investor, buckle up probably Thursday or Friday we'll launch the accredited round again.
Uh this it This is the last time we're going to raise money before we do mini funds. Which if mini funds go the way we expect we think we'll never have to fund raise again for House Hack because the cash flow should be fantastic. Should be. No guarantees. I can't make those guarantees. Could be terrible.
So we're very excited for that but this is what we're focused on. So how do you practically as a viewer look for this? Well, first of all, you have to have cash. Uh and most importantly beyond cash, you have to have the ability to underwrite deals. I teach this in my Zero to Millionaire Real Estate Investing course but I mean frankly, what you really need to do is when you're looking at rents right now, you just need to discount them.
You need to discount the rents to get quality tenants so you can actually stabilize a building. Because if you can't stabilize a building, you're screwed. Vacancy sucks. A lot of people have a lot of vacancy in buildings because they don't know how to manage real estate. I deal with this all the time.
In fact, most of the time we're buying buildings, we're buying buildings that have been poorly managed. And because they're mismanaged, we go fix the problem, and we get paid for doing that. But, property management is something that I've done for what, I mean, how old am I? I'm 32, so 14 years, yeah, since I was 18.
So, if you can master property management, you could solve these problems. If you then have cash to pick up assumable loans, you could write low offers on deals, and hopefully assume their financing. Now, there's no guarantee you'll be able to assume the financing. That's the other risk factor you run into.
You might go call up Fannie Mae, and they go, "Nah, just pay us off cash." Okay, well, in that case, I guess you're stuck with a 5.92 cap. It's not a bad deal, either, but, you know, a lot of people are going to look and go, "Oh, but Treasuries, you know, you got 5% on money markets right now and one-year Treasuries." Fine.
It's true. Uh but, if you get a good buy on a deal, hopefully you're going to be looking at leveraged appreciation plus that cash flow, right? Plus the tax benefits. So, you know, obviously real estate's a different instrument than like a Treasury bond. But, anyway, this is fascinating, and I think there are a lot of opportunities out there.
We think there are way fewer opportunities in single-family this moment in time. I think that's going to flip-flop again, maybe this summer, as we get excess inventory of houses and rates that don't actually come down as quickly as people think. Even if we start cutting rates, what's 25 bips do? Not that much for a homeowner.
So, that's why right now we see huge opportunities in multifamily. You have to be careful of where you're buying them, though, because there's a lot of development. We're trying to look for lower development areas where we're a little bit more insulated and protected from a massive surge of new inventory coming on, and ideally there are a lot of jobs.
So, lots of jobs, less development, great place to buy. Especially if you can find somebody in default with an assumable loan that even though that loan is in default, you can still take it over and bring it current with the seller back paying it. Those are a lot of conditions. I'm just saying, that's what we're doing all day long, and we have a team at House Hack who's doing that.
Uh but I wanted to share this mostly because there are so many deals out there right now. I'm I'm looking at deals. I'm like, wow, we I mean we could probably deploy another $200 million, but we don't have another $200 million right now uh because there are so many deals. And so, but we enjoy this. So, this is what we're doing.
We're growing our real estate startup. We're growing our property management division. Uh we're we're uh creating a scalable enterprise. And it's a lot of hard work. It means I'm traveling more and posting on YouTube less, but that's okay. It's a balance, you know? Some weeks I post very little. Sometimes I can post more.
So, it's very interesting. But uh very excited for the team. Shout out to the entire team. Well, we're growing, and hey, if you come across an opportunity, send it to me. [email protected]. Really appreciate you. Thanks so much. Stay tuned for the next fundraise coming and the warrant call probably next end of next week if we can get it situated, which we should be able to. Thanks so much. We'll talk soon, and I'll keep you update.
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