BiggerNews: How Much of a Return Should Your Investment Property Produce?

BiggerPockets Real Estate Podcast

BiggerPockets

Education, Investing, Business

4.8 • 16.6K Ratings

🗓️ 15 November 2024

⏱️ 39 minutes

🔗️ Recording | iTunes | RSS

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Summary

What makes a “good” real estate deal in 2025 and beyond? How much of a return should your investment property be producing? Are real estate returns good enough in this tough housing market to beat out other performing assets like stocks? Today, we’re sharing our exact investing criteria, defining what makes a “good” real estate deal to us, and how you can use key indicators to identify deals worth the effort. We’re breaking this episode into a few parts as we touch on the primary types of investment properties: long-term rentals, short-term rentals, and house flips. Garrett Brown is our resident vacation rental expert and shares how he’s routinely getting twenty percent (or greater) returns by reinvesting in his short-term rentals. Next, familiar face James Dainard discusses the unbelievable house-flipping returns he nets, but are they worth the risk? Finally, Dave shares the metric he goes after when investing in long-term, low-risk rental properties. Plus, we’ll share when it’s a better use of your money to reinvest in your current properties vs. going out and buying new ones! In This Episode We Cover: What makes a “good” real estate deal in 2025 and beyond The massive return James is making with house flipping (and the HUGE risks he takes) Garrett’s unique short-term rentals pulling in twenty percent (or higher!) average returns IRR (internal rate of return) explained and why everyone should calculate this when investing When to buy more properties vs. reinvest back into your performing portfolio And So Much More! Links from the Show Join BiggerPockets for FREE Let Us Know What You Thought of the Show! Get a Quote on Your Next Short-Term Rental Loan with Host Financial Calculate IRR with Dave’s Book, “Real Estate by the Numbers” Property Manager Finder What's a "Good" Deal in Real Estate? 5 Criteria to Consider Connect with Garrett Connect with James Connect with Dave (00:00) Intro (00:51) What's a "Good" Return? (06:21) IRR (Internal Rate of Return) Explained (07:59) What Makes a "Good" STR Deal? (11:14) Flipping Houses (High Risk/Reward) (16:43) Long-Term Rentals (Low Risk) (23:17) When to Reinvest vs. Buy More (29:23) Do This NOW! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1044 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email advertise@biggerpockets.com. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Everyone tells you you got to go out and buy good deals, but no one actually tells you what that
0:05.1	means, like what is a good deal today? Well, in this episode, we're going to give you the real
0:10.8	numbers you should be looking out for.
0:17.6	What's up, everyone? It's Dave. And today I have my on-the-market co-host, James Dainerd here with me,
0:24.0	alongside Biggerpockets short-term rental expert, Garrett Brown. So today, we're going to dig into some
0:29.8	real numbers of what a good return is on a flip, on a long-term rental, on a short-term rental,
0:35.4	and for different types of investors.
0:41.3	Garrett, welcome back to the show. Thanks for being here. Thanks for having me back. I'm excited.
0:46.2	Yeah, likewise, James. Good having you as well. I always like coming on and talk deals.
0:50.8	Well, we knew this show was perfect for you. We were talking about specific numbers, different types of return. So let's just start there, James. Before we talk about baseline for what your
0:55.7	expectations of a return are, what metrics do you actually look at for determining what deals you
1:02.7	should be doing? You know, so when I'm investing, I'm pretty simple. I look at cash on cash return.
1:08.4	How much cash am I putting into the deal? What is it producing me back on an
1:13.2	annual basis? And whether it's a flip, a development, a rental property, that is my biggest concern.
1:19.6	If I'm going to take away any cash and park it on a property, I want to know what is going to
1:23.7	be my return on annual basis because that tells me whether to spend it or not.
1:28.0	Okay. Well, that's pretty simple. I love cash on cash return. And James alluded to this,
1:33.0	but if you haven't heard of this term, it's basically just a measurement of how efficiently
1:38.2	your investments produce cash flow. So you just take the total profit you make from an investment in a given year.
1:45.8	You divide that by the amount of money that you put into that deal. And that doesn't include any
1:50.8	financing. It's like actually how many dollars came out of your pocket. And you divide that and
1:56.0	that's cash on cash return. And it could be 2%, it could be 20%, it could be 200%. And we'll talk about what
	...

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