This is the classic “Cashflow” way of RE investing. You collect $200 a door and build your way up. It’s kinda the opposite of the “Appreciation” method we are more used to in Bay Area. Both methods work.
I think the biggest hole in his calculation is the “buy properties at 20% discount” assumption. Maybe it can happen outside of prime Bay Area like in deep East Bay or even Stockton?
Easy for BAGB to do. Every year can find a property at 80% discount that can be boosted by 10% in the first year, and cashflow 18%! Yes, cashflow not yield. No worries, the tenants would be absolute kwai and no vacancies whatsoever because is so easy to find tenants who is willing to pay whatever you ask for. Tenants would also maintain and make repairs at their own costs. Super cool tenants.
Agreed. The key appears to be to buy at 80 cents on the dollar, then another 10% appreciation in the first year, so roughly 30% gain in one year with only 16% of the capital down. So maybe it’s quicker to just keep trading up like this and forget the cashflow? So flipping is the way to go !