Holy Crap. this is absolutely insane in this video. I'm going to show you how to get a 12% cash onh 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 you get them. Okay, so first, why are there deals in real estate right now? Multif Family Rents are starting to fall.

If you're buying Multif family right now and you are not underwriting that Multif Family rents are falling, you're screwing yourself. You need to go in realizing that Multif Family rents are falling. They've already fallen anywhere between $200 to $600 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 might be 30% higher, so a $2,000 rent might be somewhere around $2,600 Maybe it's come down 200 bucks to 2 2400. so it's still 20% fatter than what you had in 2019. That sucks as a tenant. but for multifam, you got to be careful.

As an investor paying a 20 $2,600 valuation, right? I Mean simple. How do you value Multif Family Real estate? It's very simple. Take $2,600 Watch the difference. $2,600 Let's say it's A10 unit apartment building time 12 that gives you gross scheduled rent GSI of $312,000 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? Very simple. 2600 time, 10 units time 12 time the 15 time 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 a 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, multifam developments that are hitting the market, especially in the Sunb belt area and you got to be careful of this. Okay, the Sunb Bel 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: C It's an opportunity if you underwrite it correctly.

So Sun Belt 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 are probably two months worth of concessions and 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 Multif Family. 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 two months free. Okay, $3,000 is what you think the rent is. well, times 12. You should be collecting $36,000 a year, right? But they had two months free.

So you're really only collecting 30,000 Which means you're not getting 3,000 a month. You're getting 2500 a month. That's a huge difference, So a great way to get screwed on Multif family. Again, concessions Anyway, they mask rent drops, right? Okay, so what do we have? How do you get good deals in Multif Family? 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 multif family apartment units less so single family. single family is a whole. Another 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 hear oh, rates down, prices up inventory is going to get saturated on Sfd, so be careful about that one. But what we are seeing with certainty is multifamily. Uh, an explosion of multif family apartment buildings and that leads to a greater supply of Apartments which leads to prices coming down.

Makes 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 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 defaulting 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 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 escro on I've changed the numbers slightly. the cash on cash return is the same, but I've DED 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. 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, ready here We go right here. Let's say somebody has a property with a loan in default worth $9.45 million.

Okay, that loan is a Fanny May assumable interest only loan due in 2028. I think ours is 2028 or 7. something like that. That, and they're in default because they've overleveraged on other projects because they're 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 loans financeable at let's call it 3 and a half% loans and 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. 189 or 1820, rather 1820 time 50 units or 55 units Time 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 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 by 3 and a half per. 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 could 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 four years to figure it out.

Yes, that is a risk. You're are 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. uh, ordinarily right, or the cap rate on this. So the cap rate on this would be uh, 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 a half% perc. Oh, 5.9% So look at that.

Your cap rate on this deal is 5.9% but your cash on cash return is 1203. 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 know you're You're leveraging this up to 71% So uh, 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 2 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. Haack 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 my zero to million 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 a manage real estate. I Deal with this all the time. In fact, most of the time when we're buying 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 32? So 14 years you know since I was 18. So if you can, Master Property Management You could solve these problems. If you then have cash to pick 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 Fanny May and they go nah, just pay us off cash. Okay, well then 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 all 5% on money markets right now. and onee treasuries? Fine, that's true.

Uh, but if you get a good Buy in a deal, hopefully you're going to be looking at leverage, depreciation, plus that cash flow, right? Plus the tax benefits. So you obviously real estate is 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 rat 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 multif family. 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 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's 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 what we're growing and hey, if you come across an opportunity, send it to me Kevin House.com 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 updated bye Why not advertise these things that you told us here? I Feel like nobody else knows about this? We'll We'll try a little advertising and see how it goes.

Congratulations man, you have done so much People Love you people! look up up to you Kevin PA there financial analyst and YouTuber meet Kevin Always great to get your take even though I'm a licensed financial advisor, real estate broker and becoming a stock broker. This video is neither personalized Financial advice nor real estate advice for you. It is not tax, legal or otherwise personalized advice tailor to you. This video provides generalized perspective, information and commentary.

Any third-party content I Show should not be deemed endorsed by me. This video is not and shall never be deemed reasonably sufficient information for the purpose of evaluating a security or investment decision. Any links, promoted products or either paid affiliations or products or Services which we may benefit from I personally operate an actively managed ETF and hold long positions in various Securities potentially including those mentioned in this video. However, I have no relationship to any issuers other than House Act nor am I presently acting as a market maker.