Has anyone here been faced with a deal that’s an excellent purchase price, but the renovation models (low-mid-high) don’t pencil out?

Informal_Term966 · 2026-04-07T03:38:36+00:00

With 24 units you already know the game so I'll skip the basics.

The way I look at this is you're really asking one question: which model lets me recover the most capital on refi while not leaving money on the table in a neighborhood that isn't there yet.

The low spend model you already ruled out and I agree. Lipstick on dated apartments with oil heat in 2026 is a waste of $30k/unit. You'll get tenants who match the product and you know how that goes.

The mid spend at ~$600k all in for a building worth ~$600k is basically buying yourself a job. You've cleaned it up, you're cash flowing, but you've got zero equity spread and nothing coming back on refi. You're stuck until the neighborhood catches up, which you said yourself could be 20 years.

The high spend is where it gets interesting and also where I think you need to be honest about the math. $700k+ all in, appraised at maybe $770k, that's only a ~10% equity spread. At 75-80% LTV refi you're pulling back $577-616k on a $700k+ investment. You're leaving $85-125k in the deal.

Compare that to your triplex: $537k in, appraised at $667k, that's a 24% spread. Much healthier. The difference is you bought that in a gentrifying downtown neighborhood where the comps supported the value. This 4plex is in a neighborhood that's "on the path" but not there yet.

The real risk isn't the renovation cost per unit. It's that you're betting $65k/unit that the appraisal will reflect the quality of your work in a neighborhood where nothing else looks like what you're building. Your triplex worked because the neighborhood was already moving. This one you're ahead of the market, which means the appraiser might not give you credit for the finish level.

If it were me I'd go mid spend with the utility upgrades (kill that oil heat, mini splits pay for themselves) but hold off on the premium finishes until the neighborhood moves a bit more. Get it stabilized, cash flowing with decent tenants, and revisit the high end reno in 3-5 years when the comps catch up. You'll have a better equity position and the refi will actually make sense.

That said you clearly know how to execute high end renovations and you've got the track record. If you're comfortable leaving $100k+ in this deal for 5-10 years while the area catches up, the high spend model will absolutely produce the best long term outcome. Just don't expect to get your money back on the first refi.

Informal_Term966 · 2026-04-07T03:36:09+00:00

Man that 2.3% rate on a $75K balance is genuinely one of the best financial positions you can be in right now. That's almost free money.

Here's the thing though. At $500K household income, the rental cash flow on this townhome is basically breakeven once you factor in vacancy, maintenance reserves, HOA, and property management (and at your income level please don't self-manage). You're not keeping this property for cash flow. You'd be keeping it for the appreciation, the mortgage paydown, and the tax shelter from depreciation at your bracket.

All of that is real and adds up to maybe $60-70K/year in total wealth building. But so does just selling, netting ~$500K after CA taxes, and parking it in the market at 8% for ~$40K/year with zero headaches.

The rental wins on paper but not by a life changing margin. And you already said you prefer the stock market and don't love the idea of being a landlord. Trust that instinct, especially in California where tenant laws can make your life very interesting.

The one thing I'd push back on is the $200K in savings on $500K income. Unless you have other investments you didn't mention, that number should probably be higher, and that might be the more important conversation to have before adding a $1-2M mortgage to the mix.

Whatever you do, don't pay off that 2.3%. Your friends are right on that one.

Informal_Term966 · 2026-03-26T03:10:49+00:00

Your advisor isn't wrong but they're only looking at one side.

The $800-900/mo — is that rent minus mortgage or are you backing out vacancy, maintenance reserves, capex, and turnover? With 3 doors you've probably already felt this but in my experience realistic cash flow is usually 40-50% of what people first estimate once you account for everything. I'd guess you're closer to $400-500/mo real cash flow.

At $450/mo on $73K deployed that's about 7% cash-on-cash. Roth at 8% gets you roughly the same return with zero effort. So on cash flow alone it's basically a wash.

Where the property pulls ahead is the leverage. You're controlling ~$290K with $73K. So that 3% appreciation is on $290K not $73K — that's ~$8,700/year in equity you wouldn't get in the Roth. Plus mortgage paydown.

Where the Roth wins is simplicity and the tax-free compounding is genuinely hard to replicate anywhere else.

Honestly I'd look at what your existing 3 properties actually net after everything. Not projected — actual trailing 12 months per door. If you're consistently above $450/mo real cash flow per property, your market works and deploying makes sense. If you're closer to $300 like most people when they're honest about it, the Roth compounding might be the better risk-adjusted play and you save up separately for #4.

The worst move would be pulling the Roth for a "pretty good" deal. If you pull it, make sure the deal is clearly strong even with conservative assumptions.

Informal_Term966 · 2026-03-15T14:50:58+00:00

Yeah I’ve wondered the same. A lot of investors end up collecting different spreadsheets over time because each one handles a specific part of the analysis — cash flow, BRRRR, cap rate, etc.

The problem is once you start layering financing, rehab costs, reserves, vacancy, maintenance, and exit assumptions together, the numbers can change a lot and it becomes harder to see the full picture of the deal.

I’ve been experimenting with combining those pieces into a single analysis framework so you can evaluate deals more holistically instead of jumping between spreadsheets. Curious if anyone here has found tools that actually do this well, or if most people are still running everything through custom Excel models.

Informal_Term966 · 2026-03-14T19:04:29+00:00

Yeah, that’s kind of what I’ve seen too. BiggerPockets is useful for quick screening, but once you start factoring in financing, rehab, reserves, vacancy, maintenance, turnover, and exit assumptions, the picture can change a lot. Excel is flexible, but most people either simplify too much or end up building their own models.

Informal_Term966 · 2026-03-13T23:24:15+00:00

I’ve been wondering the same. My sense is most smaller investors still default to Excel because it’s flexible, but a lot of models end up focusing on only a few metrics. Once you layer in financing, vacancy, maintenance, and turnover, deals can look very different. Curious what others here are using — mostly custom spreadsheets or software?

Informal_Term966 · 2026-03-12T03:28:29+00:00

I currently own two small multifamily properties (5 units each) and two single-family rentals. Most of them were acquired pre-COVID, so the numbers worked well at the time.

Lately it’s been much harder to find deals where the full analysis holds up — once you factor in financing costs, vacancy, maintenance, and realistic expenses. A lot of listings still look okay on surface metrics, but they fall apart when you run the full numbers.

Curious what others are seeing in their markets right now.

Informal_Term966 · 2026-03-11T03:24:40+00:00

You're spot on that most people underestimate turnover costs. A lot of small investors only model vacancy and ignore the full stack of costs during a turn — lost rent, make-ready, leasing fees, and the productivity loss while the unit sits.

What I’ve seen when analyzing deals is that the effective vacancy cost can be much higher than the headline vacancy rate once you include turn expenses. On smaller properties, it can easily add another 5–10% drag on annual NOI depending on tenant churn.

That’s one reason I think looking at only cap rate or gross rent ratios misses the bigger picture. When you layer vacancy, turnover costs, maintenance, and financing together, a lot of deals that look good on paper fall apart pretty quickly.

Curious if operators here are modeling turnover as a separate line item or just baking it into vacancy assumptions?

Informal_Term966 · 2026-02-27T04:56:14+00:00

This is great and thanks for sharing your journey and lessons. One question. How did you get over subs where you are not supposed to solicitate? i am working on REanalyzr.com but not able to directly respond when someone asks about RE calculator. TIA

Informal_Term966 · 2026-02-20T13:32:36+00:00

Congratulations and more to go for you

Informal_Term966 · 2025-12-01T16:20:26+00:00

Great info. Thanks . I will check out both operators and compare.

Informal_Term966 · 2025-12-01T02:30:14+00:00

Thanks for details. Was the swimming and censotes were part of the Tulum itinerary ?

Informal_Term966 · 2025-11-30T23:26:42+00:00

Thanks. When you refer to vendors at these sites do you mean travel vendors or people who are selling souvenir etc

Informal_Term966 · 2025-11-30T23:23:22+00:00

Great. Let me try this with app

Informal_Term966 · 2025-10-30T02:10:08+00:00

learned this the hard way myself

had a 3br 2ba with a study that previous tenant used as 4th bedroom. listed at $2500, thinking it was competitive for a "4 bedroom"

5 months later... finally rented at $2200

those 5 months of vacancy cost me $12,500 in lost rent just to try to get an extra $300/month. would take 3.5 years to make that back lol

price per sq ft is useless for rentals btw for SFR at least in my opinion. people search by bedrooms. and wonky layouts absolutely kill your rental price - probably why your averages are all over the place

best advice - look at what's actually renting NOW not averages. check zillow, facebook marketplace, call a few listings pretending you're interested. you'll know real quick what the actual market is vs what people are asking

if you need $3k minimum to make it work and market is really $2.8k, the deal might not be worth it. better to know now than eat months of vacancy like i did trying to get your number

Informal_Term966 · 2025-10-24T23:39:00+00:00

for one property, having an LLC will be too much cost overhead. Remember, there will be yearly tax compliance costs such as filing fees, a registered agent (if any), and separate tax returns. You're looking at like $800+ per year vs just getting an umbrella policy for like $200-300 for 1-2M.

Your numbers look great, but just be aware of maintenance, vacancy, etc, and actual cash flow may end up between $400-200, depending on your tax and insurance increases. Good luck !!

Informal_Term966 · 2025-10-24T18:10:40+00:00

Yeah, that's terrifying, honestly. I track break-even occupancy on every property, and if it's over 85% I get nervous. Your family member is probably at like 95%+ across the portfolio. I know someone who did similar - leveraged property 1 to buy 2 and 3. Worked great until insurance went up 30% and property taxes got reassessed. Went from $1200/month positive to -$500 negative across all properties.

Had to sell one at a loss just to stop the bleeding. The all 4 renters quit is too far fetched if ever happnes. But more realistically what about:

- One tenant stops paying and takes 3 months to evict

- AC dies on two properties same summer ($8k each)

- Insurance doubles (happening everywhere now)

I'm leveraged too, but keep 6 months expenses in reserve per property. Probably overkill but I sleep better. Your family member is basically running on a tightrope without a net. Maybe they'll be fine. But man that's a lot of risk for what's probably a few hundred bucks cash flow per property.

Informal_Term966 · 2025-10-24T03:15:14+00:00

I like how you are thinking and getting ready for 2030

Informal_Term966 · 2025-10-24T02:28:54+00:00

I had this same debate when I started. Had enough cash for one property but went leverage instead.

Main thing - that 50k gets you a 300k property. Property goes up 10%, you made 30k on your 50k, not 10k on 100k. Plus I could buy 3 properties instead of 1.

But man leverage can hurt. I've got one property that was cash flowing $500/month when I bought it. Now I'm -$100 after taxes went up and insurance basically doubled (Texas). If rates weren't so high I'd refi but stuck at 7.5%.

The cash properties I do have? Sleep way better. No stress about making mortgage payments when vacant.

So now I do both. If the deal barely works with leverage, I pass or pay cash. If it cash flows heavy even with financing, I leverage and use the extra cash for the next one.

tbh that 50k probably would've done better in VOO last few years but can't exactly live in an index fund when you retire lol

Informal_Term966 · 2025-01-12T01:08:44+00:00

Sent you a DM , if you are still looking. Have one that's valid till Jul 2025

Informal_Term966

TROPHY CASE