Cash Flow vs. Appreciation 💰

Today’s top stories…

• Cash flow or appreciation? Navigating the high-interest rate reality for savvy investors

• Luxury real estate defies gravity, soaring to record heights while the rest of the market struggles

• AI in real estate: Efficiency boosters and value unlocks that you need to know about

• 💰 Deal of the Day!: 5 bd | 3 ba | Albrightsville, PA

Today’s mortgage rate (30 Yr. Fixed): 7.43%

Cash Flow vs. Appreciation: The High-Interest Rate Dilemma

Let's talk cash flow vs. appreciation in this high-interest rate environment. CoreLogic says nationwide prices increased 5.5% YoY as of December 2023. On a $200K property, that's about $10K in appreciation – equivalent to nearly $1K/month in cash flow. Tough to achieve with current rates.

But appreciation isn't everything. Lower-priced rentals in C/D+ areas might cash flow better, but come with more tenant issues and labor. Section 8? Prepare for inspections and maintenance headaches.

So what's the play?

• Value-add improvements to force appreciation and boost cash flow

• Large down payments to ensure positive cash flow, then refi when rates drop

• Convert extra space to add bedrooms or rent by the room

• Consider short-term rentals – they generate 61% more income (AirDNA)

• Secure family financing at lower rates

• "Subject-to" agreements to keep seller's mortgage in place

• Liquidate other assets to buy all-cash at a discount

Loading up on B/B+ properties, leveraging tax breaks, and waiting for rates to fall might be the move. It's a long game, but holding quality assets in solid areas has proven wise.

Remember, cash flow is king, but building wealth through appreciation and tax benefits is the royal flush.

(source)

⏰ Quick Tips

You asked. I answered.

What is the difference between a fixer-upper and a turnkey property?

A fixer-upper is a property that requires significant repairs or renovations before it can be rented or sold, while a turnkey property is move-in ready and requires little to no additional work. Fixer-uppers often come with a lower purchase price but require more time, money, and effort to bring up to rentable or sellable condition. Turnkey properties, while more expensive upfront, allow investors to generate rental income or sell the property immediately. The choice between a fixer-upper and a turnkey property depends on your investment strategy, skills, and available resources.

Learn more

Luxury Real Estate's Record-Breaking Run

As the broader housing market grapples with high mortgage rates and low inventory, the luxury sector is experiencing a remarkable boom. According to Redfin, luxury home sales increased by 2% in the first quarter, marking the best year-over-year gains in three years. This contrasts sharply with the 4% decline in overall real estate sales nationwide.

The surge in luxury sales is fueled by affluent buyers wielding the power of all-cash purchases. Nearly half of luxury homes were bought with cash in the quarter, the highest share in a decade. In Manhattan, a staggering 68% of all sales were all-cash deals, setting a new record.

This influx of cash is driving prices to new heights, with median luxury home prices soaring 9% to an all-time record of $1,225,000. Sellers, confident in rising prices, are cashing in on their equity, resulting in a 13% jump in luxury homes for sale. Surprisingly, the strongest price growth is occurring in markets not traditionally known for luxury, such as Providence, RI (16%) and New Brunswick, NJ (15%).

Seattle leads the pack in luxury sales growth at 37%, followed by Austin (26%) and San Francisco (24%). Tech money, baby. Luxury homes are selling at a blistering pace, with Seattle boasting a median of just nine days on the market.

As the two-tier market diverges, luxury real estate proves resilient and lucrative for those who can afford it, while the rest of the market struggles to keep pace.

(source)

AI: Real Estate's Efficiency and Value Booster

At The Gathering by HousingWire, a panel of real estate experts – Jonathan Lickstein (LoKation Real Estate), Howard Tager (Ylopo LLC), and Josh Team (SERHANT) – shared insights on the growing use of generative AI beyond marketing copy, exploring its potential to streamline operations and cut costs.

Tager, an early adopter of AI in SMS marketing, emphasized the importance of domain expertise in identifying time-consuming processes ripe for AI optimization. Lickstein highlighted his company's AI-powered compliance program, which reads and approves standardized forms and transaction data, allowing them to double their agent count without additional compliance staff.

When asked about AI's value-adding potential, Lickstein pointed to its ability to "alleviate the transactionality" of relationships, enabling agents to focus on building new connections. Tager stressed the importance of having a "domain expert" to vet AI service providers and ensure cost-efficient implementation.

Looking ahead, Lickstein predicts AI will provide targeted insights for agents to "shoot with a sniper rifle instead of a bazooka." Tager warns that brokerages reluctant to embrace AI risk falling behind competitors, both internally and externally.

As AI continues to evolve, forward-thinking real estate professionals are poised to unlock new levels of efficiency and value, transforming the industry landscape for those willing to adapt.

(source)

💰 Deal of the Day!

Price: $729,900

Address: 37 Frost Ln, Albrightsville, PA 18210

With its luxurious rustic design, top-notch amenities, and prime location in the Poconos, this 2022-built, 5-bedroom, 3-bathroom home is an ideal turnkey vacation rental that offers guests an unparalleled experience and promises strong returns for the owner.

Airdna data:

Estimated monthly payment: $4,927/month (if financed)

Estimated monthly revenue: $4,508/month

Cashflow excludes additional operating expenses. Always confirm local regulations, HOAs and permits before purchasing a property.

Thanks and see you tomorrow!

✍️ Brett