Good luck!

My investment strategy will be large-scale acquisition, renovation and disposition, using $10M startup capital from a VC fund.

The 40% return isn’t what I’m trying to get per property; that’s the minimum return per year a VC fund typically expects on their investment. On a $10M investment, they want to see a minimum of $20M profit in 5 years. If they have 40% ownership in my corporation, that means I need to net a total of $50M in 5 years just to meet their minimum expectations. My main agenda right now is planning how I’m going to make at least that much money in 5 years from $10M startup capital.

What I should be asking is if you know the best way to calculate profits for a potential flip, and what sort of minimum return I should expect per property. I haven’t looked around this site much yet; do you have an article posted with that information? Do you know anyone I should talk to or sites I should visit to learn more about my specific strategy?

By default then, cash flow is gonna be your trump card. I recommend you specialize more in location than cap rate. That said, given that you’ll probably be buying a lot from banks, the cap rates should still be relatively high, even though location might be an ‘A’.

Still, 40% is gonna be a tough road to navigate.

My interest is in running my venture as a big business, with big VC money and a large acquisition team, mostly working the flip angle with long-term holding of anything I can’t flip in a month’s time. To get a VC fund that magical 40% return per year, which end would be better to veer towards for considering long-term holding outcomes: cash flow or appreciation? In such a scenario, would 10 caps be a good idea?

The answer will show up today in a post. This is too good to pass up. Thanks!

OK agree with most of what you’ve written so I’ll ignore all of that stuff and focus on our “degree” of disagreement, as you artfully put it. So here’s my question for you: If you had a $50 million dollar bill to invest would you buy a mansion in Beverly Hills or would you buy a block of duplexes in blue collar East LA?

Beverly Hills is high demand. Having Steven Spielberg and Michael Eisner as your neighbors would be pretty cool. High demand areas will always have a higher value than low demand areas, but it doesn’t follow that high demand areas will always appreciate faster. If this were the case then the wealthy zip codes would steadily pull away from the poorer ones ad infinitum, but we know this isn’t the way that laws of economics work.

I can’t answer my own hypothetical question because I don’t know Los Angeles, but I do know that I wouldn’t automatically gravitate towards the high demand area with the expectation that this would help me in the capital appreciation category.