STOP losing money! Real estate deals UNDER 10% IRR? NO WAY! #shorts
In this YouTube short, the speaker warns that commercial real‑estate opportunities offering less than a two‑digit internal rate of return (IRR) are generally not worth pursuing. He walks through a specific deal, highlighting that the bank would only finance 25% of the purchase price at a 7% interest rate, resulting in a debt service coverage ratio (DSCR) of roughly 1.06—well below the preferred minimum of 1.25. To reach an acceptable DSCR the investor would need to provide about 40% equity (a 60% loan‑to‑value), which translates to roughly $1.5 million of out‑of‑pocket cash. The speaker points out that, under these terms, the investor would effectively be paying the tenant to occupy the space, making the deal unattractive unless the seller offers owner financing, which is rare. He further argues that any deal with an IRR under 10% fails to meet current market standards, describing the property as more of a tax write‑off than a cash‑flowing asset. Finally, he critiques the lease assumptions, noting that a 2% annual rental growth rate is too low compared to the typical 3.5% or inflation‑linked growth needed for a solid investment.
