Tommy DobczykOpportunity Zone Advisor, OZ Wizard · Director of Development | Certified Opportunity Zone Advisor

STOP losing money! Real estate deals UNDER 10% IRR? NO WAY! #shorts

3 Jul 2026 · 2 min

Watch on YouTube

2:05

In this YouTube short, the speaker critiques a commercial real‑estate opportunity, explaining that current market conditions make any deal yielding under a two‑digit IRR unappealing. He outlines the bank’s financing limits—only 25% loan‑to‑value at a 7% interest rate—resulting in a debt service coverage ratio (DSCR) of about 1.06, well below the preferred minimum of 1.25. To reach a more acceptable 60% LTV, the investor would need to provide roughly 40% equity, translating to a substantial cash outlay (e.g., $1.5 million on a $3.75 million property). The speaker notes that the projected rent growth of 2% annually is insufficient compared to the typical 3.5% or inflation‑linked growth, further eroding cash‑flow potential. He argues that without owner financing—rarely offered—the deal functions more as a tax write‑off than a cash‑generating asset, and any IRR below 10% fails to justify the risk.

Chapters

Honestly, there's nothing out there in real estate right now under 2 digits that's worth doing. So, because even if we went to buy this, we'd have to buy it with debt. Say, for example, we got to go to the bank to get the loan. The bank is only going to give us a certain percentage of that property. And so right here, you can see that the highest amount that they give us, which is 25%, and at a ridiculously low rate of 7%. We are only getting a DSCR score of approximately 1.06. That is horrible for a commercial property because we want an average of 1.25 minimum, right? And we can't get to 1.25 unless we do a 60% LTV, which means that we have to come up with 40% of the money. So if we're at 3.75, let's just say at 3.75, that's going to be almost like another million and a half dollars we got to come up with on our own. To do the deal, right? So this really breaks this deal a little bit in the fact that because of the DSCR score, if we take the two rents that we would have to pay, if we take the two loan payments we'd have to pay and condition that against what we're getting on our lease, we're actually paying for our tenant to live there. So it's not worth doing that. And again, unless the owner's willing to do some owner financing deal. So then at that point it makes sense, but they're typically not interested. Honestly, there's nothing out there in real estate right now under 2 digits that's worth doing. So if your IRR, which is your internal rate of return, is not greater than 10%, it's not worth doing, right? Because there's so much out there right now that's available to do that. This is literally more of a property setup for a tax write-off than it is for for it to be a cash flowing asset. It's not structured as a cash flowing asset. So going through, it shows like the strengths have the long-term lease, absolute triple net, annual rental growth at 2%. That's way too low. Typically it needs to be more like 3.5% or equivalent to inflation.