Need Advice: How to Cash Flow in 2022
Hello, I'm new to investing, and with the current prices against current rents, I'm finding it difficult to get properties to cash flow. As far as I know, I am pretty thorough with the calculators. Is it just me? Or is it the current state of the market? Any advice would be appreciated. Thanks!
@James Wachob I don't know if you remember this but we actually met in a burned-down house on Ivy road in 38117 two years ago! Going to shoot you a PM to hear more about your success!
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#2 Managing Your Property Contributor
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If you're looking on the MLS, you'll be hard-pressed to find something that cashflows.
You should:
1) Source your own deals before the seller gets to an agent
2) Find properties you can reposition as STR
3) Find other ways to reposition a property to increase cashflow/value- convert a garage or den to a bedroom, etc.
I appreciate all the responses! I have found many of your posts to be insightful! Glad to be part of the BP community.
-Chris
Quote from @Chris Kreslins:Hi Chris,
Hello, I'm new to investing, and with the current prices against current rents, I'm finding it difficult to get properties to cash flow. As far as I know, I am pretty thorough with the calculators. Is it just me? Or is it the current state of the market? Any advice would be appreciated. Thanks!
I am still finding deals that are great on cash flow and appreciation. Maybe it is the market you are looking at? You should consider investing OOS here in Columbus or Cincinnati. The price to rent ratio makes for great investments. Not to mention our appreciation has been 8% higher then the US national average, because of the high demand for affordable housing.
Everything cash flows. Put 100% down and you’ll have cash flow. The question to answer is what is your minimum return you’ll accept on your cash? From there the strategy to get that # becomes more clear.
@Corbin Loveless only real estate investors could appreciate that opening... "I don't know if you remember this but we actually met in a burned-down house on Ivy road in 38117 two years ago!"
LOVE IT!
Yes Sir I remember that one... great to hear from you!
@James Wachob haha you're exactly right, look forward to connecting!
Okay so here are my number on one I'm looking at today. This puts me $300 in the hole each month. What would you do to tweak this? or is it just what it is and I need to keep looking for a better deal?
Price: 299,000
Closing Costs: 5980
Down payment: 74,750
Interest: 6.5
30 yr conv loan
2 Units: $2000 total
Prop Tax: 308/mo
Insurance: 75/mo
Repairs and Maintenance: 5%
Vacancy: 5%
Capital Exp: 5%
Property Mang: 10%
Utilities: 0
Quote from @Chris Kreslins:
Okay so here are my number on one I'm looking at today. This puts me $300 in the hole each month. What would you do to tweak this? or is it just what it is and I need to keep looking for a better deal?
Price: 299,000
Closing Costs: 5980
Down payment: 74,750
Interest: 6.5
30 yr conv loan
2 Units: $2000 total
Prop Tax: 308/mo
Insurance: 75/mo
Repairs and Maintenance: 5%
Vacancy: 5%
Capital Exp: 5%
Property Mang: 10%
Utilities: 0
As is doesn't look like it works, but you've not given us enough info to really be helpful. Can you fix up the units and get more rent? Can you generate income from the property from something besides rent? (Convert space into secure storage, laundry that you charge for, RUBS on utilities, etc?). Can you increase rent by maximizing space? (2 bedrooms but you can figure out a way to add a 3rd). Also, as I mentioned above, what is the minimum cash on cash return you're willing to accept? Pay cash for this place, using your numbers, and you're probably around 5% CoC. Is that good for you? If. It what % are you looking for? Then try to figure out if you can hit that % by making some adjustments I mention here. If you can't find a way to hit your # then you just move on to the next one.
Hope this helps,
Matt
I recently bought small multifamily in Spokane County and it's a house hack. The property is operating between 12-15% COC return. Impossible is the wrong word to use, you have to make it a deal instead of finding the deal.
Cash flow is tightening a little, however prices will also adjust a little. Look at major metros and locations that have affordable cost of living, limited supply, growing population and job markets etc... Im finding plenty of cash flowing deals in most of the major metros in Texas, Arizona, Florida, Georgia, Carolinas. Need to juice your cash flow, you can always add short term rentals to your portfolio. Usually 3-8x of what a normal long term rental cash flows. I just converted 3 of my single families to STR.
I also started investing more in commercial real estate syndications. Most of the deals I invest in usually pay a 7-10% pref and typical ARR is over 20%. Last year I had 4 passive investments run full cycle and all returned >30% ARR.
@Chris Kreslins as others have mentioned, long-term rentals are just one strategy you could consider. If you really believe in the location and long-term appreciation prospects, you could also consider short-term rentals, mid-term rentals (furnished and month-to-month), rent-by-the-room, house hacking, BRRRR to increase rent yields, just to name a few. The question isn't "does it cash flow?" but rather "how can I make it cash flow?"
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@Chris Kreslins You have already received great advise here.
Understand your personal goals and situation and invest in market(s) that support your goals while exploring all the listed strategies to cash flow on any property.
Goodluck
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Quote from @Chris Kreslins:
Hello, I'm new to investing, and with the current prices against current rents, I'm finding it difficult to get properties to cash flow. As far as I know, I am pretty thorough with the calculators. Is it just me? Or is it the current state of the market? Any advice would be appreciated. Thanks!
Hello Chris! That is so awesome that you want to invest in real estate! Just based on some experience with clients, there's definitely still some house that does cash flow. However, these client's have put down a lot of downpayment and are not house hacking. In my experience, about 12 months ago I purchased a duplex in Cheney. I am house hacking it right now, therefore, I am not cash flowing (but my property is appreciating too) BUT once I leave the unit - it will be cash flowing for me.
Good luck out there! If you have any questions, please feel free to connect with me and I'd be happy to answer them!
Quote from @Chad McMahan:
Quote from @Chris Kreslins:
Hello, I'm new to investing, and with the current prices against current rents, I'm finding it difficult to get properties to cash flow. As far as I know, I am pretty thorough with the calculators. Is it just me? Or is it the current state of the market? Any advice would be appreciated. Thanks!
Hi Chris.
If your (or your realtor's) numbers are not showing at least 20% cash on cash returns, move on. There is still plenty of money to be made. For my clients, I target a minimum of 20% and usually hit closer to 30%+.
Hey Chad, how are you able to achieve 20% COC returns? I would be interested to know more
Quote from @Chris Kreslins:Hi Chris.
Hello, I'm new to investing, and with the current prices against current rents, I'm finding it difficult to get properties to cash flow. As far as I know, I am pretty thorough with the calculators. Is it just me? Or is it the current state of the market? Any advice would be appreciated. Thanks!
You're not alone- I'm seeing quite a few posts reflecting concern about cash flow, now that we are not in the crazy climb market we were experiencing up to 6 months ago.
I have the opposite perspective. Right now is the best opportunity to buy cash flow (STR's and LTR's) properties, that I have seen since 2009. Amazing inventory hitting the market, great buying prices and terms. My clients (and my own purchases) that have more recently closed escrow are getting strong bookings/occupancy and are pacing for cash on cash returns around 20%-38%. As long as you have it dialed in and use a proven system it's not hard to get great returns.
No strings, if I can point you in the right direction, let me know.
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Real Estate Agent Arizona (#SA637448000 )
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Spokane was a cash flowing city back in 2019. Not possible anymore. Spokane County fastest growing county in WA. CDA - fastest growing city in the nation. I'd look out of state. Anything decent here is going for $455K. Meaning not built in the 70's 1,500 to 2,000 sq.ft. 3 bed 2.5 bath... ya thats a $2,900 mortgage with today's rates. Jerome and boys will increase rates again .75 in November. This ship has sailed.
Quote from @Sachin Moozhikulam:
With home prices being as high as they are, when I factor in the mortgage payment (P&I), it's been nearly impossible to find a cash flowing rental. Maybe these market conditions are less than ideal for LTR? Maybe I simply haven't found a good enough deal, I'm not sure. I am new to this and slowly learning but currently, my analysis is yielding the same conclusion as yours.
Spokane was a cash flowing city back in 2019. Not possible anymore. Spokane County fastest growing county in WA. CDA - fastest growing city in the nation. I'd look out of state. Anything decent here is going for $455K. Meaning not built in the 70's 1,500 to 2,000 sq.ft. 3 bed 2.5 bath... ya thats a $2,900 mortgage with today's rates. Jerome and boys will increase rates again .75 in November. This ship has sailed.
Quote from @Chad McMahan:
Quote from @Chris Kreslins:Hi Chris.
Hello, I'm new to investing, and with the current prices against current rents, I'm finding it difficult to get properties to cash flow. As far as I know, I am pretty thorough with the calculators. Is it just me? Or is it the current state of the market? Any advice would be appreciated. Thanks!
You're not alone- I'm seeing quite a few posts reflecting concern about cash flow, now that we are not in the crazy climb market we were experiencing up to 6 months ago.I have the opposite perspective. Right now is the best opportunity to buy cash flow (STR's and LTR's) properties, that I have seen since 2009. Amazing inventory hitting the market, great buying prices and terms. My clients (and my own purchases) that have more recently closed escrow are getting strong bookings/occupancy and are pacing for cash on cash returns around 20%-38%. As long as you have it dialed in and use a proven system it's not hard to get great returns.
No strings, if I can point you in the right direction, let me know.
Hi Chad, thank you for sharing your experience with everyone! I am curious if you are paying a significant lower than market price to get the 20% to 40% COC return? Thanks!
Quote from @Chris Kreslins:Hi Chris.
Hello, I'm new to investing, and with the current prices against current rents, I'm finding it difficult to get properties to cash flow. As far as I know, I am pretty thorough with the calculators. Is it just me? Or is it the current state of the market? Any advice would be appreciated. Thanks!
Great to see you again.
My clients are still doing great in the current market, because their properties POP on the STR rental market. This is the most important factor when it comes to STR performance and your profit. For LTR's POP is important, but other property factors more heavily influence your income.
-
Real Estate Agent Arizona (#SA637448000 )
- (928) 300-9449
- [email protected]
Quote from @Chris Kreslins:
Hello, I'm new to investing, and with the current prices against current rents, I'm finding it difficult to get properties to cash flow. As far as I know, I am pretty thorough with the calculators. Is it just me? Or is it the current state of the market? Any advice would be appreciated. Thanks!
Base on the Market research i have been doing in this area, this is a appreciation market with limited cash flow you have to buy and hold.
Borrowing @Matthew Ringer's line from above- everything cash flows when you pay cash...
One of the opportunities that I see in the current market is cashing out on a portfolio that's appreciated massively over the past few years and reinvesting with cash. If you have a portfolio of rentals, odds are likely you have equity. Using a 1031 and paying cash for some bulletproof investments is a great way to hedge inflation/potential recession and still be "in the market" IMO.