How to find Cash flowing properties - What am I missing?
Member since 2022 · 11 posts · 7 votes
How to find Cash flowing properties - What am I missing?
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Real Estate Agent · Los Angeles, CA · Member since 2022 · 137 posts · 106 votes
3yHey Damian! I have a couple suggestions here
1. “Marry the property, date the interest rate.” Rates will drop eventually but the house you’re analyzing may not. If a property is in the red a few hundred bucks, analyze it with a 5% internet and see where you might be in the future. You can refi and pull cash out in the future to invest in your next deal.
2. Diversify your strategy or your market. I’ve built a career helping people buy Traditional Rentals in growing markets, but in todays world I’m focusing on Short Term Rentals for clients hyper focused on cash flow. The higher average monthly incomes help properties cash flow much more regularly. You might also consider other markets. Between advisors like myself and local managers it’s easy to invest further than arms distance away now.
Happy to chat more about any of these ideas.
79 Replies
- Troy, MI · Member since 2019 · 61 posts · 20 votes3y
@Damian Callaghan If you know the right places you can get 1.25 - 2%. There are places in my market, Detroit where that is possible. If onyerested, reach out.
Quote from @Damian Callaghan:
I'm new to investment but spending a lot of time on market and deal analysis. I am ready to buy but so far - even in markets where you can still pick a home up in an appreciating market for $250K - I am struggling to see how they cashflow with 25% investor down payment and interest rates up there near 7%. It frustrating - Im ready to go but certain I am missing something. I use a 0.86% (rather than 1) for quick deal analysis but do detailed analysis as well. On a $250k house you are looking at $62,500K down (which isn't cheap) - then somewhere around $1500 a month for repayment and taxes (doesn't take in to account mgmt, vacancy, capital) - and these markets I am looking at only getting $14-1600 a month in rent..
What am I missing? Help from this network welcomed!!
Note - I wanted to invest locally but even worse on Gulf Coast so been looking at NC, Jacksonville amongst other placesWhat you are missing is a GOOD team. I can get as many as I want in my market all with double digit net caps,
Example, all in 60k, rent is 1400, All in 100k, rent is 19k , net 12k Its all about your team and knowledge
Good luck
- Professional Property Investor · Brisbane, Queensland · Member since 2015 · 165 posts · 160 votes3y
Quote from @Damian Callaghan:
@David Nolan - thanks for the response. I have been doing plenty of research over the last 6 months and I have to be honest - this is the first time I have heard the term 'geared investments'. I will investigate this as I do need/want to mitigate my risks. I couldnt help notice you were in Brisbane - not sure how it works there but here in the USA (unlike the UK where I am originally from) when you sign a mortgage for a fixed rate you have that rate for the loan life time. The only time you would ever refi is if the mortgage interest rates came down. Thats my limited understanding of the USA mortgage process. Not sure if this changes your response? I am always welcoming of experienced feedback - thanks!
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Quote from @David Nolan:
@Damian Callaghan The first step in any investment is to identify exactly what it is you are looking to achieve. What is your investment objective? Are you investing for cash flow to fund other things, or are you investing for capital growth? It is important to understand this first.
If you are seeking cash flow then you would be wise to look at non-geared investments if you think interest rates will rise, or if your chosen investment is not performing as well as it needs to.
One of the greatest mistakes novice investors make is not assessing risk. Whenever there is debt or gearing, involved, the risk of all investments rises due to the interest risk associated with the borrowing.
What can you earn on the deposit amount of $62,500.00 if there is no debt? This becomes the relative debt-free risk amount you need to compare all other debt-burdened investments against.
There are companies that you can invest in that pay annual dividends in excess of 5% per annum. So, your property investment, with debt attached, needs to earn you more than that to be viable. Bearing in mind that investment into a large corporation places no emphasis on you to work on the investment compared to property investing. They also have capital gains potential as companies grow in value over time.
One final point, it is also possible to borrow to invest in shares in public companies. Might be worth considering.
Hope this helps.Hi Damien. Whilst I live in Brisbane I am also from the UK and I have purchased numerous properties in the USA. It is not so much about interest rates and mortgage terms, it is about your investment objectives and risk profile.
When you consider an investment are you looking at the return on the value of the property or the return on funds employed? If you invest $50,000.00 of your own money into an investment, geared or otherwise, what rate of return are you happy to receive on that $50k? Assuming you would be happy with 10% per annum then the property needs to provide you with a net yield of $5k. That could be in increased net value or cash flow or a combination of both.
The point is, if you understand what you are trying to achieve numerically then there are different ways to go about it.
One guiding point I have for you is my philosophy regarding property investing. If I cannot add value to the investment I do not purchase. By that I mean if you buy a property that is in perfect condition with no upside to future development then the only way you can make capital gains is from a rise in the market value. Unfortunately, we do not control the market and as such we are therefore at the mercy of the market.
I only buy property where I have clearly identified how I am going to add value from my own efforts/initiative. That way I increase the value of the property which in turn increases my equity, (read capital gain), without relying on the market to do it for me. If the market rises then my improved value also rises. If the market falls, then my potential loss is partly mitigated by the increase in value I created at the outset.
I hope this makes sense. It is not about finding cash flow properties, it is about finding opportunities to increase your wealth. - 3yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
Class A rentals rarely break even for the first 3-5 years, unless you get a great deal or can reposition the property to quickly increase income.
Logical Property Management4.9469 Reviews - Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes3y
It's definitely become more difficult to find cash flowing markets now that rates are higher.
As others have mentioned, Detroit still fits the bill though. I have 14-doors there, having lived in Detroit Metro from 2017-2022 (also grew up in Michigan man moons ago).
My goal was to generate enough monthly cash flow so that our family could move BACK to California without changing our lifestyle. I managed to do that in 2.5 years.
I stopped purchasing in Detroit about 18 months ago because things just felt overheated. But prices have cooled and I'm starting to buy again. I have a close friend that runs a turnkey operation on the ground there and happy to talk if you're interested in the Detroit market.
- Accountant · Member since 2023 · 48 posts · 30 votes3y
There are a few things you may be missing when analyzing cash flowing properties. One potential issue is that you may not be including all of the expenses associated with owning a rental property in your analysis. Expenses such as property management, vacancy, and repairs should be factored in to determine the true cash flow of a property.
You may want to consider looking into properties that need some work, as they may be priced lower and can potentially provide a higher cash flow after the repairs are made. You may also want to explore alternative financing options such as owner financing or hard money lending, which can potentially reduce the amount of money you need to put down and increase the cash flow of a property.
- 3yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
@Travis Biziorek what do you think of this:
We've done a "Deep Dive" series on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:
https://www.biggerpockets.com/...
(BP search feature can be problematic, so we’ve also added links @ our website under View Cities & Neighborhoods We Service)Logical Property Management4.9469 Reviews - Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes3y
Quote from @Damian Callaghan:
I'm new to investment but spending a lot of time on market and deal analysis. I am ready to buy but so far - even in markets where you can still pick a home up in an appreciating market for $250K - I am struggling to see how they cashflow with 25% investor down payment and interest rates up there near 7%. It frustrating - Im ready to go but certain I am missing something. I use a 0.86% (rather than 1) for quick deal analysis but do detailed analysis as well. On a $250k house you are looking at $62,500K down (which isn't cheap) - then somewhere around $1500 a month for repayment and taxes (doesn't take in to account mgmt, vacancy, capital) - and these markets I am looking at only getting $14-1600 a month in rent..
What am I missing? Help from this network welcomed!!
Note - I wanted to invest locally but even worse on Gulf Coast so been looking at NC, Jacksonville amongst other placesCheck out Cleveland dawg........It's mad dope.
- Realtor · Greenville, SC · Member since 2017 · 14 posts · 2 votes3y
Hi Damian,
As several others have pointed out, it could be your market is very difficult to find properties that work. You may want to consider looking out of state. In and around Greenville, SC, for example, has cash flowing properties in that price range.
- Investor · Greenville, SC · Member since 2017 · 69 posts · 15 votes3y
Matthew might be on to something there. Recently saw that Greenville SC is ranked top 10 for growing cities for jobs and investing, and the city shows it. New restaurants every week, and prices are stable right now.
- Real Estate Agent · Member since 2023 · 92 posts · 80 votes3y
If it were as simple as just finding a property near 1% and pulling the trigger, everyone we know would be an investor. So many other things that are more important I think are overlooked. The cash-flow will come with time!
1. How is the condition of the property? If it cash flows but you need a new roof,HVAC, Plumbing and electrical work in first couple years is it worth it?
2. AREA? Is it up and coming? If it is, then those returns you're worried about will show up with time.
3. Insurance? Lookup these costs right away (especially in the Florida market) make or break if you're in a flood zone or on beachside.
- Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes3y
Quote from @Drew Sygit:
@Travis Biziorek what do you think of this:
We've done a "Deep Dive" series on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:
https://www.biggerpockets.com/...
(BP search feature can be problematic, so we’ve also added links @ our website under View Cities & Neighborhoods We Service)I'll take a look, Drew. We should probably connect some time.
- 3ySamara HuntleyPro MemberInvestor · Charlotte, NC · Member since 2020 · 124 posts · 189 votes
The North Carolinas are on fire.
I invest in the sub cities of Charlotte and am having great success in Mid term rentals to corporate workers, people moving in looking to get acquainted with the city prior to buying, nurses etc. Just rented my 250,000 3/2 out at $2950 for 4 months. 4 days after I listed it. Easy.
My biggest strategy is brrring anything I can. The value add is ever crucial as well as being able to pull my money back out of the property and investing it in another one. Sinking 62,500 as a down payment on a property takes a WHILE to recoup. However, if your BRRRR it and only leave lets say, 15-20k in it then thats a lot better. Don't be afraid of the construction.
My team pretty much operates as a "turnkey" company helping you acquire, renovate, lease out, refi etc. If you're interested in the Charlotte area feel free to reach out. Here to help!
You are basing your decisions on reality and not fantasy (you would be surprised on how many people do not). Find a market where you can net c-o-c minimum 10% (down to 7% if you will not need to put any real time into it's upkeep or mgt.) or walk away. Calculating IRR is becoming much more important as we get closer to 5% Cd's and solid Blue Chip dividends while returns on investment real estate fall. Real estate will offer some great opportunities later this year as the leveraged group needs to pay off paper and sellers realize there is no selling at list in 24 hours anymore.
- Real Estate Professional · Dublin, OH · Member since 2013 · 251 posts · 165 votes3y
I have up on trying to do that myself 10 years ago and bought a franchise 🤣
This is why I have been doing BRRRR for years. It's much more work but typically I end up getting most of my money out, still have equity and positive cash flow. Plus money to go do it again because I was able to get most of my money out. Everyone is spoiled now that they have seen unprecedented low rates. I remember when 7% was a great rate because they were coming down from 9%. You need to get creative by looking at the what could be done with the property.
- Real Estate Agent · Member since 2022 · 31 posts · 25 votes3y
We have some areas in Cleveland where you can buy a SFH around 200k and rent it for $2000-2200 in decent areas. Let me know if you want me to send some your way
- Rental Property Investor · Boston, MA · Member since 2016 · 82 posts · 27 votes3y
I would NOT recommend making a purchase with an expectation that you will refi to a lower rate down the line. I hear a lot of brokers pitching this lately and it is misleading. There is NO guarantee interest rates will move lower. Consider the ability to refinance to a lower rate down the line as a potential bonus, but not as a given.
I would agree with others that you might want to look at new markets and/or look at multifamily properties. Multifamilies have lower per unit expenses on average. You can still make offers at numbers that make sense for you, even it's below the listing price. Prices seem poised to move lower and properties are sitting on the market for longer, so you might find one that works for a motivated seller.
Others have mentioned owner financing. I have never done it but it certainly sounds worth exploring!
- Member since 2022 · 14 posts · 2 votes3y
Im in the same boat - Canadian looking in the US because the Canadian market has become insane ( Toronto). Looking Fl & TX but having a hard-time getting cashflow + general ignorance of area demographics.
- Investor · Honolulu, HI · Member since 2017 · 187 posts · 108 votes3y
You really aren't missing much. But actually in my experience, you want to put even more into reserves (CapEx and vacancy). And depending if you're holding the properties in an LLC or personally, you may want to pay a little extra for insurance. The only real option is a combination of putting more down, doing a BRRRR, and/or walking into a purchase with ample reserves already.
Good luck!
@Damian Callaghan certainly feel your frustration with the current rates but bear in mind that if it's a good deal now, you should lock it in because rates will eventually come back down. I recently invested in a single-family rental in DFW and am only ~$200 a month in cash flow. At least I'm in the positives, but the number feels low compared to my other investments. Anyway, I expect this amount to increase in a few months when we increase the rental rate with our tenant. FYI, there are no restrictions around rental rate increases in Texas, unlike where I'm from. I would advise you to look in the right markets (which unfortunately doesn't sound like your local market). Many things to factor in when determining which market is right but for us, it was state income tax, rental laws, and proximity to downtown. For out of state investing, I strongly suggest turnkey companies that also do property management. It will save you so much time and headache and effort. My property in DFW is through a turnkey company and I really like their process and management so far. It was already renovated and tenanted with a fixed term lease. Happy to chat further if you're interested.
- Member since 2022 · 14 posts · 2 votes3y
Quote from @Teesh L.:
@Damian Callaghan certainly feel your frustration with the current rates but bear in mind that if it's a good deal now, you should lock it in because rates will eventually come back down. I recently invested in a single-family rental in DFW and am only ~$200 a month in cash flow. At least I'm in the positives, but the number feels low compared to my other investments. Anyway, I expect this amount to increase in a few months when we increase the rental rate with our tenant. FYI, there are no restrictions around rental rate increases in Texas, unlike where I'm from. I would advise you to look in the right markets (which unfortunately doesn't sound like your local market). Many things to factor in when determining which market is right but for us, it was state income tax, rental laws, and proximity to downtown. For out of state investing, I strongly suggest turnkey companies that also do property management. It will save you so much time and headache and effort. My property in DFW is through a turnkey company and I really like their process and management so far. It was already renovated and tenanted with a fixed term lease. Happy to chat further if you're interested.
What is the name of the company - if you dont mind sharing?
Quote from @Megan Rycroft:
Quote from @Teesh L.:
@Damian Callaghan certainly feel your frustration with the current rates but bear in mind that if it's a good deal now, you should lock it in because rates will eventually come back down. I recently invested in a single-family rental in DFW and am only ~$200 a month in cash flow. At least I'm in the positives, but the number feels low compared to my other investments. Anyway, I expect this amount to increase in a few months when we increase the rental rate with our tenant. FYI, there are no restrictions around rental rate increases in Texas, unlike where I'm from. I would advise you to look in the right markets (which unfortunately doesn't sound like your local market). Many things to factor in when determining which market is right but for us, it was state income tax, rental laws, and proximity to downtown. For out of state investing, I strongly suggest turnkey companies that also do property management. It will save you so much time and headache and effort. My property in DFW is through a turnkey company and I really like their process and management so far. It was already renovated and tenanted with a fixed term lease. Happy to chat further if you're interested.
What is the name of the company - if you dont mind sharing?
I'll send you a message to avoid being flagged on BP as that's happened before!
Quote from @Damian Callaghan:
I'm new to investment but spending a lot of time on market and deal analysis. I am ready to buy but so far - even in markets where you can still pick a home up in an appreciating market for $250K - I am struggling to see how they cashflow with 25% investor down payment and interest rates up there near 7%. It frustrating - Im ready to go but certain I am missing something. I use a 0.86% (rather than 1) for quick deal analysis but do detailed analysis as well. On a $250k house you are looking at $62,500K down (which isn't cheap) - then somewhere around $1500 a month for repayment and taxes (doesn't take in to account mgmt, vacancy, capital) - and these markets I am looking at only getting $14-1600 a month in rent..
What am I missing? Help from this network welcomed!!
Note - I wanted to invest locally but even worse on Gulf Coast so been looking at NC, Jacksonville amongst other placesOne of the benefits of 14 years of increasing RE prices is that your property values will go through the roof and you'll be 1031-ing left and right. Of course, the downside is that the barrier for entry is tough for folks trying to get started.
In this market, you'd better have an extensive network of realtors, brokers, contractors, PM's, fellow investors, wholesalers, etc that you've built up over the years to find deals as well as a good team you can trust to bring those properties to the rental market. Otherwise, you'll just have to go with a property from a turnkey provider if you want to avoid negative cash-flow. Take a look at Toledo and Cleveland.
- 3yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
@Travis Biziorek please send us a Connection Request as told we've hit our max
Logical Property Management4.9469 Reviews
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