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?
Most Popular Reply
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
- Member since 2022 · 11 posts · 7 votes3y
@Teesh L. - I have not come across turn key companies - do they do realty, mgmt etc? Good call out on state income tax - hadnt considered that (UK lad still trying to remember one country/many state laws).
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.
- Member since 2022 · 11 posts · 7 votes3y
Quote from @Megan Rycroft:
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.
@Megan Rycroft - happy to share experiences here. I have been doing a fair bit of market analysis - not perfected the science but I feel like I am building a good grasp. But still waiting (Im ready to go) for that first illusive deal, build a team and start my journey
Quote from @Damian Callaghan:
@Teesh L. - I have not come across turn key companies - do they do realty, mgmt etc? Good call out on state income tax - hadnt considered that (UK lad still trying to remember one country/many state laws).
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.
Yes, this unicorn exists but it took us a while to find, and took a lot for us to trust... lots of turnkey realty companies sell the property and recommend a property management firm, but we needed more than that as we don't have time or capacity to vet the property managers. It's worth the fees. The current company we work with came recommended by a friend that invested with them as well so I didn't go in blindly. This is our first out of state and out of country investment after a 3 year hiatus, because our last experience doing it ourselves was a nightmare situation. I knew what I needed this time around!
- New to Real Estate · Ogden, UT · Member since 2023 · 19 posts · 14 votes3y
There is an expression I’m sure you’ve heard, “Great deals are made not found.” So there are a few things you can do to keep from getting stuck in analysis paralysis and losing the momentum you have.
If you haven’t already, get pre-approved with a local lender. Next when you run the numbers on a property, instead of plugging in the asking price try to work backwards and find what you need the property to sell for for it to cash flow, and submit offers at that price point.
This could take some time to find a deal, but you only need one person to accept an offer for you to get started.
Keep your head up and lean into the BP community when you need motivation and support. - Member since 2022 · 11 posts · 7 votes3y
@Cody Hawkins - Great advice.. Head is very much up and I am focused - I have to say - the advice from more experienced network here is amazing.. I am meeting with an MTR Mgmt agent tomorrow and I can walk back to an offer price as soon as I know relative MTR rental rates and vacancy rates.. Solid advice
Quote from @Cody Hawkins:
There is an expression I’m sure you’ve heard, “Great deals are made not found.” So there are a few things you can do to keep from getting stuck in analysis paralysis and losing the momentum you have.
If you haven’t already, get pre-approved with a local lender. Next when you run the numbers on a property, instead of plugging in the asking price try to work backwards and find what you need the property to sell for for it to cash flow, and submit offers at that price point.
This could take some time to find a deal, but you only need one person to accept an offer for you to get started.
Keep your head up and lean into the BP community when you need motivation and support. - Bay area, CA · Member since 2021 · 383 posts · 306 votes3y
Yes, with a high-interest rate, cash flow is tricky. There are few turnkey providers which are running their business in some areas, where cash flow is still possible.
However, with different times, one can adapt, and maybe try build to a rent model and make tons of equity as a return instead of cash flow. There are turnkey providers for that too.
- Member since 2019 · 19 posts · 2 votes3y
@Eliott Elias
Great advice. I'm ready for a sub to deal myself.
- Raleigh, NC · Member since 2021 · 19 posts · 6 votes3y
@Ruchit Patel
What’s your experience with the turnkey providers? Sending you a DM for a quick chat
- 3yJay ThomasPro MemberReal Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 716 votes
Real estate investors should be aware that higher interest rates can drastically decrease the amount of cash flow they generate. For example, if an investor has a 7% interest rate on their loan and adjusts that down to 4%, like the old rates, they will see a major impact on their overall cash flow. It is important to keep this in mind when considering real estate investments. Other variables such as market conditions and rental prices should also be taken into consideration. Keeping up with current trends and developments in Real Estate is essential for making wise investment decisions. Knowing how rate changes can affect your cash flow is another factor to consider when investing in Real Estate. Taking the time to research and understand these changing dynamics will help you make informed decisions and maximize your potential investment returns. Real estate investing is a great way to build wealth, but it is important to stay ahead of the curve when it comes to rate changes and other important factors that can influence your ROI. With diligence and smart decision-making, Real Estate investors can succeed even in an ever-changing market.
- Investor · Member since 2022 · 23 posts · 15 votes3y
Your best option would be to look at OOS investments. Even with the high interest rate, I bought a tenant occupied property @ 7% that cashflows 100+ as-is. I'm going to be bumping up the rent once I make some renovation. It should cash flow about 250 - 300. I invest in Bhm, AL.
- Rental Property Investor · Kalamazoo, MI (Kalamazoo) · Member since 2022 · 9 posts · 6 votes3y
Being self-employed, I used a 10% down bank statement loan to buy into a nice area a few months ago at an interest rate of 9% ($1600 total monthly expenses). I added a couple bathrooms and converted the living room into a large bedroom for my wife and I to live in and began renting the three other individual bedrooms. This allowed me to go from the estimated rent of ~$1000 to $1800 which will increase to $2400 after we move out assuming I continue renting by the room. In other words, I'm cash-flowing $200-$800 instead of -$600. There are obvious downsides such as additional management effort, needing additional parking, potential regulatory restrictions, etc. But just thought I'd share what's working for me!
- Member since 2019 · 17 posts · 2 votes3y
Quote from @Andres Murillo:
Hey 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.
Andres,
Would you be able to chat about "helping people buy traditional rentals in growing markets". I will say I am a new investor, but I believe I'm mentally prepared as well as analytically prepared to analyze deals,etc. Ive been doing research in various areas/topics of investing (wholesaling, auctions,etc) and have actually put in a few offers recently, but fix and flips that were on market where i live which is real competitive. Just want to brain storm on some idea/areas to maybe look at/focus/consider. I am using some websites that show metrics such as housing details(costs/rents/economic details/jobs/etc) but it still would be good to chat w/ someone w/ more experience. I need to get this train rolling.
Tommy H.
- Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes3y
Quote from @Emeka Attoh:
Your best option would be to look at OOS investments. Even with the high interest rate, I bought a tenant occupied property @ 7% that cashflows 100+ as-is. I'm going to be bumping up the rent once I make some renovation. It should cash flow about 250 - 300. I invest in Bhm, AL.
Nice man, you get it! There are deals like that (and better) in the Detroit market too. If you can cash flow today at these rates just think what you'll be doing when rates cool down and you can refi lower.
Kaboom! - Rental Property Investor · Oregon City, OR · Member since 2020 · 324 posts · 780 votes3y
Invest out of state with a turnkey provider :D. Little work and sweet returns.
- Real Estate Agent · Columbus, OH · Member since 2023 · 23 posts · 22 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 placesHey Damian, I think there are a couple of strategies that can be used, especially if you have 25% to put down. I'm located in Columbus, Ohio. Our market is appreciating and has cash flow. But your first step should be to look at off market deals. This can save massive amounts of capital without having to deal with the MLS and over zealous listing prices. From there you can leverage your working capital with hard money lenders rather than conventional lending. With the tech boom going on in the city, the rental market has been on the rise. This can help you choose what your investing strategy could be, BRRR would be great in order to acquire multiple properties in and be cautious in spending.
- Investor · Member since 2022 · 23 posts · 15 votes3y
Quote from @Elias Osborne:
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 placesHey Damian, I think there are a couple of strategies that can be used, especially if you have 25% to put down. I'm located in Columbus, Ohio. Our market is appreciating and has cash flow. But your first step should be to look at off market deals. This can save massive amounts of capital without having to deal with the MLS and over zealous listing prices. From there you can leverage your working capital with hard money lenders rather than conventional lending. With the tech boom going on in the city, the rental market has been on the rise. This can help you choose what your investing strategy could be, BRRR would be great in order to acquire multiple properties in and be cautious in spending.
This is an awesome idea. But we always need to remember that when starting out, putting in the structure to get off market deals is not attainable by many newbies. I suggest looking hard at the MLS to get some deals under your belt. The deal might not be the best but it shows commitment and desire to become a real estate investor. Once you understand the market, you can invest in getting off market deals. Off market deals don't come out of thin air. There's a lot of work in getting it.
- Real Estate Broker · Seattle, WA · Member since 2020 · 62 posts · 33 votes3y
My husband and I have had a lot of success in this market regarding buy-and-holds by focusing on off-market deals. You can be more aggressive in your offers because of the work that needs to be put into the property. We've also been able to cashflow consistently by being opportunistic with our rental strategy. Our units are set up so we can target short-term and medium term rentals. The medium term rentals can turn into long-term rentals through lease renewals of 30 - 90 days, which of course offers you higher rates. You just have to make sure your property management is top notch so you can motivate people to renew.
- Specialist · NJ · Member since 2022 · 1k+ posts · 663 votes3y
Turn-Key cash flowing properties have seen their margins shrink as rates started going up. There is still great opportunity if you can get into the property on the ground floor. Get it when it needs work, fix it, and then get a long-term mortgage using the value of the asset after repairs. You get to pull some money out, shrink your investment, and now even if the cashflow let's say is 200/month, for what you have into the property which will be 5% maybe of the ARV value it's still good.
But when you buy turn-key stuff and have to lay out the 25% of that current value and it only cash flows 200/month you have to ask yourself if tying up the capital is worth it. I mean, not many people can go laying out 25% of purchases for very long.
- 3yJared HottleBusiness MemberReal Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes
Midwest markets will get you .86 on some great properties. I can help if you are willing to go to Iowa but other markets seem to have similar returns in the Midwest.
Jared Hottle Real Estate59 Reviews - Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ 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 placesHi Damian, I can see how that would be frustrating. I can tell you're anxious to get started. Have you considered the Ohio market?
- 3yJohn WilliamsBusiness MemberProperty Manager · Clarksville, TN · Member since 2018 · 443 posts · 210 votes
Keep searching. You will most likely have to go out of state. You'll want to find submarkets like Clarksville, TN that fewer people have heard of. We are still seeing opportunities for cash flow and decent margins on rental properties
Rent My Home - Property Management4.8214 Reviews - Member since 2022 · 11 posts · 7 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 placesI will share some additional insights.. I am trying to build trust worthy sources to help me identify the 'unknowns' in out of state markets I am unfamiliar with.. I am comfortable with buy and hold but I do want to realize cashflow. I need help in those markets like
1. Which areas work well / where are the war zones I should stay away from
2. What is renting and what isnt renting (what property type) to maximize my rental. As an example - I thikn I need ot lean on MTR strategy to max the rentals - is this a 1/2 bed for a nurse or a 3/4 bed for a family (MRT strategy I only just experienced)
3. What are the MTR rates in a given area (I do my own homework on furnish finder but the gaps are huge)
I get this far with realtors and they start sending me everything under the sun - with no analysis (I appreciate this is there time). I am conducting loads of analysis on what they send me and.... back to square one - NO CASHFLOW.
So far I have no been able to connect with a single realtor or mgmt. agent who can validate why they believe what they are sending me is a cashflow target...
- Member since 2023 · 2 posts · 0 votes3y
any property that covers your mougage payment the rent amount should not be less then your monthly payment and consider a hard money loan for down payment until you get the property in your name then you can go to bank to pay it off the hard loan
Join the conversationCreate a free account to reply, vote on answers and follow this thread.