Finding positive cashflow

[Jeff Moulyn]

Hey everyone!

I am starting out as an analyst in Modesto CA in the next 6 months after I get my finance degree from Cal Poly. I got my real estate agent license about 8 months ago, and now that I am going to be earning decent money I am looking to get involved for the first time.

I developed a basic model to project cashflow with a few conservative estimates and I am unable to find anything even close to positive cashflow on listed online properties. (I don't yet have access to the MLS)

My model is assuming:

     -20% down payment

    -30yr fixed rate loan @ 3.77%  

-2% of the home value annually set aside for maintenance  

-insurance

-tax @1.01% property value annually

-10% vacancy allowance

-7% management fees

Am I being too conservative? my estimated rent is based upon craigslist postings of like properties and zillow zestimates. 

Every single property I looked at has a projected cashflow far in the negative, with the break even property value requiring that I offer +35% under the asking price. If it was close I would assume I just needed to find deals (ie not on zillow) but the numbers are waaay off. Is it reasonable to think I can purchase properties for 40% under ask?

I could really use some sage wisdom!

Jeff

[David Faulkner]

One more thing I forgot to mention. Higher IRR is NOT always better ... you need to compare the IRR you get against the risk you are taking. Make sure you are comfortable and have a solid plan (and multiple exit strategies) in place to manage and mitigate those risks and the IRR you get adequately compensates you for taking on those risks, your time, and your money that you will be putting into the deal, given your other options. Kinda an obvious point, but often inadvertently overlooked by the newbs ...