Where to find positive cash flow properties???
Lender · Santa Clarita, CA · Member since 2018 · 110 posts · 48 votes
Where to find positive cash flow properties???
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Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
7y@Dan Schweit I have family in San Diego and San Francsico and continue to be shocked looking at values. Even tough we had prices go up 7 consecutive years now, you can still buy quality properties in the Midewest, put 20% down and cash flow them well. There is a lot of fool's gold out there, deals that look great on paper, but bleed you slowly over time, so you have to make sure you understand what you are buying. Most of the midwest markets are very competitive and short on inventory, so deals will go very fast, often within a day. I get a lot of calls from out of state investors and most of them end nowhere; I think often the expectations are too high - while it's very possible and we close deals every week, you don't get deals on a silver platter, most of them don't look perfect when you first see them and often you have to "make" them into a deal, which requires work and the willingness to invest your time and energy on top of your capital. A lot depends also on your expectations, how hands on or hands off do you want to be, are you willing to plat this as a long term game or are you looking for quick returns. Sorry if I have more questions that answers, but feel free to reach out!
66 Replies
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes7y
@Dan Schweit I have family in San Diego and San Francsico and continue to be shocked looking at values. Even tough we had prices go up 7 consecutive years now, you can still buy quality properties in the Midewest, put 20% down and cash flow them well. There is a lot of fool's gold out there, deals that look great on paper, but bleed you slowly over time, so you have to make sure you understand what you are buying. Most of the midwest markets are very competitive and short on inventory, so deals will go very fast, often within a day. I get a lot of calls from out of state investors and most of them end nowhere; I think often the expectations are too high - while it's very possible and we close deals every week, you don't get deals on a silver platter, most of them don't look perfect when you first see them and often you have to "make" them into a deal, which requires work and the willingness to invest your time and energy on top of your capital. A lot depends also on your expectations, how hands on or hands off do you want to be, are you willing to plat this as a long term game or are you looking for quick returns. Sorry if I have more questions that answers, but feel free to reach out!
- 7yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Originally posted by @Dan Schweit:
Hey All. Need advice on how, or where to find properties that actually have cash flow. Im in CA, and even though rents are high, they are not comparable to what a mortgage payment with 20% down costs. Now I know digging for deals and finding a really good one will help the numbers, but I still don't see it being a good cash on cash return. Are any of you investing in markets across the country that have attainable returns for your upfront cash?? I believe there are markets out there that produce returns of 5-10%, but im not sure where. Hoping the community can help point me in the right direction.
In coastal So Cal there is initial cash flow vs Cash flow after a couple (in recent years) of ownership. In San Diego (the market I know best) average SFR rents recently increased $500/month in 3 years. This implies that cash flow has increased close to $500 on the average SFR. This implies that a SFR purchased 3 years ago that had a couple hundred dollars negative cash flow now has nearly $300/month positive cash flow.
To add to this positive cash flow, the SFR has appreciated significantly. Recent San Diego statistics had the average SFR appreciation at $152k for the previous 5 years.
Los Angeles historically produces near top of nation returns (case Shiller has it number 2 for this century). This return includes cash flow and market appreciation. If it only looked at cash flow at purchase, Los Angeles would not be #2 return but it looks at the cash flow over the long term (in this case 18 years).
Are you investing for the ling term or the short term? Can you handle negative cash flow until rent appreciation creates positive cash flow.
Good luck
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
I just think back when I was getting my instrument rating and would ask my instructor how do I tell if there is ice in those clouds or where do I find or avoid ice.. he just would say Ice is were you find it.
so you just have to go looking for it.. ( cash flow with 20% down) much of more rural CA you can easily do this.
its only in the high valued coastal areas that you need more downpayment to cash flow.
- Lender · Santa Clarita, CA · Member since 2018 · 110 posts · 48 votes7y
@Marcus Auerbach Thanks for the reply Marcus. I am realistically only looking to invest in real estate for appreciation. Obviously, cash flow would be fantastic but im looking for long term investments here and my main goal is simply to avoid negative cash flow. Im most concerned with funding my retirement with real estate. Im just using the 5-10% in my post cause I believe that is out there, but not my expectation. Over the last 15 years, ive bought and sold a few properties that I held for at least 5 years, no real cash flow, but at the end made great returns on my money. So, im really just trying to replicate that instead of funding my 401k.
Btw, I went to a panel at a local KW office a few months back and found it to be very insightful and informative. The "Keller Williams way" seems to be a solid business model and it seems like a leader in the industry.
Originally posted by @Marcus Auerbach:
@Dan Schweit I have family in San Diego and San Francsico and continue to be shocked looking at values. Even tough we had prices go up 7 consecutive years now, you can still buy quality properties in the Midewest, put 20% down and cash flow them well. There is a lot of fool's gold out there, deals that look great on paper, but bleed you slowly over time, so you have to make sure you understand what you are buying. Most of the midwest markets are very competitive and short on inventory, so deals will go very fast, often within a day. I get a lot of calls from out of state investors and most of them end nowhere; I think often the expectations are too high - while it's very possible and we close deals every week, you don't get deals on a silver platter, most of them don't look perfect when you first see them and often you have to "make" them into a deal, which requires work and the willingness to invest your time and energy on top of your capital. A lot depends also on your expectations, how hands on or hands off do you want to be, are you willing to plat this as a long term game or are you looking for quick returns. Sorry if I have more questions that answers, but feel free to reach out!
- Lender · Santa Clarita, CA · Member since 2018 · 110 posts · 48 votes7y
Originally posted by @Dan H.:
Originally posted by @Dan Schweit:
Hey All. Need advice on how, or where to find properties that actually have cash flow. Im in CA, and even though rents are high, they are not comparable to what a mortgage payment with 20% down costs. Now I know digging for deals and finding a really good one will help the numbers, but I still don't see it being a good cash on cash return. Are any of you investing in markets across the country that have attainable returns for your upfront cash?? I believe there are markets out there that produce returns of 5-10%, but im not sure where. Hoping the community can help point me in the right direction.
In coastal So Cal there is initial cash flow vs Cash flow after a couple (in recent years) of ownership. In San Diego (the market I know best) average SFR rents recently increased $500/month in 3 years. This implies that cash flow has increased close to $500 on the average SFR. This implies that a SFR purchased 3 years ago that had a couple hundred dollars negative cash flow now has nearly $300/month positive cash flow.
To add to this positive cash flow, the SFR has appreciated significantly. Recent San Diego statistics had the average SFR appreciation at $152k for the previous 5 years.
Los Angeles historically produces near top of nation returns (case Shiller has it number 2 for this century). This return includes cash flow and market appreciation. If it only looked at cash flow at purchase, Los Angeles would not be #2 return but it looks at the cash flow over the long term (in this case 18 years).
Are you investing for the ling term or the short term? Can you handle negative cash flow until rent appreciation creates positive cash flow.
Good luck
@Dan Heuschele Hey Dan. What you described is exactly what I am looking for actually. Im not even so concerned with cash flow, just trying to avoid the negative cash flow. If you look at my response to Marcus, im in it for the long term and playing the appreciation game. I like the BRRR method, or at least the option to, but looking at properties that will rent for $2,200 a month but have a monthly payment of $2,800 just doesnt make sense to me. I could handle $100-$200 negative a month if I thought the property had tremendous upside appreciation wise, but id like to find at least a breakeven.
- Lender · Santa Clarita, CA · Member since 2018 · 110 posts · 48 votes7y
Originally posted by @Jay Hinrichs:
I just think back when I was getting my instrument rating and would ask my instructor how do I tell if there is ice in those clouds or where do I find or avoid ice.. he just would say Ice is were you find it.
so you just have to go looking for it.. ( cash flow with 20% down) much of more rural CA you can easily do this.
its only in the high valued coastal areas that you need more downpayment to cash flow.
What do you consider coastal CA vs rural?? I live about 50 min from the coast and the numbers are still the same. I see you are from Summerlin, I have two rentals in Las Vegas that actually cash flow, albeit very little, but I purchased them in 2009. Are there any instances in that area that you can cash flow with the 20%??
- 7yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Originally posted by @Dan Schweit:
Originally posted by @Dan H.:
Originally posted by @Dan Schweit:
Hey All. Need advice on how, or where to find properties that actually have cash flow. Im in CA, and even though rents are high, they are not comparable to what a mortgage payment with 20% down costs. Now I know digging for deals and finding a really good one will help the numbers, but I still don't see it being a good cash on cash return. Are any of you investing in markets across the country that have attainable returns for your upfront cash?? I believe there are markets out there that produce returns of 5-10%, but im not sure where. Hoping the community can help point me in the right direction.
In coastal So Cal there is initial cash flow vs Cash flow after a couple (in recent years) of ownership. In San Diego (the market I know best) average SFR rents recently increased $500/month in 3 years. This implies that cash flow has increased close to $500 on the average SFR. This implies that a SFR purchased 3 years ago that had a couple hundred dollars negative cash flow now has nearly $300/month positive cash flow.
To add to this positive cash flow, the SFR has appreciated significantly. Recent San Diego statistics had the average SFR appreciation at $152k for the previous 5 years.
Los Angeles historically produces near top of nation returns (case Shiller has it number 2 for this century). This return includes cash flow and market appreciation. If it only looked at cash flow at purchase, Los Angeles would not be #2 return but it looks at the cash flow over the long term (in this case 18 years).
Are you investing for the ling term or the short term? Can you handle negative cash flow until rent appreciation creates positive cash flow.
Good luck
@Dan Heuschele Hey Dan. What you described is exactly what I am looking for actually. Im not even so concerned with cash flow, just trying to avoid the negative cash flow. If you look at my response to Marcus, im in it for the long term and playing the appreciation game. I like the BRRR method, or at least the option to, but looking at properties that will rent for $2,200 a month but have a monthly payment of $2,800 just doesnt make sense to me. I could handle $100-$200 negative a month if I thought the property had tremendous upside appreciation wise, but id like to find at least a breakeven.
I know San Diego much better than LA but believe the markets are similar.
In San Diego you cannot purchase a SFR at retail that will not be cash flow negative. If you want an STR that is not cash flow negative you must purchase below retail (not typically found on the MLS) or have a value add that can significantly increase the rent.
However duplex to quad in working class areas can have small positive cash flow but the competition is great for these RE. If you can add a value add that increases the rent then you can start with additional cash flow. This initial cash flow will be small with respect to the value, but historically it will increase better than virtually all other markets. In the long run, LA has been an outstanding market for buy n hold return on investment.
In summary, I suggest you look off market and at duplex to quad. Having a value add will not only produce sweat equity, but will help your cash flow.
Good luck
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Dan Schweit:
Originally posted by @Jay Hinrichs:
I just think back when I was getting my instrument rating and would ask my instructor how do I tell if there is ice in those clouds or where do I find or avoid ice.. he just would say Ice is were you find it.
so you just have to go looking for it.. ( cash flow with 20% down) much of more rural CA you can easily do this.
its only in the high valued coastal areas that you need more downpayment to cash flow.
What do you consider coastal CA vs rural?? I live about 50 min from the coast and the numbers are still the same. I see you are from Summerlin, I have two rentals in Las Vegas that actually cash flow, albeit very little, but I purchased them in 2009. Are there any instances in that area that you can cash flow with the 20%??
by rural I mean central valley some of the mountain towns of the Seirras north Western CA north of Ukiah Yreka to Corning etc etc.
- 7yDoug McVinuaPro MemberProperty Manager · Queen Creek, AZ · Member since 2016 · 608 posts · 426 votes
@Dan Schweit The suburbs of Phoenix in Multi-Family can provide some pretty good numbers! $3000.00 a month rent on a $300,000 purchase.
- Lender · Santa Clarita, CA · Member since 2018 · 110 posts · 48 votes7y
Originally posted by @Eric Dami:
@Dan Schweit try Phoenix Arizona
Thanks Eric! Thats what im hoping for from the community, solid advice on what city I should put my time and effort in to. Appreciate it.
- Lender · Santa Clarita, CA · Member since 2018 · 110 posts · 48 votes7y
Originally posted by @Doug McVinua:
@Dan Schweit The suburbs of Phoenix in Multi-Family can provide some pretty good numbers! $3000.00 a month rent on a $300,000 purchase.
Thanks Doug, this is solid info on where to start. Especially being out west already.
- 7yDoug McVinuaPro MemberProperty Manager · Queen Creek, AZ · Member since 2016 · 608 posts · 426 votes
@Dan Schweit I manage 4-Plex's in the area and know the rents so coming at this from an informed perspective.
- Realtor · Lake Stevens, WA · Member since 2018 · 122 posts · 91 votes7y
Originally posted by @Dan Schweit:
Hey All. Need advice on how, or where to find properties that actually have cash flow. Im in CA, and even though rents are high, they are not comparable to what a mortgage payment with 20% down costs. Now I know digging for deals and finding a really good one will help the numbers, but I still don't see it being a good cash on cash return. Are any of you investing in markets across the country that have attainable returns for your upfront cash?? I believe there are markets out there that produce returns of 5-10%, but im not sure where. Hoping the community can help point me in the right direction.
I have two rental properties in Kansas City. My fourplex currently rents for $4,190 (soon to be $4,390) and I purchased for $365k in Sept 2018. My SFH isn't quite as good, but it was originally my personal residence converted to rental. That rents for $2k and I purchased for $258k back in May 2017 (built in 2016). Mortgage, taxes, and insurance come out to about $1,600.
- Rental Property Investor · Leander, TX · Member since 2018 · 183 posts · 264 votes7y
There are many cities in the Midwest that cash flow quite well, but historically those places have not appreciated much (or at all). I've been investing in small multi-family in the Cleveland area, and the cash flow has been pretty solid. 12-15% cash on cash with 25% down. And all my deals have been on MLS, no off market deals.
- Rental Property Investor · San Diego, CA · Member since 2018 · 242 posts · 234 votes7y
@Doug McVinua
Where around Phoenix are you finding
$3000 rent for $300k?
- All Over, USA · Member since 2017 · 689 posts · 756 votes7y
@Dan Schweit
Look at North Vegas or SW Vegas.
Last one I picked up a few months ago: +$286/month after HOA and PM fees.
- Lender · Santa Clarita, CA · Member since 2018 · 110 posts · 48 votes7y
Originally posted by @Kyle Wells:
Originally posted by @Dan Schweit:
Hey All. Need advice on how, or where to find properties that actually have cash flow. Im in CA, and even though rents are high, they are not comparable to what a mortgage payment with 20% down costs. Now I know digging for deals and finding a really good one will help the numbers, but I still don't see it being a good cash on cash return. Are any of you investing in markets across the country that have attainable returns for your upfront cash?? I believe there are markets out there that produce returns of 5-10%, but im not sure where. Hoping the community can help point me in the right direction.
I have two rental properties in Kansas City. My fourplex currently rents for $4,190 (soon to be $4,390) and I purchased for $365k in Sept 2018. My SFH isn't quite as good, but it was originally my personal residence converted to rental. That rents for $2k and I purchased for $258k back in May 2017 (built in 2016). Mortgage, taxes, and insurance come out to about $1,600.
Nice Little deals you have there, even the converted primary is working out nicely, I wouldn't scoff at that one. I may have overlooked it but do you live in Kansas City?
- Lender · Santa Clarita, CA · Member since 2018 · 110 posts · 48 votes7y
Originally posted by @Aaron Hunt:
@Dan Schweit
Look at North Vegas or SW Vegas.
Last one I picked up a few months ago: +$286/month after HOA and PM fees.
Thanks for the response. Im interested in this. I own a rental that is in Rhodes Ranch. How are the neighborhoods that you are buying in?? I know they demos and neighborhoods can differ greatly if you move in the wrong direction one way or another in that city. Also, if you wouldn't mind sharing im just curious about what rents you are getting, just to see how im positioned in my rentals.
- Realtor · Lake Stevens, WA · Member since 2018 · 122 posts · 91 votes7y
Originally posted by @Dan Schweit:
Originally posted by @Kyle Wells:
Originally posted by @Dan Schweit:
Hey All. Need advice on how, or where to find properties that actually have cash flow. Im in CA, and even though rents are high, they are not comparable to what a mortgage payment with 20% down costs. Now I know digging for deals and finding a really good one will help the numbers, but I still don't see it being a good cash on cash return. Are any of you investing in markets across the country that have attainable returns for your upfront cash?? I believe there are markets out there that produce returns of 5-10%, but im not sure where. Hoping the community can help point me in the right direction.
I have two rental properties in Kansas City. My fourplex currently rents for $4,190 (soon to be $4,390) and I purchased for $365k in Sept 2018. My SFH isn't quite as good, but it was originally my personal residence converted to rental. That rents for $2k and I purchased for $258k back in May 2017 (built in 2016). Mortgage, taxes, and insurance come out to about $1,600.
Nice Little deals you have there, even the converted primary is working out nicely, I wouldn't scoff at that one. I may have overlooked it but do you live in Kansas City?
I moved from the Greater Seattle Area to Kansas City for 2 yrs for work. Now I'm moving back to the Seattle Area, but will continue to hold the Kansas City properties. It's a good area to cash flow and is still a city that many gravitate to from the midwest.
- All Over, USA · Member since 2017 · 689 posts · 756 votes7y
Originally posted by @Dan Schweit:
Originally posted by @Aaron Hunt:
@Dan Schweit
Look at North Vegas or SW Vegas.
Last one I picked up a few months ago: +$286/month after HOA and PM fees.
Thanks for the response. Im interested in this. I own a rental that is in Rhodes Ranch. How are the neighborhoods that you are buying in?? I know they demos and neighborhoods can differ greatly if you move in the wrong direction one way or another in that city. Also, if you wouldn't mind sharing im just curious about what rents you are getting, just to see how im positioned in my rentals.
That rental was the lowest priced rental that I own out there. Rent sits at $1190/month.
I go after Class A deals primarily, for minimal fix-up costs, equity appreciation potential, and some cash-flow.
Obviously, I can't create these deals nearly as often as I would like, so it's often a matter of timing, finding the deal and not waffling about it, and quick counters to seal it. I also buy my Vegas properties site unseen (from the East Coast) cause there's a ridiculous amount of competition out there.
- Member since 2019 · 6 posts · 0 votes7y
@Joel Fine thanks so much Joel for sharing! This is really motivational! When you say your multi-families all have been on MLS and no off-market deals, did you mean you found them online? Can I ask what areas are you focused at? Do you tour the properties in person? I see you are like me, investing from CA :)
Thanks much!
- Rental Property Investor · Leander, TX · Member since 2018 · 183 posts · 264 votes7y
Originally posted by @Paige Yu:
@Joel Fine thanks so much Joel for sharing! This is really motivational! When you say your multi-families all have been on MLS and no off-market deals, did you mean you found them online? Can I ask what areas are you focused at? Do you tour the properties in person? I see you are like me, investing from CA :)
Thanks much!
My pleasure @Paige Yu!
Some of the properties I've found online (Zillow), some were found by my agent. But all have been publicly visible at the time I made offers - no "pocket listings" or otherwise off-market. All of my purchases have been in various stages of distress, with rehab budgets ranging from $3k to $25k per door. Some have been sitting on the market for many weeks; others were in contract with another buyer but then fell out. So in many cases I'm dealing with a seller who has reason to be discouraged or impatient. That may be why I've been able to get them at modest prices that cash flow well, even after paying for the rehab.
I have not been touring the properties in person, for the most part. My agent, my contractor, and my inspector are essential members of my team and help me evaluate each property.
Regarding areas, I've bought all over Cleveland: West side (Brooklyn, Old Brooklyn, Clark-Fulton) and East side (Cleveland Heights, Shaker Heights, Waterloo, even one in East Cleveland (not the war zone part)). Neighborhood quality ranging from "A" (Shaker Heights) to "C-" (Clark-Fulton). Rents ranging from 1.5% to 2% of acquisition cost. Basically where-ever the numbers can work and my spreadsheet says it will cash flow.
- Lender · Santa Clarita, CA · Member since 2018 · 110 posts · 48 votes7y
Originally posted by @Jian G.:
@Dan Schweit
It’s not easy but they are still out there both Los Angeles and San Diego.
Jian, I appreciate the response as well. Im intrigued by your answer and would love to know a bit more. Obviously not looking to tap into all your secrets, but some more valuable insight would be fantastic.
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