Is it risky to now consider vacancy as part of analyzing deal?

4 Replies

Hi All,

I am a new member at bigger pockets. I am looking to buy my first property, an investment property in sacramento, california (too expensive in bay area :))

The property that I am looking at seems to have low/none returns in terms of cashflow.

I am getting into negative cash flow if I consider vacancy, is this a common pattern for people buying for cashflow in california?

Can someone suggest according to this market what would you guys have done ? can i not expect good returns in california market?

please advise!

Thanks,

Syed

@Mudassir Syed yes, always factor in a vacancy rate. What percent vacancy will vary based on product type and submarket (this is true for SFR as well). Vacancies will happen and you not only lose revenue but have higher expenses to turn the house/unit/etc over.

On the SFR side cash flow will often be driven by how much money you put down. The higher the deposit the more cash flow but cash-on-cash returns will not be as good as other markets.