Agent said not to worry about cash flow and consider tax benef

107 Replies

@Llewelyn A. All true. The real test is what return are you getting on money invested. If you pay cash of course you get cash flow but if it's only 2--5 percent is it worth the risk of a bad tenant, downturn in prices, or natural disaster. I have a 10% rule. If it doesn't make that then I keep looking. I generally pay cash and 10% gives me a great return if considering appreciation on top of that. Everyone has their rules of the road, it's just what you are comfortable with. People say I'm crazy to pay cash but I am not comfortable with lots of debt and I manage my own rentals. I am retired as well so it gives me a job lol.

@Nathan Yarnell

You have been given terrible advice and running your business in that manner is a good way to lose your shirt. Unless you are currently wealthy and could offset major losses on your own it’s doubtful a bank would even give you a loan on a negatively cash flowing property. My advise is to look elsewhere and get yourself a new agent. This one is just trying to make a sale.

Tax benefits are just that, a benefit.  When you buy your first place, think about how you are going to buy the second.  If you have negative cash flow, it will make it that much harder to buy the next one.

The only time I advise it for my clients is if they are house hacking and there is PMI that will eventually go away. But if it is straight investment, then it is a hard pass.

Originally posted by @Fred Cannon :

@Llewelyn A. All true. The real test is what return are you getting on money invested. If you pay cash of course you get cash flow but if it's only 2--5 percent is it worth the risk of a bad tenant, downturn in prices, or natural disaster. I have a 10% rule. If it doesn't make that then I keep looking. I generally pay cash and 10% gives me a great return if considering appreciation on top of that. Everyone has their rules of the road, it's just what you are comfortable with. People say I'm crazy to pay cash but I am not comfortable with lots of debt and I manage my own rentals. I am retired as well so it gives me a job lol.

pay cash buy strong B to A locations live with 5 to 7% return with zero risk and a ton of upside.. that is how its done. !!!

@Jay Hinrichs Jay I have considered many times to take out a couple of mortgages on my debt free rentals, but no matter how many good reasons to do that, it doesn't erase the memory of what can happen in a market crash. When I was a younger man I had different dreams, but now I am older, wiser, and don't need the headaches that dreams may cause when you wake up. I have gone thru two crashes, lost in the first one but more that made up those losses in the second one. I lost two rentals and my primary home in the dot.com crash but bought 8 rentals in 2008-2010 for cash and 20 cents to the dollar owed the bank. There will always be another crash coming and always be winners and losers when it happens. I try to caution about having too much debt but everyone has their own thoughts about that, but you don't know it until you live it.

@Nathan Yarnell I agree with the other posts. This is what is commonly known as "Commission Breath" 🤣. If it doesn't cash flow at current market rents, look for another agent. But you might use this agent to list your properties. 😁