Hello everyone! My first post here and is a complete noob in real estate investing :)
I have a chance to put a 0 down on a condo in a A grade area that cost 400k and rent income is around 2400 a month. 0 down will result in ~1k negative cash flow per month. Or another option is 25% down with ~100 positive cash flow per month.
Is either option a good deal? or should I not do this as all. Any advice is appreciated thanks!!
Realtor · Santa Ana, CA · Member since 2014 · 131 posts · 111 votes
4y
In the early days of my real estate career, I would buy nothing down properties strictly betting on appreciation. That is called speculation and I had more losers than winners. Properties that have negative cash low are called alligators because they eat up your savings on a monthly basis. Unless you have a way to improve the property to a positive cash flow position, stay away from the alligators. Save your money and a lot of headaches…focus on positive cash flow properties and you will be a lot better off.
Realtor · Santa Ana, CA · Member since 2014 · 131 posts · 111 votes
4y
In the early days of my real estate career, I would buy nothing down properties strictly betting on appreciation. That is called speculation and I had more losers than winners. Properties that have negative cash low are called alligators because they eat up your savings on a monthly basis. Unless you have a way to improve the property to a positive cash flow position, stay away from the alligators. Save your money and a lot of headaches…focus on positive cash flow properties and you will be a lot better off.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
4y
According to your math putting down $100k will save you $11k/year. Can you make a guaranteed 11% on your money somewhere else? It will probably also get you out of PMI and probably lower your interest rate. I truly don't mind negative cashflow properties as most of your wealth will be made with inflation/appreciation but I also wouldn't turn down a guaranteed 11% return.
would it truly make any difference if that 25% down made you cashflow positive $100? In case you’re wondering, no, it would not. You’re going to have a fridge go bad, a water heater fail, a 2 week vacancy. Each of these things will make your $100 cashflow go poof. If you NEED cashflow to invest in real estate you’re probably not ready. If you’re considering a negative $1,000 deal that means you probably don’t need it. But you do need to figure out if it will actually be making any money, at least eventually.
In the early days of my real estate career, I would buy nothing down properties strictly betting on appreciation. That is called speculation and I had more losers than winners. Properties that have negative cash flow are called alligators because they eat up your savings on a monthly basis. Unless you have a way to improve the property to a positive cash flow position, stay away from the alligators. Save your money and a lot of headaches…focus on positive cash flow properties and you will be a lot better off.
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
4y
Both are terrible options. $100/month positive CF is just negative CF waiting to happen. Furthermore, if you have to change a negative CF property into a positive one by increasing the DP, then the positive CF is just an illusion. All you did was pay for all that negative CF upfront.
As far as $1000/month negative Cf goes. There are no words in the English dictionary that can adequately describe how bad an idea that is.