With 5% - Numbers Don't Work

[Nicholas Kitchen]

Hello all ... having some issues with making the numbers work with such little down payment. I'm using mortgage/interest, taxes, insurance, 10% management fee, 10% maintenance buffer, 7% vacancy rate in my excel spreadsheet. Every property I come across it's showing basically $0 or negative $ NOI. Are people really getting amazing deals that the numbers work?

I'm looking at four quadplexes at $359k each with each of them at $33.6k gross yearly. By putting 5% down it just doesn't seem to work. Am I missing something or are my numbers suuuuper conservative?

Thanks for your responses in advance! :)

[Don Konipol]

Most property today is priced (and selling) at such low cap rates that it takes a significant equity contribution to see a positive cash flow.

So, you have to find a deal that you can "work".   Examples

1. Negotiate purchase with price way below asking price

2. Negotiate owner financing with a no interest loan

3. Purchase a property where you can "add value" and hence increase rents

4. Purchase a property where rental rate is significantly under market

5. Purchase a property that is being mismanaged and replace with better management

6. Purchase in an area that is undergoing significant change that will result in higher rental rates

7. Purchase a property that will allow a change in the way rents are charged, such as putting in separate utility metering, utilizing short term or even daily rentals at a premium (Airbnb), increasing occupancy rate (renting out motel suites monthly which eliminates local motel daily occupancy tax).

8. Purchase a property you can upgrade from say a C to a B and raise rents accordingly

Many of these ways require cash, as does purchasing for positive cash flow.  The increase in world money supply has been enormous the last 25 years.  While the nothing/low money down investor can still find a deal, they are becoming rarer as more money chases fewer properties.