No Cash flow but lots of Equity?? HELP

6 Replies

Hey guys, I need some advice on a potential investment (Rental property), I've been looking for a couple of months for my 1st rental property and something came up this week, in a great neighborhood, 200,000 ARV selling for 150,000 with minor cosmetic repairs needed. My initial thought was, WOW! 50,000 initial equity in the house in a great community with value continuing to rise. After I did all my calculations, with expected rent and taxes, insurance, expenses , including repairs, vacancy, cap ex and prop management. With 20% down I would be breaking even each month, taxes are ridiculous!!- NO CASH FLOW!....I would have to put around 40-45% down to cash flow , or I could essentially buy cash with LOC and then refi the full amount because the ARV is soo high. I could be basically just paying the closing costs out of pocket, but still NO CASH FLOW!! I don't know what to do, this house will not last long, Do I walk away? Do I put more money down to cash flow, but be out of pocket 40-45K or should I refi, and be low money in, but NO CASH FLOW???? Please help!! Thanks

Depends on what your goal is.  If your goal is cash flow then yes, walk away.  Don't fall in love with a property.  Always let the numbers guide you.

That being said, if this is an appreciation opportunity and you expect the house to go up significantly in value then maybe the cash flow doesn't matter.  If you can do the minor cosmetic repairs and flip it for $200k, then who cares that it doesn't cash flow.

Again, know what your strategy is and let the numbers guide your decisions.  If you are looking to build a portfolio of cash flowing buy and holds, then this one probably won't work and you need to keep looking.

Good luck.

Originally posted by @Wade Sikkink :

Depends on what your goal is.  If your goal is cash flow then yes, walk away.  Don't fall in love with a property.  Always let the numbers guide you.

That being said, if this is an appreciation opportunity and you expect the house to go up significantly in value then maybe the cash flow doesn't matter.  If you can do the minor cosmetic repairs and flip it for $200k, then who cares that it doesn't cash flow.

Again, know what your strategy is and let the numbers guide your decisions.  If you are looking to build a portfolio of cash flowing buy and holds, then this one probably won't work and you need to keep looking.

Good luck.

 Thanks for the advice, Yes, my strategy would be for the long term, but like you said, if I sit on it for a few years and then flip it, that could also work.

Sounds like your strategy is buy and hold. This is a flip deal. Walk away!

I’m a flexible Investor who invest properties either cash flow or appreciate or both cash flow and appreciate would be great.

Even it does not cash flow (at least close to break even monthly), I would buy it if it has equity already and if it does appreciate.

Buy, fix, sell!

it doesn't appear as great of a deal as you think if what youre saying is true

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