Is anybody cashflowing right now???

[Steven Barr]

With home prices still very high and interest rates now high too, is anyone actually cashflowing on newly acquired property? Even the 1% rule doesn’t seem to work anymore 

Example: assuming 20% down

Purchase price: 250k

Rent: 2500/mo

Expenses: 1375/mo (45% expenses)

Debt service: 1350/mo (200k at 7% fixed 30 am)

Cashflow: -$225

[Sam McCormack]

Quote from @Steven Barr:

Quote from @Sam McCormack:

I don't find conventional financing to work with the 1% rule, I would say now it is like 1.25%. I have resorted to creative financing. With not as much demand, people are much willing to accept creative financing now, plus it provides a better return

@Sam McCormack can you provide an example of a creatively financed deal and how it would provide better cashflow than 20% conventional?

 Seller financing. Give them the price they have it listed at, but with a lower interest rate. DM me for more details and ideas. That was just an example

[Marcus Auerbach]

Inflation is easing up, next CPI on Dec 13th and rates are coming down fast now. 45% expenses do not make sense. And 5 year ARM's are a reasonable bet at the moment. For anyone with a portfolio that's the only financing we can get anyway.

[Steven Barr]

Quote from @Marcus Auerbach:

Inflation is easing up, next CPI on Dec 13th and rates are coming down fast now. 45% expenses do not make sense. And 5 year ARM's are a reasonable bet at the moment. For anyone with a portfolio that's the only financing we can get anyway.

@Marcus Auerbach what do you mean by 45% expenses don’t make sense? Are you saying that’s estimating too much? Or it’s a bad property if it’s that expensive

my breakdown of 45% is as follows:

Property mgmt: 14% or roughly $350/mo (assuming 10% of monthly rents and a fee of 1 months rent for placement with tenant staying for 2 years…. So 250 for monthly rents plus 100 for 2500 placement fee spread out over 24 month period)

Turn cost: 3% or roughly $75-85/mo assuming $2k of repairs necessary to turn it 

Vacancy: 4% or roughly $100/mo assuming 1 month to locate and place tenant in 24 month term 

Insurance: 4% or roughly $100/mo (using one of my properties as example here)

Property taxes: 9% or $225/mo (using on of my properties as examples)

Capital expenditures: 3% or $75/mo (amortizating roofs, hvac, water heater, etc… over their useful lifespan)

Operational expenses: 10% or $250/mo

So technically 46% in total. Somewhere between $1100-1200/mo roughly is the estimate

[Rob Nappi]

Yes, just closed on a property 2 weeks ago. After rehab. Will be cash flowing around $2k a month after all expenses. Probably my last property for the year. I’m averaging $1500-$6400 a month on my properties for cash flow. All investments in or around Indianapolis. P

[Tyler Lingle]

Quote from @Kyle Baker:

I think you can still find cash-flowing properties you just need to think a little more creatively. Its not so much the purchase price as much as it is the interest rate that is hurting your potential deals. I would look for options where the seller or yourself (or both) buys down the rate. An even better option in my opinion would be a 2-1 or even a 3-2-1 buy-down. This type of buy-down has to come from the seller. The seller does a temporary buy-down the first 2-3 years at which time the interest rates have hopefully come back down to a cash-flowing number. 

In your example the loan would be for 200k (80% LTV) and the first year your interest rate would be 5%. Second year would be at 6% and the third would go back to the original 7% but again buy that time the ideal scenario is the rates have dropped back down again and you refinance at that lower rate.

3-2-1 scenario is the same although it would be 4% first year, 5% second, 6% third and back to the 7% on the fourth. If rates drop before that time period you can keep that unused money as it was essentially pre paid interest payments sitting in an escrow account waiting to be dispersed. If you would like to see more specific numbers and how much it would cost I can do that for you. 

I am a Realtor in Indianapolis IN. If you ever wanted to how far your money can go in the midwest feel free to shoot me a message! Cheers

 Unfortunately, most lenders don't allow rate buy downs on rentals. However, closing cost credits are definitely there for the taking. 

Agree with your thoughts here!

[Luka Milicevic]

Quote from @Russell Brazil:

Why would you have $1375 a month in expenses on a $2500 a month rental? That is $16,500 per year. That would be like replacing the roof, waterheater, hvac, and some other repairs, every single year!

 HAHA!!! But that's what we have been taught right??? 50% rule! 

[Brian Aguirre]

No my FL Properties are losing cash flow but have large equity positions. The loss helps offset the overall schedule C on my taxes. Brian