How much negative cash flow is too much
Member since 2023 · 13 posts · 10 votes
How much negative cash flow is too much
Most Popular Reply
147 Replies
- Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes3y
Quote from @Bruce Woodruff:
In the end it all comes down to one thing: we want to make the most profit possible with the least amount of risk, right?
This can be done in a number of ways depending on the specific property, location, cash v loan, individual risk tolerance, etc, etc....
So on some properties, and for some investor's situations, negative cash flow can be a good thing. For others it would be a bad thing. Arguing in general about cash flow is kinda useless in my view....
But RE the OPs question, my opinion is still a big NO. But even with that, I don't know enough about the specifics to even be sure about that answer....RE is a funny game with very few solid Yes or No answers....
This is how I see it. There are so many variables and characteristics that make up the equation. Iḿ baffled by people insinuating others don´t know what they are doing if they don´t adopt negative cash flow. They base it on tenant quality and appreciation. My goodness, I have one of the best tenants I´ve ever had in one of my class Ds. My networks have instant cash flow in B class communities because they know how to renovate and buy. Itś too much to say this is the way it goes because of that. For me, it would have to multiple circumstances in a property for me to even consider it and with that, I would NEVER do it unless it was something like maybe $250 in the negative. Everything people are justifying losing tens of thousands on I´ve seen work in every class. Everything I have has had really strong appreciation in the past five years, with tons of cash flow. It is what it is. People have to do what works for their style. No real right and wrong if the in the end they win. Just depends on making the right choices to make it happen. I do understand the people saying they only want high end places they enjoy and would consider living in. That is their personal model and if works for them its ok.
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Mark Cruse:
Yessir, there it is! Too much mudslinging on here about this topic IMHO. Do what works and makes you money, while you provide housing to people who need it.....
Seems simple, but maybe I'm just too old or dumb for this....?
- 3ySam YinPro MemberLos Angeles, CA · Member since 2021 · 583 posts · 738 votes
@Brad S.
Well said. I agree totally. Many people forget their true time horizon and individual intentions for REI.
If you love your job and/or want to keep working another 10, 20, 30, or 40 years, most of the efficient investing strategies wont matter to you. You are not depending on REI to support you. You are depending on your ability to keep working to support your REI.
This is similar to people with longer horizons. Time will cover up investing mistakes/missteps, as long as you can hold on.
But for the investor that want freedom quickly, cash flow, equity realization, and trade velocity is much more important.
I'm of the latter mindset, but I can understand the other as well. Like Bruce said, if you know it will appreciate (6 to 24 months MAX) AND you will sell it, then I would buy with zero or some negative cash flow. But as a long term hold, it's kinda counter productive.
Carlos brought up a good example about his engine replacement. I invested for cash flow to get put of W2 quickly. Took about 2 years of aggressive investing for cash flow. Now I have the freedom to invest for long term appreciation if I want to. Last summer, I took a 7 week long RV trip across America, as I always do. Less than 2 weeks before the trip, my RV engine conked out on my way to the River to meet my buddy. It was a $5 Oring located in the back of my 6.0 Powerstroke. It's a LAZY DAZE, so the entire RV is welded Aluminum.
Long story short, it cost me almost $8000 to replace the $5 Oring and update a few other items while the motor was pulled out. I didn't flinch. I never affected the trip. Last summer, diesel was at an all time high across the USA, cost me about $4000 in fuel... no biggie. I sprinkled in a few cruises and several other camping trips through the year. ALL thanks to investing for cash flow.
I am in SoCal. I invest in SoCal. I invest in C areas for cash flow. Them slowly transfer to B and A... but seriously, they do not compare to C.
Dont discount C properties that cash flow. Dont put too much stock on B and A properties with great potentials if you are just starting out. Focus on how you operate and invest. Focus on building your network. Create systems that are repeatable. That's where your focus should be.
Or else keep on working that awesome job to bank on appreciation way later. There no right or wrong, just different ways of viewing/enjoying life. I wanted to spend my time with my 3 little kids NOW, rather than work 40 hrs a week to support long term hold for big appreciation 10 to 20 years later. That was not my vision.
- Realtor · Columbus Ohio, Cleveland Ohio · Member since 2022 · 849 posts · 830 votes3y
Quote from @Bradley Shuhart:
I have an opportunity to assume a loan at 2.5% in a HCOL SoCal community. Even at that rate I will still be losing about $800-$1000 per month with a renter due to HOA & Mello Roos. I'm ok with a negative cash flow for a couple of years because its in an area that should continue to appreciate. My question is how much is too much negative cash flow? Is there a general rule of thumb or is it based on personal tolerance. Thank you!
I think its based on youre personal tolerance. I wouldnt if i was loosing 1k/month unless i was buying into some substantial equity as well.. Rates will go down eventually and you can refi. I think just ask is the amount youre loosing per month less than what youd spend on a higher interest rate till you can refi on a better deal? Hopefully that makes sense.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @V.G Jason:
Quote from @Carlos Ptriawan:
Quote from @V.G Jason:
Quote from @Marcus Auerbach:
Team cash flow is giving dangerours advice!
Kihei became huge for celebrities, I thought. Like a few went, so a ton went. Then some got in front of others only to sell it to them lol.
Milwaukee is very interesting. I think Madison might be the most interesting example of this and god forbid I toss an Ohio city in there-- Columbus. I think Columbus, Madison and even Kansas City may be a different investor grade area than it was pre-covid. I am trying to research where to attack for Q4 '23- Q1 '24, then take my break in summer of 24. And some of the midwest areas are trending a bit more up.
Kihei in 2016 is having 1:4 absorption rate, in 2021 It's 1:0.9 absorption rate. This is the best chart I've ever seen how to correlate demand/supply and price appreciation.
Madison is very interesting, the very reason why in many cities in US the home is peaking at Q2 2022 is because between Feb 2022 to May 2022, the home supply increases by 50% to 200% in many cities ! but in Madison, the listed home for sale is only increased by 20%. Currently in Madison, the number of demand and supply is just matched 1:1 ; in their cash flow neighborhood (in zip code 53209), the absorption rate was like 1:2
Currently in many cities, the supply is lower than the demand. There're more "supply" in the cash-flow market, as expected.
- 3ySam YinPro MemberLos Angeles, CA · Member since 2021 · 583 posts · 738 votes
Quote from @Mark Cruse:
Quote from @Gisa Bauschke:
I think it largely depends on where you invest. Where we live, if the proparty is purchased with a mortgage, a positive cashflow is almost unheard of due to extremely high real estate prices. We bought a condo in a very desirable area for 750K two years ago. Rented immediately. It had $600 negative cashflow the first year (against mortgage and HOA costs). Felt insane. This year it runs $400 negative cashflow. We had a modest rent increase because the tenants are incredible. If they stay, we will be cash flow positive in 3 years. If we get new tenants, we will become cashflow positive next year, as rents in this area grew ~ 700$/month over the last 2 years. >50% of the units in the building are investments, so I do not think there will be any changes in the condo rules. Condo appreciated 100 K over 2 years. While the negative cash flow was scary in the beginning, now it starts making sense.
Just curious, what that your original game plan? If so, what was the rational behind it? By the time you cash flow, excluding maintenance, turnover costs, repairs, and your time still you could be 50k in the hole. There are some C class communities you could buy a 50k property free and clear. Just by tracking the S&P you could turn that 50k into 75k in a reasonable amount of time as opposed to being in the hole. Was the original thought process to just have a very nice cool place in a cool area or was it a wealth move meant to play out over a few decades?
Great points. I think some investors overlook the Capex when they project their long term holds. The longer you hold onto a property, the higher the risk for major capex, which can, and often, wipe out your accumulated cash flow.
Based on the OP, it may be a strategy the works for him. But is is not a strategy I would subscribe to at my phase of investing. However, if I had a $20M portfolio at 60%, or less, LTV that is is producing over 5% ROE, than I might consider it. MIGHT. With a $50M portfolio, I would definitely do it because it would be time to acquire grade A properties for appreciation plays as a bonus or a just cause I want to. I would probably look the coast line between San Diego to Morro Bay and acquire assets within 0.5 miles from the water. Those Grade A properties will have rock hard stability for generations. It's the land/location value.
But for now, C and B- are my bread and butter. I grew up and C and below areas and I can tell you, the working class will tolerate more which translates to less work for the LL.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Sam Yin:
Quote from @Mark Cruse:
Quote from @Gisa Bauschke:
Based on the OP, it may be a strategy the works for him. But is is not a strategy I would subscribe to at my phase of investing. However, if I had a $20M portfolio at 60%, or less, LTV that is is producing over 5% ROE, than I might consider it. MIGHT. With a $50M portfolio, I would definitely do it because it would be time to acquire grade A properties for appreciation plays as a bonus or a just cause I want to. I would probably look the coast line between San Diego to Morro Bay and acquire assets within 0.5 miles from the water. Those Grade A properties will have rock hard stability for generations. It's the land/location value.
I quickly analyzed Morro Bay and area around Pismo ; these area has stable supply and demand over the years, the ratio was like 2:1. The trend is interesting but there's no "uptick" of demand.But the whole SF Bay area NorCal especially around san ramon/dublin has ratio like 0.8:1.
So if I threw 1 mil bucks, I would buy in Dublin rather than Morro Bay LOL - 3ySam YinPro MemberLos Angeles, CA · Member since 2021 · 583 posts · 738 votes
Quote from @Carlos Ptriawan:
Quote from @Sam Yin:
Quote from @Mark Cruse:
Quote from @Gisa Bauschke:
Based on the OP, it may be a strategy the works for him. But is is not a strategy I would subscribe to at my phase of investing. However, if I had a $20M portfolio at 60%, or less, LTV that is is producing over 5% ROE, than I might consider it. MIGHT. With a $50M portfolio, I would definitely do it because it would be time to acquire grade A properties for appreciation plays as a bonus or a just cause I want to. I would probably look the coast line between San Diego to Morro Bay and acquire assets within 0.5 miles from the water. Those Grade A properties will have rock hard stability for generations. It's the land/location value.
I quickly analyzed Morro Bay and area around Pismo ; these area has stable supply and demand over the years, the ratio was like 2:1. The trend is interesting but there's no "uptick" of demand.But the whole SF Bay area NorCal especially around san ramon/dublin has ratio like 0.8:1.
So if I threw 1 mil bucks, I would buy in Dublin rather than Morro Bay LOLHi Carlos.
I agree. I put down Morrow Bay because I love that area and a purchase there would be more for me than investing. We go up there as a family very often and I love the weather in the area. I been keeping an eye on the area, particularly Cayucos just north of it. I would be willing to throw away a few $M to nab a large lot with a small single story just to keep as a vacation home. It really just a tourist area with awesome weather. It's been a dream of mine. But everytime I'm about to pull the trigger, I end up using the money to buy another C property for cash flow.
a couple of years ago, there were a few properties up there, between 30 to 60 acres, next the the water, with a small home on it. They were about 2M to 3M. I knew this was a rare opportunity and had great appreciation. Likely millions. I was so tempted. I'm glad I did not buy it because I would still have to work a full time job. I gave up that fantasy for a few C and D properties IN San Bernadino. Best decision ever! Took me off the W2 treadmill.
I agree with your analysis regarding Dublin vs Morrow. One day, may be 5 years from now, I'll revisit those areas for appreciation play. But for now, I'll stay the course and get the kids through school. Been trying to convince my wife to retire early as well, but she loves her current situation. She wants to stick it out about 5 more years to pick up her pension. - Member since 2020 · 404 posts · 235 votes3y
I'm in the same boat. I'm looking at a negative 4k a month cash flow on a $1.25 mil duplex here in SoCal. That would be with a 8 % interest rate and about 30% below market rents. I bought the exact replica duplex from the seller last year at 1.28 mil but got one unit vacant. Due to low rents and higher interest this deal is is not looking as good. The property is worth close to 1.4 to 1.5 mil range right now. I analyze this area and own 2 duplex and my personal residence in the same town so very keen on price. Rents and rates can both adjust overtime but even that could take awhile. Idea of close to 50k loss a year could easily eat up the sweetness of the deal. This would be my 4th duplex in Southern California and it would eat up majority of my cash flow from my other 3. I know if the seller was to list the property on the MLS it will be gobbled up in a week and go for a lot more than what his willing to sell to me off market. I do see slowing down and days on market here in SoCal but if a property is priced well and in good area there is there a ton of multiple and cash offers.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Sam Yin:
Quote from @Carlos Ptriawan:
Quote from @Sam Yin:
Quote from @Mark Cruse:
Quote from @Gisa Bauschke:
I agree with your analysis regarding Dublin vs Morrow. One day, may be 5 years from now, I'll revisit those areas for appreciation play. But for now, I'll stay the course and get the kids through school. Been trying to convince my wife to retire early as well, but she loves her current situation. She wants to stick it out about 5 more years to pick up her pension.
From redfin and MLS data, it seems even Riverside in SoCal or Sacramento in NorCal would have more appreciation compare to Morro Bay. Maybe San Diego coast would even have more demand. San Diego in particular is very interesting as people from SF and LA is moving to this city.
How Redfin could analyze this demand and published it for free is so amazing, but how their logic matched with my data source is quite amazing as well so we know where to invest.
- 3yJustin R.Pro MemberRental Property Investor · San Anselmo · Member since 2015 · 659 posts · 599 votesAnyone here saying "any negative cashflow is too much", doesn't fully understand markets outside of their own. The question should be "how much negative cash flow is too much for YOUR situation."
Quote from @Bradley Shuhart:
I have an opportunity to assume a loan at 2.5% in a HCOL SoCal community. Even at that rate I will still be losing about $800-$1000 per month with a renter due to HOA & Mello Roos. I'm ok with a negative cash flow for a couple of years because its in an area that should continue to appreciate. My question is how much is too much negative cash flow? Is there a general rule of thumb or is it based on personal tolerance. Thank you!
Cashflow is great, and always one of my top priorities, but not my only goal. Wealth is typically created in RE by appreciation (forced and natural), and long term loan pay down. The markets that typically have the highest appreciation and larger loan pay down potential (driven by property values) are the markets that usually dont cash flow. I invest in the midwest, the northeast, the southeast, and California. Hardly any of my properties in the North East and CA cash flow; yet that are the primary driver in my wealth creation and balance sheet.
If your subject property was 1m dollars, and you used a very conservative factor of 3% natural appreciation, that is 30k per year, or $2500 per month. At year 1 of the amortization schedule you are paying about $1900 a month in principle pay down, 23k per year. That is 53k per year in wealth creation at only 3% appreciation.
What about when rents increase? What if you added a room to create more value? What about year 10 on the amortization schedule?
If you cannot afford to lose money monthly then yes, cash flow or work income should be your first goal. If you can afford it, then don't be scared to sacrifice a little bit each month for the long term play. - 3yMarc RiceBusiness MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
@Bradley Shuhart
Every market is different, if the property appreciates $100k a year for a $12k/yr cost then it could be worth it.
Marc Rice | Investor Friendly Agent at Reafco Tailwind Team574 Reviews - Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes3y
@V.G Jason and @Carlos Ptriawan
Milwaukee's potential has been building over the last decades, especilly since 2015. The city has been moderniced, but people here are (financially) very conservative and resisited higher prices, basically: because "it's always been this way". A catalyst was needed to break that notion.
The second factor is moderate climate. People tend to be more productive in cooler climates. Our summers are still pleasanat and our winters have gotten milder. We don't have extreme weather of any kind: no hurricanes, floods, fires, heatwaves. But we do have an almost unlimited supply of fresh water from the Great Lakes.
The housing market is so tight and we have very little new construction (again, financially conservative builders) that a slight uptick in immigration causes a shortage. Wisconsin went from like #45 in the US to #17 in last years UHaul migration report.
Q4 is my favorite time to buy, prices are about 5-8% lower than spring, less competition. Q1 on the other hand is a terrible time to buy in Milwaukee, check out my latest YouTube video for details.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
@Bradley Shuhart I have read pages of various freak-out's in every direction, of various value but I have not read a clear concise answer on your question, from REAL WORLD experience.
I personally invest in what some would call "net-loss" properties, new construction build, and I make my clients and self BIG PROFITS doing it, so I will try to answer your question.
First of all, you have to look at the WHOLE PICTURE of what that net loose is. What is it after everything, after tax implications, after mortgage paydown, what is the REAL actual impact.
I do MANY properties that seem to have as much as $500 per month "loose" because rent's are $500 month less than payments on the house, month 1. But, after we consider all the math, after tax benefits, after tenant payments allocated unto principle paydown, after REAL actual appreciation (FYI it's not some big crazy #, we us 2.9% for annual appreciation if done in correct strategic area) we have a TRUE net of maybe MAYBE as much as a few hundred dollars net loss THE FIRST YEAR.
I have a hard-rule of no more than 1 months rent in true net loose the 1st year. Again, THE FIRST YEAR. Because we are INVESTING we look at a lot more than year 1. And the relationship between the years has MAJOR implications.
Year 2 we MUST see true net positive. If we can't get into true net positive year 2, it's a no-go. And, in 99% of cases we ARE in true net-positive by end of year 1.
Now, we also must see appreciating RENTS. This is key. Because we NEED to see that things WILL BE positive on cash-flow by end of yr3. Again, this is on cash-flow.
By end of yr3 we should be sitting nice, with appreciation, rents appreciated, by end of yr3 we must be in net positive land.
By yr 5 things need to be looking good. It needs to be in a place that a sale would not only be profitable, but make sense as an investment. Generally we want to see a 10%+ ROI by that time, and yes we run FULL calculations that consider cost of selling and all that jazz.
And yr 7 things need to be looking like it's a hard decision to make, to sell to reap the very sizable gains in property, ideally around 2x our capital affording Pyramiding at this point, but the cash-flow is now so good that some would call it a "cash-cow" so we'd feel a draw to just hold it. But if in portfolio growth, we must sell, because cap-x is now going to come into the picture and start eroding our returns.
Now if you start an investment, so deep into the red, yes one can dig out of it but your adding considerable years to that scale. What should be a VERY profitable sale in 7yrs, empowering Pyramiding, is probably going to take more like 15yrs, or longer because of cap-x coming in to erode returns and demand more capital investment.
Not to mention, pumping so much added capital into things annually destroys your returns.
The deal you highlighted is ludicrous, it is. That IS speculation, because you gambling so much on the 1 factor of sizable appreciation digging you out. No, that's a setup for failure.
When I do my analysis, yes it's with appreciation factored in but it's not appreciation to dig us out of a pit, and I use REAL factual historical data for mine, I am currently using 2.9% appreciation factor, LESS than inflation. For rents, sub 4%, again, actual factual historical data and it's LESS than inflation. So it's very easy for me to experience BETTER than projected returns, because I am ignoring the big swings, again investing vs speculating or paycheck-buying. Investing is over a duration of time.
I am INTENSLY strategic with my acquisitions, I know EXACTLY why and how we are going to get the appreciation we expect, specifics like actions with planned city development, expansions, employment, infrastructure etc etc., it's never "well, the market should, maybe, uhm-aaahh maybe go up", no, I know EXACTLY why and can readily point to it. I can say exactly who is doing what, I know the demographics of inbound migration, which lends to exactly what unit is most attractive to them.
I consume data like a NASA super-computer, and I can readily spit out the knowledge from those facts. That's how I KNOW, not guess, where and what to invest in.
It's very VERY dangerous what your attempting. It's NOT easy what I do, on difficulty scale it's a level 11. I can't stress this enough. While Brrr is not an easy strategy either, this what I coin AAA-Strategy is a razor sharp double edged blade, done wrong it can very easily rip a person wide-open and bleed a person out before they even know what happened. Yes, I may make it look easy, just as any Samurai does with their katana.
Be-very-VERY-careful using this strategy. If you don't fully know EXACTLY what your doing, DON'T DO IT. You'll know your ready when you have full command of the math and analysis of it all.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3yIf only "if's" and "but's" where when's and what's.....
Quote from @Marc Rice:
@Bradley Shuhart
Every market is different, if the property appreciates $100k a year for a $12k/yr cost then it could be worth it.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Marcus Auerbach:
@V.G Jason and @Carlos Ptriawan
Milwaukee's potential has been building over the last decades, especilly since 2015. The city has been moderniced, but people here are (financially) very conservative and resisited higher prices, basically: because "it's always been this way". A catalyst was needed to break that notion.
The second factor is moderate climate. People tend to be more productive in cooler climates. Our summers are still pleasanat and our winters have gotten milder. We don't have extreme weather of any kind: no hurricanes, floods, fires, heatwaves. But we do have an almost unlimited supply of fresh water from the Great Lakes.
The housing market is so tight and we have very little new construction (again, financially conservative builders) that a slight uptick in immigration causes a shortage. Wisconsin went from like #45 in the US to #17 in last years UHaul migration report.
Q4 is my favorite time to buy, prices are about 5-8% lower than spring, less competition. Q1 on the other hand is a terrible time to buy in Milwaukee, check out my latest YouTube video for details.
Is there a new big company or industry moving to Milwaukee in the last 5 years that spurs the demand so great ?
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes3y
Quote from @Carlos Ptriawan:
Quote from @Marcus Auerbach:
@V.G Jason and @Carlos Ptriawan
Milwaukee's potential has been building over the last decades, especilly since 2015. The city has been moderniced, but people here are (financially) very conservative and resisited higher prices, basically: because "it's always been this way". A catalyst was needed to break that notion.
The second factor is moderate climate. People tend to be more productive in cooler climates. Our summers are still pleasanat and our winters have gotten milder. We don't have extreme weather of any kind: no hurricanes, floods, fires, heatwaves. But we do have an almost unlimited supply of fresh water from the Great Lakes.
The housing market is so tight and we have very little new construction (again, financially conservative builders) that a slight uptick in immigration causes a shortage. Wisconsin went from like #45 in the US to #17 in last years UHaul migration report.
Q4 is my favorite time to buy, prices are about 5-8% lower than spring, less competition. Q1 on the other hand is a terrible time to buy in Milwaukee, check out my latest YouTube video for details.
Is there a new big company or industry moving to Milwaukee in the last 5 years that spurs the demand so great ?
Not really. Microsoft is building a one billion dollar data center just south of Milwaukee, but that will only require a small crew to run. The economy is quite diverse, health care and manufacturing are significant, but no single dominating company or industry, which is something I really like, Unemplyment is exceptionally low at 2.6% to the point where companies complain that they can't bring people in due to a lack of housing. Other than cool climate (which is great for productivity) and midwest-friendly I can't point to a single reason..
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Marcus Auerbach:
Quote from @Carlos Ptriawan:
Quote from @Marcus Auerbach:
@V.G Jason and @Carlos Ptriawan
Milwaukee's potential has been building over the last decades, especilly since 2015. The city has been moderniced, but people here are (financially) very conservative and resisited higher prices, basically: because "it's always been this way". A catalyst was needed to break that notion.
The second factor is moderate climate. People tend to be more productive in cooler climates. Our summers are still pleasanat and our winters have gotten milder. We don't have extreme weather of any kind: no hurricanes, floods, fires, heatwaves. But we do have an almost unlimited supply of fresh water from the Great Lakes.
The housing market is so tight and we have very little new construction (again, financially conservative builders) that a slight uptick in immigration causes a shortage. Wisconsin went from like #45 in the US to #17 in last years UHaul migration report.
Q4 is my favorite time to buy, prices are about 5-8% lower than spring, less competition. Q1 on the other hand is a terrible time to buy in Milwaukee, check out my latest YouTube video for details.
Is there a new big company or industry moving to Milwaukee in the last 5 years that spurs the demand so great ?
Not really. Microsoft is building a one billion dollar data center just south of Milwaukee, but that will only require a small crew to run. The economy is quite diverse, health care and manufacturing are significant, but no single dominating company or industry, which is something I really like, Unemplyment is exceptionally low at 2.6% to the point where companies complain that they can't bring people in due to a lack of housing. Other than cool climate (which is great for productivity) and midwest-friendly I can't point to a single reason..
This is good point, so the strength of the economy of this particular city economy is seems created from the low unemployment number lower than national figure , and also limited housing due to financial conservative's builder.
- Investor · Tampa, FL · Member since 2016 · 679 posts · 288 votes3y
Hello Bradley Shuhart in San Diego. If your thinking straight, "You Make Your Profit the Day You Buy the Property." Otherwise what are you thinking? You need to watch Grant Cardone's youtube video, "The Worst Investment You'll Ever Make."
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes3y
I read through most of the comments, all very good points made and what's right for one person might not work for someone else. I'm in a negative cash flow situation by -$1200 a month (for covering mortgage PITI) for the past year but mine is more easily remedied by getting roommates in with current tenants and raising the rent on current tenants (a long story) to bring it up to market rate rent in the Bay Area. I can afford this right now because of my W2 job but I definitely need to fix this situation soon.
Are you still considering buying this property with assuming the 2.5% loan? If not are you trying to still trying to invest in SoCal? I've heard some California investors doing mid-term rentals to charge more rent than long term rentals (would have to furnish the place, pay for utilities and WiFi)
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Becca F.:
I'm in a negative cash flow situation by -$1200 a month (for covering mortgage PITI) for the past year but mine is more easily remedied by getting roommates in with current tenants and raising the rent on current tenants (a long story) to bring it up to market rate rent in the Bay Area.
Glad you are surviving! But you do realize that you are still losing $1200 a month that you could be putting in your pocket? Not a good investment...unless that property is guaranteed going to double in value real soon.....
- San Diego · Member since 2021 · 16 posts · 11 votes3y
Why don’t you just become a hard money lender and earn in the interest you will charge for it. Let someone else take the risk and wait your time or look for a deal that at least breaks even, if looking for the appreciation game.
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes3y
Quote from @Bruce Woodruff:
Quote from @Becca F.:
I'm in a negative cash flow situation by -$1200 a month (for covering mortgage PITI) for the past year but mine is more easily remedied by getting roommates in with current tenants and raising the rent on current tenants (a long story) to bring it up to market rate rent in the Bay Area.
Glad you are surviving! But you do realize that you are still losing $1200 a month that you could be putting in your pocket? Not a good investment...unless that property is guaranteed going to double in value real soon.....
Yes I know I'm losing $1200 a month and it's starting to financially sting. I acquired this property a while ago and have substantial equity in it. I didn't buy it at the current high Bay Area prices. The low rent is from renting out to a family member (very long story).
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes3y
Quote from @Chris Vargas:
Why don’t you just become a hard money lender and earn in the interest you will charge for it. Let someone else take the risk and wait your time or look for a deal that at least breaks even, if looking for the appreciation game.
I think this is a good idea to become a Private Lender for someone who has extra money instead of trying to BRRRR in this environment or be negative cash flow with rent. I've talked to PLs who are getting 8 to 12% interest if the borrower and PL can find an agreement and repayment schedule that works for both parties. That's a much better return than what they're getting with a 4 to 5% interest on CDs or HYSAs.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.