What do you do when you analyze a Negative cash flow?

26 Replies

Promotion
Roofstock
Buy & sell single-family rentals online
Radically accessible real estate investing
Get access to exclusive property listings, proprietary data, and support to build your portfolio.
Learn More
Originally posted by @Michael Plante :
Originally posted by @Jack Orthman:

Here is a breakdown including my 25% tax bracket. I could have had this house ready for re-sale in 60 days.

 What is a 25% tax bracket 

 I put 25% for the income tax you will pay to the state and IRS for the profit you earn if you sell the property. I always like to know how much I have left after paying taxes. I don't know if you pay 20% or 25% and I know very little about how much people pay, but I think taxes for short-term real estate investments may be a little higher that taxes for wages you earn when working for yourself or for some company. Not sure!

Originally posted by @Steve Vaughan :
Originally posted by @Josh Thompson:

I have yet to find a home with positive cash flow. So now i'm wondering what I could do differently to turn it into positive. Should I try a new area? Should I speculate rents to go up in the long term?

You need to source deals off market. MLS is sort for 'too late'. There are simply too many mouths that need fed in a status quo agent-fortified transaction

The cash-flow has sucked on some of my best purchases.  It's the equity capture at the buy that matters. It's the smart value-adds that matter.  The way is off-market.  Work it. 

I agree with that. I never purchased a single-family property that was on MLS or any internet website because they are always prices to the highest price the un-savvy investors will pay.

@Josh Thompson

It's easy to make a property cash flow on paper by playing with the numbers. Of course, these investors lose their shirt because their investigation used unreal numbers. Most expenses can be estimated very close to real numbers (tax, insurance, etc). The maintanence and cap expenses are less exact but should still be able to be estimated if the cash flow is negative using real world data, then adjust sales price to see where it does work.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you