At what ARV amount do properties usually not cash flow?

Question

Thinking of investing in New Castle County Delaware. $275K median home value for B Class neighborhoods, but I’m wondering if they’ll cash flow at this ARV.

John Underwood · Answer

There is not a one size fits all formula.

It depends on many things such as rent potential and expenses.

Pit all your numbers in a spreadsheet and you can quickly see what your cash flow looks like verses your out of pocket investment.

Also what does appreciation look like for this area?

Many things to consider.

Joe Villeneuve · Answer

Maybe.  Run the numbers...all of them, with dollar signs in front.  The cost of the property is only one factor to whether it will CF or not.  There is no set range of specific dollars of cost that can answer that question.

Learn to analyze markets with the understanding that the geographical area that defines the micro-market you need to find that will give you your answer, is defined by the numbers with dollar signs.  Not zip code, not any form of percentage, not rents, not cost of properties, etc...  It will be defined by the spreads between what comes out of your pocket, and what you get back.  Another way of looking at this is what comes to you in the form of cash, and what you get to keep.

Lori Williams · Answer

I have heard that C neighborhoods cash flow the best. And I heard not to over rehab for the neighborhood. I first heard that after I started doing B+ properties on a C- street. And I have found the right C street w B properties can cash flow much better than C.

so it all depends on where your street is, what's going on around it, how desirable the neighborhood is, etc. As well as how much you have in the property purchase and rehab, vs what market rents are for similar properties.

A 250k house where I live would not rent for the 3k/ mo it should rent for to make as much as I do on a 73k property 5 min down the road that rents for 1350.00 and has way lower taxes.  But I'm sure that would not be nessarily be the case everywhere.

At what ARV amount do properties usually not cash flow?

Most Popular Reply