Investor · Coeur d’Alene, ID · Member since 2017 · 36 posts · 14 votes
Hi guys, I have a SFH rental property that has 150k in it. It only cash flows 200/mo. I feel like this equity could be flipped into a better investment. My number 1 goal is cash flow. How much cash flow should I try to get if I have 150k to put down? Is it safe/smart to go out of state to find something with better cash flow?
Hi guys, I have a SFH rental property that has 150k in it. It only cash flows 200/mo. I feel like this equity could be flipped into a better investment. My number 1 goal is cash flow. How much cash flow should I try to get if I have 150k to put down? Is it safe/smart to go out of state to find something with better cash flow?
thank you!!
There are a lot of things working against you right now…. Real estate values are high, and interest rates are high as well. As soon as you say out of state, you necessarily add in property management which is just another roadblock to better cash flow.
Cash flow is mostly a function of how good of a deal you can find. To start off with, financing the property will usually give you better cash flow. My short advice is that you are looking for the cheapest house that will rent for the most dollars per month. For us this was C grade properties. 3-4 years ago we could get these for around. $75k/door. Today it’s closer to $125k/door in our area… and of course , every area is different. Try plotting 6 houses that are for sale in your area where house cost per square foot goes on the bottom of the graph, and rent on the vertical axis. Pick two cheap houses, two mid price houses, and two higher priced houses. This will show you the correlation between house price and your rents in your area. My bet is you will see the rent slope downward per square foot the higher the price of the house. Which is simply to say there is higher rent per square foot in the smaller houses. So target the houses that will net you the most money.
$200/month is about the absolute minimum I would accept on net profit… and that would be after all expenses plus a maintenance reserve. We have found much better deals than that through patience, and a little luck… we average closer to $300-400/door per month, but have some that we really scored on that are pushing $800/month… but those are rare. I wouldn’t personally buy one that only netted $200/month unless you just don’t see any better options.