positive cash flow?

9 Replies

I am looking to buy some duplexes from a guy, this will be my first rei adventure, but cant figure how the numbers will work. We haven't talked about prices or any of that yet, but I figure the units go for about 450 a month. So that's 900 for both. Now I figure the price will be around 140,000 for each duplex. It seems like the payment will exceed the rent coming in. Any help?

You should try out the property analysis tool on the left sidebar of this site. It will let you plug in lots of different numbers and you will be able to determine what the cash flow should be. Of course, the results are only as good as the data you put in, but if you can come up with good/realistic estimates, it will give you a pretty good picture of the deal.

Yes, use the property analysis tool. I am in your position right now. I have a contract on my first property, a duplex, and used the propoerty analysis tool to analyze the deal. It was very educational and helped me pass on several prior deals. I put in all my know expenses and figured cash flow. Then I threw in extra expenses, like a water heater going out, just to see what it would do to my cash flow. I quickly reallized that many deals are so close to break even that any unexpected expense will cause a loss.

I don't know the cost of insurance and taxes and any other expenses in your area, but your deal sounds like there woulnd't be muhc cash flow. I saw that just based on the deal I'm doing know. Can you raise the rent?

WOW. Not only will you not be cash flowing you won't even cover an interest only loan at 8%. RUN!!!!

Well let me clarify. If your startegy is to buy and hold for rental income then RUN!!! If your strategy is to buy and refi or resell with apprecitation then maybe stay. Your market needs to be a HIGHLY appreciating market to rationalize a negative cash flow like that.

don't invest unless you KNOW whether there's cashflow there or not.

If you search, you can find places with tenants already in place and run the numbers with that way. Why get into a situation where you're loosing money from the start? See if you can negotiate the price of the duplex down to something more reasonable based on the comp rents. And, maybe consider a few choice upgrades to command a higher rent...

this is definitely not a deal so run as far as you can from this deal if he is asking for anything more than approx 70-80K !

you can easily buy 2 single family homes or townhomes, possibly brand new in various states and rent them out for $800-$1100 a month each. (depending on the state, city, and area).

Originally posted by "CDZB":
I am looking to buy some duplexes from a guy, this will be my first rei adventure, but cant figure how the numbers will work. We haven't talked about prices or any of that yet, but I figure the units go for about 450 a month. So that's 900 for both. Now I figure the price will be around 140,000 for each duplex. It seems like the payment will exceed the rent coming in. Any help?

The property analysis tool is great for detailed analysis (see the link in my signature for help with the tool). If you want a "quick and dirty" analysis then just take the total monthly rent ($900) and multiply by 100 ($90K). If the sales price is around that then you can do a closer analysis.

There are a lot of bad deals out there. Ryan was DEAD ON with his rent vs. rehab comment. This might be OK if you can resell for more ($200K?), but don't count on a bigger fool for rental property.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here