Is $200 in Cash Flow a good deal?

5 Replies

Hey everyone,

I'm about a week out on finishing my first property, I planned on making it a rental however after running the numbers I will be cash flowing about $254 per month (after all expenses). I'm all in at 57k and it appraised at 75k, my bank is allowing me to pull out 80% LTV on a 5 year ARM with a 20 year amortization which works for the BRRRR model.

So my question is: Is $254 in cashflow actually a good deal? My only other alternative would be to sell obviously...

Any input is much appreciated!

Hey William,

For what you have invested, you are looking at roughly a 5% return which is relatively low. Is it in an area that is growing or is this more of a cashflow play? 

With returns that low, a bad tenant could wipe your returns for a year or two. This could be avoided by avoiding bad tenants though. 

To me it seems like a very small return and you may want to consider selling. 

The next time around, you should have try to determine this prior to starting the project to figured out what your exit strategy will be.

Either way, sounds like your first project was a success, congrats!

Good luck on figure projects.

Congrats William on your first property. I agree with Brandon, will need to consider what is your exit strategy on the next one. It' might not be a bad idea to sell this one the way buyers are buying up properties these days. One question is does your all in cost include any reserves for repairs and maintenance. Because you will have those unless you put some type of verbiage in the rental agreement that tenants are responsible for certain repairs. 

Originally posted by @Shaka E. :

Congrats William on your first property. I agree with Brandon, will need to consider what is your exit strategy on the next one. It' might not be a bad idea to sell this one the way buyers are buying up properties these days. One question is does your all in cost include any reserves for repairs and maintenance. Because you will have those unless you put some type of verbiage in the rental agreement that tenants are responsible for certain repairs. 

Thank you!

I only accounted for expenses on the rental income (10%). 

 

Originally posted by @Brandon Rush :

Hey William,

For what you have invested, you are looking at roughly a 5% return which is relatively low. Is it in an area that is growing or is this more of a cashflow play? 

With returns that low, a bad tenant could wipe your returns for a year or two. This could be avoided by avoiding bad tenants though. 

To me it seems like a very small return and you may want to consider selling. 

The next time around, you should have try to determine this prior to starting the project to figured out what your exit strategy will be.

Either way, sounds like your first project was a success, congrats!

Good luck on figure projects.

Thanks Brandon,

I wasn't really worried about what I have invested because on the cash out refinance I will be pulling out 60k and I am all in at 57k. In other words ill have no money left in the deal after the refi. The area is appreciating at a decent rate and rents are also increasing, however I am still leaning towards selling...

Also a 5% return is based on the 57k left in the property, but if I pulled that out wouldn't the return be infinite?

 

I would keep that $254 especialy with the numbers you just mentioned. Its a solid deal.