I've seen several posts talking about having a positive cashflow using the Rent minus All Expenses calculation. Personally I find it hard to imagine I'd be out of pocket $8,000 a year even knowing the rent is paying $8k to 9k in principal (which is not an expense), leaving me a positive cashflow (but I could only realize it when I sell above certain price). If I'm out of pocket only a couple of grand a year (still with a positive cash flow on paper) then I'd feel more comfortable and resilient, but the numbers I give above aren't that far-fetched in the hot market today even putting 20% down.
What are your take on this when you evaluate a potential investment property? Am I just out of touch with the reality, not looking in the right area or the right types of properties?
This is a tough answer as what is your end game? I know a lot of people who invest in assets in A+ locations that do not cash flow because they are confident they can get long term appreciation. Those that follow this play typically are building wealth.
The other play is cash flow with low / no appreciation. While you have cash flow and paying down principal, typically there is little appreciation. I see many fail in this area because the cash flow on paper looks good but when the tenant destroys the place and you have a $10k bill to repaint and redo floors and fix cabinets etc. There goes a year of cash flow and no appreciation.
People can win at both of these and many go with a balanced portfolio. Today it is even more difficult since prices have skyrocketed. You can still find deals but have to put in some work as they won’t come to you
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