Can't find cash flowing property. Is the market over-saturated?
Hello all,
I'm a first time home buyer looking for a duplex/triplex around Philadelphia, and I'm becoming very confused as to how many houses will leave me with a negative cash flow. It's becoming next to impossible to find a house that will net me a positive cash flow while also being located in a somewhat decent area.
Take this property for example:
Asking price: $230,000 Rents: $1,400
Expenses:
- P & I (based on 5% down): $1,100
- HO Insurance: $90
- Mortgage Insurance: $130
- Property Tax: $220
- Vacancy and Property Management: 10% of rents each
- Repairs: 1% of purchase price per year
This leaves me with a whopping negative $615 per month, and a cap rate of 3.5%. I realize MLS numbers are typically high, but this seems ridiculous. I would have to offer 55% of the asking price to even have a positive cash flow.
This is a more extreme example, but almost no houses I have looked at have had positive cash flows, and I've been looking for months. Also, houses are still being sold.
So, my question is: is the market really this over-saturated and seller-friendly, or am I doing something wrong? Are my estimates too conservative?
Any help would be very much appreciated. Thanks!
Derek