great cash flow opportunity?

Question

first off, im not rich...im scraping by actually...i own some rental property and rent out 5 units currently...i also bought and sold 2 multi's a few years ago...i have experience in this market and renting to section 8 tenants...

im looking to make another purchase of a 3 unit for CASH FLOW purposes...one property im looking at tomorrow (we'll see how much work/$$ it needs) can be bought for $200K...i can rent out each unit for $1350 and would cash flow about $2000 per month...

is this too good to be true?...these houses were selling for $450K 2-3 years ago and now they are going for half of that, meanwhile the rents have stayed the same...

Robert Granara · Answer

looked at property today that was described in my previous thread...terrible, crooked floors...no hardwood...no parking...needs more than a clean up...

actually looked a 3 today...and found another more expensive 270K asking price 3 decker...this one is move in condition in B maybe B+ shape...

my cash flow estimates are around 1700 for this property...has everything that i need for investment (deleaded, parking, 2 car garage, 3 bedrooms, good n'hood)...this one sold 2 yrs ago for 480K (unreal)

and my location is boston...the city is north of boston

Jon Holdman · Answer

I calculate $694 monthly cash flow before tax:

Rent: $4050/month
Expenses: $2025/month
Payment: $1331/month (100% financing, 7%, 30 years)
Cash flow: $694

With a more realistic 20% down payment, cash flow goes up to $960.  Seems like a pretty good deal.  I'd be curious where your are, if you don't mind saying.

If you want to argue about whether or not expenses are really 50% of the rent, find one of the threads over in the deal analysis forum.  Its a popular topic.

Jon