Low cash flow, but easy to buy.. Advice wanted

8 Replies

Hi BP,

It's been a while since I last posted, so I'm trying to be more active. I have a question that relates to a situation I could be finding myself in very soon..

I am 24yrs old (as of tomorrow) and my wife and I currently own 2 rental properties. We anxiously would like to expand as quick as we can handle!

So my question is, if u were in my situation, would you buy investment properties for 0% down through owner financing, assuming you would only cash flow 100-150/door. I generally would like to buy properties that cash flow a little more, but the deal is hard to beat.. I would be buying these from a family friend/agent that we know very well, so the properties would likely be at FMV, and with 0% down, the monthly payments would cut into cash flow a bit..

Thoughts?

Joe

Joe

I'm actually starting to do some of these deals myself as we speak. Any return on zero spent is infinite and it doesn't get any better than that. However the question remains how long is that financing for where you are only making $100/month and how much time and resources do you need to put into the deal as an ongoing basis? If it is only for 1-3 years then everything else is pure profit with minimal ongoing maintenance then sure. If not it might not be worth the headache for the money. As an ROI standpoint yes makes sense but does it get you closer to Your goal and enhance your quality of life? Only you know that answer.

@Joseph Shevy

Hi Joseph

We all have different criteria when we buy. I look to purchase properties that are underperforming that I can add value to and reposition to be able to refinance and extract my capital while cash flowing on the deal. The more value I create the more profit I will make. That statement is true for any business. If I am buying a property at FMV and cash flowing minimally there is not much value being created with the exception of no money out of my pocket. The return would be infinite. The only problem is when the property goes vacant the cash flow will be destroyed along with any projections

Unless i can purchase any of these units and spread my risk I would not follow that model

Hope that helps

Good luck

Gino

Originally posted by @Joseph Shevy :

Hi BP,

It's been a while since I last posted, so I'm trying to be more active. I have a question that relates to a situation I could be finding myself in very soon..

I am 24yrs old (as of tomorrow) and my wife and I currently own 2 rental properties. We anxiously would like to expand as quick as we can handle!

So my question is, if u were in my situation, would you buy investment properties for 0% down through owner financing, assuming you would only cash flow 100-150/door. I generally would like to buy properties that cash flow a little more, but the deal is hard to beat.. I would be buying these from a family friend/agent that we know very well, so the properties would likely be at FMV, and with 0% down, the monthly payments would cut into cash flow a bit..

Thoughts?

Joe

The big thing alot of people ignore (especially when starting is probably management). 

If it cashflows after paying property management, and the correct amount for reserves and cap-X, then buy it. 

Account for the cost of professional tradesperson repairs and property management, even if you are self managing and doing your ownrepairs. 

If you fail to do that, then you are buying a job (albiet with equity/appreciation potential) 

@Ozzy Smith , thank you for the reply and advice. As mentioned in my post, that is 100-150 per door. And these are not single family properties, so we are talking probably around 250-450/property, as they will probably end up being closer to the 150/door range. I think this is worth it for the cost of closing + increasing my cash flow, even tho it is less than I hope to get.

@Gino Barbaro , thanks for your input. It is appreciated. Although, like I mentioned above, the cash flow will be closer to 250-450/property which is not as much as I try to get, but its not Terrible. And how I calculate cash flow, takes into account possible vacancies.. So my hope is that future vacancy, won't hit hard. I also have my first two properties that cash flow around 400-450 each and that would help diversify risk. 

Originally posted by @Michael Herr :
Originally posted by @Joseph Shevy:

Hi BP,

It's been a while since I last posted, so I'm trying to be more active. I have a question that relates to a situation I could be finding myself in very soon..

I am 24yrs old (as of tomorrow) and my wife and I currently own 2 rental properties. We anxiously would like to expand as quick as we can handle!

So my question is, if u were in my situation, would you buy investment properties for 0% down through owner financing, assuming you would only cash flow 100-150/door. I generally would like to buy properties that cash flow a little more, but the deal is hard to beat.. I would be buying these from a family friend/agent that we know very well, so the properties would likely be at FMV, and with 0% down, the monthly payments would cut into cash flow a bit..

Thoughts?

Joe

The big thing alot of people ignore (especially when starting is probably management). 

If it cashflows after paying property management, and the correct amount for reserves and cap-X, then buy it. 

Account for the cost of professional tradesperson repairs and property management, even if you are self managing and doing your ownrepairs. 

If you fail to do that, then you are buying a job (albiet with equity/appreciation potential) 

 Hey Michael,

Thanks for the reply. I do calculate cash flow taking into consideration property management, vacancies, cap ex, etc.. Although I do manage my own properties, I sub out some repair work. 

Originally posted by @Ali Boone :

$100-150/door with zero down is free money and infinite returns!

 Agree with Ali. If you've accounted for everything and it comes out to $100/door, what are you waiting for? That's like saying... normally I work for $500/door... but now I'm getting free $100/door... what should I do?