Negative Cash Flow: Help me analyze this deal

1 Reply

View report

I have tried to analyze a few deals now, and I know that I will need to analyze a lot more before the right one comes along. But, I just wanted to check and see first if I am on the right track. Either I have chosen only really bad deals or I am inputting the data incorrectly because cash flow has been coming up negative. Could someone please help me out here?

Make sure your rent amount is accurate.  $875/month for a 200k home seems pretty low.  If your rent amount is off, then it will mess up all of your other calculations.  

You are buying a home for 199, putting in 5k worth of repairs, how is the ARV still only 199? That doesn't make sense, what is the purpose of doing these repairs? Can the home be rented without doing these repairs?

Is it normal in your area for the tenant to pay for items such as water/garbage?  That is $70/month that in many geographic locations is the responsibility of the tenant to pay for, and not the landlord.  

Are property taxes really $295/month?  At that rate property taxes eat up a whopping 33% of your total income.  This seems very out of line.  Either your rent amount should be much higher, or taxes should be lower.  Either that or your geographic area is simply taxed WAY too much and is not investor friendly.

Is insurance really 160/month?  That seems excessively high to me.  Typically rental insurance is cheaper than owner occupied insurance since you don't need to worry about paying insurance on the personal belongings.  I tend to go with the cheaper insurance providers with a higher deductible since insurance is a scam anyway and they will attempt to weasel out of paying for anything.  So you end up paying for deductibles year after year and get nothing, or very little in return.  Have you ever once used your car insurance policy to pay for an accident?  -probably not, which is the same concept.

Double check all of your numbers, because at 295 taxes, 160 insurance and 70 utilities, you would never cashflow even if you didn't have a mortgage if the rent is only 875.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here