The biggest question from newbie and some not so newbie investors, “Is This A Good Deal”. The answer of course is; it depends.

What makes a deal good is we don’t know till the end of the project and it’s stabilized. The ideal project is one that you have no money in the deal at the end and it cash flows. That means theoretically a free house. See this example:

Buy a property for $150K, rehab it for 50K, the forced ARV is $260K and cash flows $300/month.

That’s a great buy. Your cash on cash return is infinite. Your tenant is paying down your mortgage, covering your property taxes and insurance and you’re putting money in your pocket. Even if you had $5000 stuck in and you took the cash flow and put it towards the money stuck in, you are 100% no money in, in 18 months. That’s still a great deal.

You can still have a great deal even if the infinite return is delayed. I see these deals are becoming more apparent again in certain markets with the real estate market making its own correction. It takes patience to buy at the right number and may require in an out of state purchase if your market is just not conducive to this concept.

What have you been seeing lately or what have you experienced over the last few years?