All Forum Posts by: Cody Z.

I was at an event and on my phone - Would like to close the books on this...

The original post was:

"Originally posted by @Vinh Huynh:

Hi BP,

I've just bought a property in Rancho Cucamonga in California and rent it out from last year. Since I live in Southern California, the price of real estate is kind of high. Therefore, although I've already put 25% for my down payment and the value of the house is about $500k , I've still got month negative cash flow. I rent it for $ 2,200 but my expense is around $2,500 ( included tax , property management fees, insurance and mortgage). I would like to listen to your advise how to make cashflow break even or become positive. Thank you"

-$300 Monthly Net Operating Loss / $2,500 Operating Expenses = 12%

That mean's, keeping all things constant, over 30 years you would have had 88% of an asset paid for you by someone else assuming no appreciation or tax benefit - Simply just the amount of cash towards an assessed value at a date in time.

That is not a bad investment - You used monetary leverage to then leverage someone else's time and income to pay for an asset in your portfolio. Again, I understand that some folks on here are looking for additional income streams to reduce their dependency on a job, etc... but the point remains that just because something does not cash flow does not mean that it is a bad investment. it just depends on your goals... 

Also, you can increase revenue or rent by using a short term rental model which will change the negative cash flow dilemma. As an example - If OP is already collecting $2,200 in gross rents on an annual basis, it would be highly unlikely that using the STR model would not be able to earn them positive cash flow. Also, expenses such as utilities could be shifted to the tenant or there could be other potential value adds such as an added storage space that could produce income on the property.

Yes, obviously assets that cash flow is ideal and will provide its owner with more options but positive cash flow or bust is not always possible for people starting out or in every market and does not take into account that the person owning will most likely be much better off having owned it and participated in the first place.

Good luck @Vinh Huynh