All Forum Posts by: Lilly Olabre

Plenty of people have done this.  It happens.   You can always try to resale it as turnkey with tenant in place if the numbers are good.

Or just wait for prices to go up, or owner finance it to the tenant....lots of options.

@Lilly Olabre

One idea might be to hold it as an short term rental to cover your cost. Generally they get higher cash flow than long term rentals and better upkeep…..If Airbnb would work in that area with laws and regulations and demand. If you renovated it for a flip it’s probably a really nice house & should rent well. Plus you’d have easy access to be able to show the house in the future should you want to sell in a year or 2 for an actual profit.

 I would list the property and price it high enough to make money. It may feel too high, but in this market you may be surprised. My concerns is you will make more mistakes when renting, so your small loss could turn into a bigger loss. You can always list the property and rent it later if you don't get buyers. Sometimes selling for break-even is the best move on a first rental.

Becoming a landlord takes more education than flipping, so if you are headed that direction, be prepared to read and educate yourself. Your state has very tenant friendly laws, so make sure you fully understand what you are getting into.

Hi @Lilly Olabre  I would not recommend intentionally getting into a property with negative cash flow.  I know it's tempting to assume that values will keep increasing and interest and other expenses will remain constant, but that is not always the case.  The areas with the most rapid price increases recently are also the most likely to move downward if a correction comes along.  That being said, if your costs of rehab are higher than anticipated, you are looking at an unintentional cashflow position that hopefully will correct when rents increase.  Best of luck to you in this and all future deals

Plenty of people have done this.  It happens.   You can always try to resale it as turnkey with tenant in place if the numbers are good.

Or just wait for prices to go up, or owner finance it to the tenant....lots of options.

@Lilly Olabre @Tsipora Smith

Cash flow can be highly dependent on the percent down, interest rate, and amount allocated for Capex/maintenance/vacancy. This is why Cap Rate, CCR are frequently employed because it gives a broader picture on the return.

I invest in Austin and have bought 'cash flow negative' properties.  If it is losing $50 a month that is only $600 a year.  I am ok if I had to front that cost for a few years in the event the market took a nose dive.  I also expect that the market appreciation and growth will outpace that loss.  Just weigh out the risk vs reward and then determine if that fits in your comfort range. 

That's how I feel too....If I lose a little bit the first year then I'm OK with that.  I just wanted to see if I wait 1-2 years, if I'm able to get some money back...and I'm not sure who to ask first to help me out.

@Lilly Olabre it would all depend on your options. If a long-term rental won't cash flow positive, what about a short-term rental? Rent by the room? Mid-term rental (furnished 30+ days)? There are lots of different ways to make a property cash flow but it all depends on what you CAN do and what you WANT to do if you keep it. 

David Green mentions he does this often in areas known for high appreciation. I think it would have to depend on the area you're investing in. If it is not known for high appreciation like the Bay area, Austin Texas or etc., then I wouldn't think it's a good idea. Look at some other unique exit plans such as owner finance. This allows you to recoup money up front in the form of their down payment but also "sell" for a higher price than the current market will bear.