How do you make money in an area where mortgage payment is higher than rent?

Question

For example a 3 bedroom usually goes for about $1400 but mortgages are atleast $2000 and up....

Answer 1

You have to live in what you can afford. If you cannot afford a mortgage for $2,000 a month, then you need to consider renting and saving any extra money you have. The greater down payment you can put on a home, the less your payment will be each month.

Answer 2

You can make money but that will be when you sell.

Unless you can afford to feed the alligator, it's not a wise idea to invest in property with a negative cash flow.

Invest in areas where there is a shortage of rental properties. This drives up rents, typically to levels higher than mortgage payments. Ideally you want to select an area where there is little potential for further development. The last thing you want is for some developer to come in and start building nice apartment complexes and saturating the market with relatively cheap rentals!

Answer 3

Refinance. Talk to a mortgage broker about all of your options. You may be able to lower your mortgage payments. Look at interest only mortgages or mortgages ammortized over a period of time longer than the 30 years.

Just make sure your rate is fixed. Interest rates are only going up and you don't want to be trapped in an ARM. That's just asking for a whole new set of problems.

Answer 4

You have received some very good, general answers; however, I'm thinking you are looking for something specific - because based on your question, you want to make money!!!! You are going to have to target a specific area that will generate substantial appreciation enough to justify the negative cash flow - and this can certainly be done. I research real estate dynamics at the zip-code level. Let's take zip code 32808 which is located in east Orlando, Florida. You can buy a home, on average, for $275,000. You are not going to rent the home for much more than $2000 per month, and your mortgage will be around $2500 per month - you are now in a $500 per month negative cash flow situation. Let's take a 1 year scenario. Over the first year, the cash flow cost you $6000 - however, based on AVERAGE appreciation in the area over the past 5 years, your $275,000 home is now worth $316,000. You've made $41,000 minus your $6000 cost which comes to a net return of $35,000 - is that the kind of money you are looking to make in real estate in 1 year???

Answer 5

Assume 3 to 5% annuall appreciation and your actual downpayment. The 3 to 5% is actually far higher since your only outlay is the downpayment and costs plus 600 per month less the deduction for mortgage interest. It may sound like more, but even in this situation you often do well in the end.

On the other hand, I look for positive cash flow in investments and thats getting very hard to find nowdays.

Answer 6

Depending on your type of employment (Self Will not work) you have the write off of the interest and taxes. Figure as an example that for every 3 dollars you spend you get a buck back. You are also betting on raising appreciation to offset this as well. Buy for the long haul 5 years plus.

Answer 7

Don't attempt to make money that way. You've got a good start realizing that's bad, but you'll just have to be more creative. Sorry.

Answer 8

Re-locate elsewhere??