Should I be disapointed with negative cash flow in Real Estate?

Question

I have bought properties in various states, but I do have negative cash flow. Not much, just some, but that still disapoints me. Should I be disapointed. Can any one provide me with comforting data, not just opinion?

Thanks

Answer 1

Don't forget the tax implications when calculating your cash flow. That's a pretty common omission.

As long as your properties are continuing to increase in value, that's were a significant portion of your gain will come from.

Keep in mind that real estate is the ultimate leveraged investment. You put down 5% - 20% and the bank puts down the rest but YOU get to claim the entire purchase price as your basis when you settle up with the tax man after you sell.

If you put $10k down on a $100k property and sell it in 5 years for $150k your ROI is 500% or 100% per annum on the $10k you put down. THAT'S how you make $$$ in real estate!

Feel any better now?

Answer 2

Perhaps, we are hearing a little regret in that you didn't give this more consideration before you purchased the property.

As always, it is going to depend on what your goals/objectives were/are. If you are looking for monthly income, then yes...you should be disappointed.

If you are in a fast appreciating area of the country (and when you find that right now, let me know) then you may trade off some cash flow for some wealth creation.

At the end of the day, I don't buy a house that I am not going to at least break even cash flow wise. Tax write off's are great, but you can't eat or pay bills with them. And while it sounds like you are able to financially afford the difference, what happens when an unforeseen circumstance arises (reality is what happens when we are busy planning our life)?

By and large, I set a goal of $200 positive cash flow a month, or I don't do the deal. And I do a small amount (depending on your place in the real estate investment world) deals a year. I buy about 15 properties a year. Not one of them is a negative cash flow.

If the properties have brought you great appreciation and you have held them for a sufficient time, consider selling them and investing in something that brings cash flow if that is your objective.

Answer 3

Well. I can help you on this one!. We purchased 21 units here in Pennsylvania since February. I am the director of the company. I would suggest to you, that you will have some of this your first few up to 5 years. So its not just you my friend. I can suggest to you on how to curb some of these expenses. I would suggest contacting your utility companies, if you are responsible for paying any and inquire on budget amounts. That is the same amount paid every month all year round. Kinda nice here with the Gas Company. Check your rents vs. the market trends. We were the lowest to rent from and will be working to increase many of our rents in 2007. Don't be afraid to shop for materials for repairs. We lowered our electric liability by 12% by switching to energy conservative light bulbs. There are so many things to look for. If you are responsible for utilities go to www.climatecrisis.net and look at the energy conservation section. It has some great FREE tips that save money-Good luck

Answer 4

No, you shouldn't be disappointed. It's part of the business...that's why it's called "INVESTING". If it was always a win/win, then everyone would be doing it! You win some, you lose some! And no, it's not an opinion, it's the fact!

Whenever you put money up for investment, it should be money you're also prepared to lose just as much as you would gaining! OK, that...that is MY opinion!

Answer 5

Negative cash flow in regard to renting out the real estate or what? We need more info.

What you deem as negative cash flow may not be/

Answer 6

I even have controlled multi relatives dwellings for 18 years now and that i like it with the selection featuring it. you would be waiting to make an extremely good month-to-month income as long as you recognize each thing bearing directly to the valuables in question. you could envision into the plumbing in and around the valuables, you prefer to envision appreciably into the drainage systems and the waste pass. very almost all the homes I even have controlled have had sewer matters. the only thank you to get previous those matters is to establish a quarterly sewer provider the place a expert comes out and snakes the sewer each 3 months. yet another significant element to look at is insulation interior the valuables. I purely moved out of a property that I had controlled that had no insulation everywhere and became into geared up interior the 60's interior the summertime it became into sweltering. yet another good element is to do a property inspection with the present proprietors or property managers so which you will pass into each and each unit and spot how issues have been saved up. Di bit be afraid to invite questions approximately turn around. you will surely need to appreciate how long your tenants have lived there. final yet not hire screening is so significant, you could reveal each and genuinely all of us tenant and not pass a bump with the intention to communicate because of the fact which you prefer to appreciate their economic historic previous the two with credits and leases. bear in mind condominium and or leases of any variety do have circumstances the place human beings pass out they are intrem places to stay often while all of us is leaving one domicile and going to purchase yet another. that's good to think of of seniors besides to hire to because of the fact they do ot prefer to pass lots and are often there for the long haul and extremely respectful to the valuables. wish a number of this information helps you and good success

Answer 7

Keep in mind...........

Times and markets are changing!

In California with average homes selling well over $500,000, a 20% decline is $100,000! In any market 'timing is everything'! So, could you afford a loss of 25% of your investment all because of poor timing???

This last up cycle was 10 years in many parts of the country. The downcycle now started in CA, Wash DC, NYC, Vegas and other hot areas of the past are all soft and getting softer.

From 1990 to 1996, the average home in San Diego lost 20% of its' value! The cycle we are now enterng looks like it could well exceed that on the downside!

With all the 100% financing, interest only loans, EZ qualifing etc...even a slight decline will cause many to be unable to sell for the amount due on their loans!

For some great 'insider' articles on the San Diego real estate market, which I beli
eve will apply to any of the hot real estate markets of the past five years.....visit:

http://www.brokerforyou.com/brokerforyou

http://www.downtown-san-diego-real-estate.com/san-diego-real-estate-article-index.htm

http://www.brokerforyou.com

http://www.san-diego-for-sale-by-owner.com

http://www.la-jolla-ca-del-mar-san-diego-real-estate-encinitas-california.us

http://www.brokerforyou.com/blogger/index.html

http://san-diego-coastal-real-estate.blogspot.com
http://sandiegofsbo.blogspot.com
http://downtown-san-diego-real-estate-views.blogspot.com
http://san-diego-coastal-real-estate.blogspot.com
http://sandiegofsbo.blogspot.com
http://downtown-san-diego-real-estate-views.blogspot.com
http://www.brokerforyou.com/san-diego-real-estate-sales.html
http://www.poway-real-estate.info
http://www.del-mar-real-estate.info
http://www.la-jolla-real-estate.info
http://www.los-angeles-real-estate-brokers.com
http://www.san-jose-real-estate-brokers.com
http://www.orange-county-real-estate-brokers.com
http://www.san-francisco-real-estate-brokers.com
http://www.sacramento-real-estate-broker.com

Answer 8

Dont be disappointed darling!!! It is worth it!!!