Is this a good time to get into the real estate investment arena?

Question

I am looking into a 4 unit home that shows positive cash flow. Yet the upfront deposit and downpayment may not make my true cash flow as positive. Any suggestions?

Answer 1

Real estate investments such as rental properties don't really produce cash flow unless you have enough money to put down over 20% of the home cost. On the other hand, I know a few people who are willing to break even as long as they hold on to their properties for 5 or more years while the property value increases. There are negative sides of managing your own property:

1) Finding quality tenants
2) Having to pay for damages past the value of the security deposit
3)Collecting rent and evicting delinquent tenants
4) Matianince of the home

I would recomend looking for a property management company that manages single properties, most will manage your property for 15 percent of the gross monthly rent.

Another thing you want to look for when investing in a rental property is the amount of turn around in the area. You want to invest in a property at a location where people will plan to stay for at least a few years. Avoiding tenant turnaround will help save you money in renovation, general cleaning and turn around costs.

A four bedroom house has some advantages, becuase your tenants will most likely be planning on staying a while and are more likely to be stable, paying clients. On the other hand, the larger the rental property, the longer it will take you to find a renter. I would search online for other rental homes in the area, if there are a lot, I would stay away from that market-- too much competition and prices start dropping.

If this is your first investment, I would recoment starting on a property that needs some cosmetic work but is otherwise functionally and mechanically apt. I bought my own first house that way, I kept low-balling offers until I got a house at a great price. But it was in horrible shape. I spent about 15 grand fixing it up, and now it is worth a ton more than I bought it for. Oh, and not to mention I got to renovate the home to MY standards and prefrences. If you are willing to put in the elbow grease and have the income to support that, I would recomend doing that first, then selling the home, making a profit and finding a rental afterwards.

The best advice I could give you is to watch the trends and read the real estate section of your paper everyday, and look back to see what the trends have been in the area, that will give you the ability to make sound, educated judgements regarding your real estate investments. I wish you the best of luck!

Answer 2

Most rental properties do not have positive cash flow from the start. You have to put down some capital first in order to start seeing positive cash flow. Most investors hold onto the investment for about 5-10 years. Year by year your rental income should increase and within the holding period the value of the property will appreciate. To maximize your cash flow you should take out an interest only loan.

Answer 3

In my past experience I would only by a rental property if my rent received would at least cover my mortgage payment.

If I was buying I 4 unit home, and 3 of the 4 rents covered my expenses on the home and mortgage, it would be a good investment for me.

In the current housing market, houses are selling cheaper because of the current foreclosure rate. Eventually, the market will turn around and house prices will go back up. So my answer to you is yes, but make sure you can afford it and have some monet set a side for repairs.

Answer 4

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Answer 5

Tenants and toilets...who needs em:)
Chasing rent and worrying about maintaining property eats up your time. Can't make money when your playing landlord.

As an investor...Time is Money. The best way to make money is to Get in and Get Out as quickly as possible.

If you are unsure about which deals are best and what exits work the fastest, you should think about getting a mentor/coach. They invest for a living and have already made the mistakes so you don't have to. I would recommend trying to get Chris Harris from: http://scbuyshouses.com
They have excellent mentoring and joint venture partnership programs.