Everything needed to start, can't find a cash flowing property.

[Chris Core]

Hello all. I am struggling to get a deal done. I got a PA for 300k/FHA loan. 720+ credit score, 75k cash, and good income. I considered starting out house hacking a MF, but it will only increase my monthly expenses, not lower them or provide cash flow. I'm looking primarily in the Upstate SC/ Huntsville AL area. Would love any tips/advice to move forward!

[Drew Sygit]

@Chris Core

Can’t find a rental property to cashflow?

You’re probably thinking you have to offer asking price – not true!

To determine what to offer on a rental property:

• Determine reasonable market rent, NOT the highest!
• Deduct NEW property taxes after you buy
• Deduct home insurance costs
• Deduct maintenance percentage, typically 10%
• Deduct vacancy+tenant nonperformance percentage
  (we recommend 5% for Class A, 10% Class B, 20% Class C, good luck with Class D)
• Deduct whatever dollar/percentage of cashflow you want

Now, what you have left over is the amount for debt service.

Enter it into a mortgage calculator, with current interest rate for an investment property, to determine your maximum mortgage amount.

Divide the mortgage amount by either 75% or 80%, depending on the required down payment percentage - this is your tentative price to offer.

If the property needs repairs, you'll want to deduct 110%-120% of the estimated repairs from this amount.

Be sure to also research the ARV and make sure it's 10-20% higher than your tentative purchase price.

As long as the ARV checks out, this is the purchase price to offer.

It is probably significantly below the asking price. Who cares? If you pay more, you won't meet your metrics and will probably have negative cashflow and/or equity.

You may have to make 10, 20 or even 100 offers to get one accepted at the price that meets your numbers.

This is what all investors did BEFORE the Great Real Estate Crash of 2008-2010.