About small amounts of cash flow...

[Hilary Hill]

I'm sorry if this is a stupid question, but I'm just really starting to research this stuff and some things don't make sense to me... Ok, I've read in several places that multi family units are what many aim to buy. But then someone will say they bought a multi family, rehabbed it, rented it out, but the cash flow is only $200 a month. Why would you go through so much trouble for only $200 a month? Is it because you're also paying down the mortgage on the property so 15 years from now you'll own it and can sell it for profit? Explain it to me like I'm 5, but I'm not getting out of bed for $200 a month. I'm sure I'm missing something here....? thanks!

[Jason D.]

@Hilary Hill I'll explain using a BRRRR I'm a few weeks away from completing. Paid $55k for it, put $55k in renovations and holding costs, so I'm all in at $110k. Home will be worth roughly $150k and will rent for $1600/month. I'm going to refinance at 75% ARV so I'll get back $112k, meaning that I'll pay the loan off, get my down payment back, and have spent $0 in the end for the property. I'll cash flow about $225 after all expenses and reserves, and have $38k in equity. So essentially for free, I have a house with $38k in equity, $225 per month imcome in perpetuity, and get all of the tax benefits associated with owning property. That's a pretty good deal, if you ask me, and that's why I get up for $200 per month.