Cash flow to purchase price comparison

[Justin K.]

So everyone is looking for that elusive cash flow property that Brandon always talks about on the podcasts. That one property that you find that is a true cash cow that makes this time and effort all worth it.

But....what happens if you can't ever find it? I'm on my 100+ calculation on properties and to date I have found not a single property to cash flow more than $300 not including removal of expenses. To even get close I'm going to have to offer about half of the asking price which even my realtor said could be a slap in the face. 

Example with rough numbers

Asking- 80k

Offering-49k

Rent- 800 on a very very good day

P&I- 500 on 15yr note

Cash flow- $300 not taking out for capex, repairs, management, etc...

So after this is all said and done, what is the cash flow minimum you will do? I've seen more than a handful of people who ''won't even get out of bed for less tha $300 including expenses being taken out.'' 

As you can see, offering 49k on a asking price of 80k could be just a joke to the seller. So what are my options and what is the hives mindset on how much cash flow you will ''get out of bed for?"

[Alexander Felice]

Bed of Procrustes

You heard Brandon mention an oversimplification of deal profitability ($300/month) and now you're trying to fit your market into that metric, incorrect approach. Read what the market says is profitable, and decide if you want to invest there, maybe you don't

also, how realistic is $300/month cash flow, and at what risk level does it require. that's a HIGH benchmark for unit cashflow imo, but it also leaves out tons of calculations. Things don't cash flow the same every month, so is it $300 every month, or is that the average, is that a property with low vacancy and maintenance expense? Is the cash flow high only because it's not counting an inevitable large Capital expenditure ~3 years from now.

and cash flow is ALWAYS: gross - expense = NOI - debt service = CASH FLOW. So if you're not counting in expenses then it's not even close. This is why it's so important to look at the whole deal, know the market, and really understand what is viable and reasonable for these deals. Trying to cram all this information, against any random market, into some oversimplified and arbitrary profitability metric is not in your best interest.

learn what you market tells you is profitable, then move towards that. Also, not all markets work the same way, so you may have to look elsewhere.