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Updated almost 6 years ago on . Most recent reply

Fundamental wealth generating question with example
Hi Everyone, I'm in the self-educating-need-to-pull-trigger stage, planning out some paths towards investing in my first property. A little bit of overwhelm too. I have a question on the fundamental concept of generating wealth with investing, at least starting out. Let me describe a scenario for investing in my first property, a single family home. These are hypothetical numbers, but generally close I believe.
House price 350k
10% down, 35k. (I could put more down for a smaller loan, but a recent conversation with an investor suggested putting less down to have more cash on hand for rehab or buying other properties.)
Loan 315k, 3.75% for 30yrs, comes to $1,485.82/mo.
Taxes & insurance, estimating at $250/mo.
Total monthly expenses (not too mention setting aside for cap ex, vacancy, everything else) = $1735.81
Rent = $1500. (This is a rough educated guess on the area, it depends on the house, condition, location, etc.) Looking at a second tier city in the mid-south.
Cash flow = -$235.81. That's negative 235.
My question: How exactly am I making any money anywhere here? What am I missing? This makes no sense.
Thank you for any clarity to help me understand what the heck is going on here.
Most Popular Reply

@Christopher Davis pretty much no house that costs 350k and rents for 1500 will cash flow.
I recommend analyzing deals with 25 percent down and not look at anything that’s below the 1 percent rule. Ideally more like 1.25-1.5 percent rule. This will help you instantly determine if a deal is worth learning more about or not.
I could tell you immediately that 350k and 1500 rent will always be cash flow negative