How to evaluate a deal - principal payback?

[Brian Tremaine]

Hi All,

I'm questioning my approach after several decades, old dogs they say ....

I want to evaluate the purchase of a SFR. I normally account for my overall cash flow as rent minus expenses, where expenses are mortgage payment (prin & interest), insurance, taxes plus a reserve for miscellaneous.

In looking at a property near Hillo ($250k 3/2) with 20% down. This leads to a property I can rent for maybe $1200 but my cash-flow is negative at -$152. However, if I account for the fact I'm paying down principal  $263/mo my net is really a positive $111.

I already have a couple rentals near Hillo and I manage them myself from CA with tenants that are long-term stable.

Which way is the correct way to analyze this? Principal or not?

P.S. HI requires resident RE Brokers to manage short-term vacation rentals owned out-of-state but long-term non-vacation rentals don't fall under this rule.

Thanks for your advice

[Joe Villeneuve]

You're rationalizing to convince yourself this deal works.