rental purchases and resulting cashflow

[Andy V.]

I am totally stoked about rentals, having recently come to feel that they will be my main focus, accepting the fact that when a nice flip comes my way, I'd take advantage of it. Atleast that's the way I felt after 9 podcasts and countless hours reading posts here on Bigger Pockets. I'm looking at three properties being considered for BRRRR opportunties right now. After crunching the numbers on the Bigger Pockets calculator, they just barely cashflow! I used 10% for vacancy, 10% for repairs, $200 for Capex, plus taxes, insurance, and 8% for management fees. I thought I might manage my rentals myself for a few years but wanted to set them up for conversion to PM by others whenever I wanted to. In any event, buying $40 - $60K properties that need about $15 - $20K in repairs and have ARV's of $90 - $110,000, such that I need none of my own money down (using private lending for the initial purchase), yields a positive cash flow of barely more than $100! It hardly seems worth it if you excude appreciation as a benefit you can count on. How do you do it? How and where do you find properties that cash flow $375 +/mo. like I read about?

[Michael Boyer]

Andy,

Positive cash flow right out of the box is a good thing.... 

Why? 

Rents go up over time in most areas (the nice part of inflation) and as a savvy landlord with a long term fixed mortgage and a DIY guy, you will keep your costs flat (though some like insurance and maybe trash or any utilities will creep up)...

Maybe a story would help. 

When I bought my fourplex just a decade ago, I rented 2br for 800-900 (depending if the unit had a yard). I thought, wow, when I can get $1,000 a unit, I will be set.... but that may take forever...

Then a unit would turn over or a lease would renew a year or two later, and I would study close the Craigslist listings and Property Manager websites (primary sources in my area for listings), finding the same size units in my neighborhood (usually the same street), and I would raise rents 25 bucks here, 50 bucks there to catch up with the market.... Rinse, repeat....

This summer, a remodeled 4 plex just like mine a couple of doors down rented and filled all four 2 Bedroom units for $1,500. 

In addition to the rents going up, the property value has increased, too. Both 4 plexes for sale in town now are asking (I know, they may not get it, but fun to dream), 600K  and I got in for about 60% of that amount and have paid down about 1/2 the mortgage.

So you get the idea... Buy and hold is not a one to three month deal but the ultimate long game... of decades.. rents and property values go up, mortgage debt goes down.....

Best of luck!