Buying A class properties with no/low cash flow

[Sid Yanamala]

I have been trying to find an answer to this situation for very long time and finally thought this is the best place to get answers. 

          I am from Charlotte NC and in my and couple of near by communities there are lot of properties on sale and I know they are very good properties. But the only issue with them is they do not work for buy and hold strategy and they produce no or very low cash flow if you analyze them with all the expenses.  

           All these homes were built between 2005 to 2007 time frame. I really would like to buy these properties as they are near to where I am staying and the schools also very good. Market is too hot now and prices are like more than $100 per square feet some times near $150. 

          Just wondering what kind of strategy will be good for investors considering these facts? I know just do not buy these homes and find better homes else where is nice strategy. But would really like to know what you will do if you are in this situation.

[Curtis Waters]

Sid,

I consider real estate investing as a business.  If you bought properties with little or no cash flow, you will be funding your business for an unknown period of time.  Your only upside would be appreciation, which any impact to the economy would easily wipe out and take you negative.  Of course, a savvy business owner wouldn't consider this approach.

A better strategy would be an informed decision to purchase a property that is older but has its major systems rehabbed as required (electric, plumbing, HVAC, roof).  The benchmarks I use ensure that the property cash flows and returns at least a 10% return annually on your total investment.  You can contact me directly for the website containing the calculator I use to decide homes to purchase myself.  You are fortunate that the metro Charlotte market has property bargains now - but prices are on the rise!   

You will find others who promote a 1% strategy (if home costs $150K then must rent for $1500/mo), but my strategy is based on return and risk.  You can still find many low cost homes in the Charlotte market - the key is to have the home inspected by a NC home inspector who understands your goals and works with investors, then consider your total investment in your return calculations.