How are you able to create positive CF in this high interest market?

[Zach Jones]

So I'm a fan of MF investing.. I've been looking at traditional financing with 25% down (it sucks I know but I've saved and don't know of better options currently) and I've even considered going FHA at 3% IF I could find a nice quadplex locally. The main issue with both of these plans, ESPECIALLY the FHA one, is the mortgages! With non primary rates over 8%, nothing seems to be able to create any kind of decent CF. I'm running numbers on properties with 120-150k out of pocket with ROIs in the 11/12 year range because most properties are CF around a couple hundred a month. I know I could refi eventually but I disagree with ever accepting negative CF and don't want to put myself in any compromising position. That being said, I know the big players that are into both SFH and MF aren't not buying due to the rates.. atleast I assume they're not. What can I do? What are you doing? How are you able to invest in this climate and make deals make sense? Also, I live i the central Florida area where we've got duplexes selling for around 4-500k.. Let me know your thoughts! I'd greatly appreciate it. Having a very hard time keeping a positive mindset toward RE investing with the current economic state and "whats to come".

PS.. for those in my area who look at out of state investing, I'm attempting to learn more about this subject and getting over the sketchiness of never seeing a property or physically being able to handle something if necessary BUT, if you are.  Where are you looking at investing and in what class of property? Hows the CF?? 

[Zachary Ware]

Hey Zach,

I think a lot of us are in the same boat here, more so in some markets than others. There are still some markets where you can find cash flow out there. I am looking outside of major cities in tertiary markets. As others have said, the goal of house hacking is to pay less than you would for rent. But even then, when you move out and put a tenant in your place, you want to be making money on the property, and I have not seen many properties in my market that fit that box. With interest rates and prices where they are, there are still a few ways that you can cash flow. 

Value Add is a huge part of all RE investing. Buying at a discount, and putting in some sweat equity is a great play but can also be tough when househacking. If you want to use most of the first-time homebuyer loans the property will need to be turnkey. I would look into an FHA 203k loan if you are wanting to do renovations.

Seller financing can also be a great option if rates are too high for values. You can negotiate the rate you are paying though these deals generally take more leg work to find. You will need to be sourcing deals off the street and looking for motivated sellers.