Opportunity cost and deal analysis

[Joseph Harr]

Say I have $35,000 in a HYSA that generates $150 per month in interest. If I invest that money into a rental property that breaks even, wouldn't I actually be cashflow negative $150 per month now that I'm not getting that interest from the HYSA anymore? At that point I'd just be banking on the loan paydown and hoping for appreciation. 

[Mitch Messer]

Quote from @Joseph Harr:

Say I have $35,000 in a HYSA that generates $150 per month in interest. If I invest that money into a rental property that breaks even, wouldn't I actually be cashflow negative $150 per month now that I'm not getting that interest from the HYSA anymore? At that point I'd just be banking on the loan paydown and hoping for appreciation. 

You're absolutely correct!

And, that's why I would BEG you not to buy a property that just "breaks even!"

Right now you're earning 5.14% interest on your money, and you pay income taxes on every bit of that $1800 per year.

Meanwhile, I won't even consider a rental property unless it pays me at least 10% cash-on-cash return and a minimum of $250+ in monthly cash flow. Plus, I get to deduct legit business expenses and also depreciation on my taxes. And, I can benefit from amortization and appreciation over the long term.

Best of all, my investment is inflation-protected: As overall prices go up, so do my rents and my property values.

Your HYSA simply can't compete with a quality rental property investment. (The fact that they have the nerve to call it a "High Yield Savings Account" is almost insulting! 😂)

Fortunately, you're here, so you probably already appreciate that real estate is the way to go!

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