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Updated over 5 years ago, 03/31/2019

User Stats

70
Posts
10
Votes
Justin Miles
  • Flipper/Rehabber
  • Alpharetta, GA
10
Votes |
70
Posts

How to calculate cash flow in downturn

Justin Miles
  • Flipper/Rehabber
  • Alpharetta, GA
Posted

So I see people on here doing case studies calculating scope of work and calculating cash on cash return and monthly cash flow but I see these numbers are based on the loan terms and fixed and projected cost of maintenance and vacancy. It also uses it uses the current rent comps of comparable homes. My question is with the market peeking out is anybody looking at the possibility of 5,10,15 years from now the rental comps being much less, And having a negative impact on the cash flow and cash on cash return. Should there be another line item under potential costs factoring in a potentially reduced rate of cash flow based on a reduced amount of rentable price in a downturn. Does anybody use this type of thought process when purchasing a rental or is it just a thought that if the market does start to pull back that the property would just be liquidated. Also is there any type of historical data or chart that would show how the rentable cost per square foot would be negatively impacted per percentage of downturn of market value of the property?

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