Can't find cash flowing property. Is the market over-saturated?

[Derek Badgley]

Hello all,

I'm a first time home buyer looking for a duplex/triplex around Philadelphia, and I'm becoming very confused as to how many houses will leave me with a negative cash flow. It's becoming next to impossible to find a house that will net me a positive cash flow while also being located in a somewhat decent area. 

Take this property for example:

Asking price:  $230,000   Rents: $1,400

Expenses:

• P & I (based on 5% down): $1,100
• HO Insurance: $90
• Mortgage Insurance: $130
• Property Tax: $220
• Vacancy and Property Management: 10% of rents each
• Repairs: 1% of purchase price per year 

This leaves me with a whopping negative $615 per month, and a cap rate of 3.5%. I realize MLS numbers are typically high, but this seems ridiculous. I would have to offer 55% of the asking price to even have a positive cash flow.

This is a more extreme example, but almost no houses I have looked at have had positive cash flows, and I've been looking for months. Also, houses are still being sold. 

So, my question is: is the market really this over-saturated and seller-friendly, or am I doing something wrong? Are my estimates too conservative?

Any help would be very much appreciated. Thanks!

Derek