How Much Should A Rental Property Cashflow?

[Hector Espinosa]

Hi All,

I would like to hear your comments about the following property, which I think, based on the analysis I made, seems to a be a potential good investment:

* Purchase Price: $98,000
* Monthly Cash Flow: $310
* Annual Cash Flow: $3731
* CoC ROI: 15.86%
* 5-year annualized return: 15.35% (with a profit if sold of $25K)

Also, what are some of the disadvantages of buying old houses? Is there any particular maintenance that is required in a regular basis?

Something I noticed that is making me doubt about making an official offer is that it seems to be in an area with high crime.  

Appreciate your comments.

[Mark Cruse]

Not enough details so most of the answers will be general. However, one concern with newbies is attempting to self-manage in high crime areas. High crime is sort of relative and varies from person to person. However, if it's truly one of those communities that has very high crime and difficult to attract any descent tenants, it can lead to disaster. If you don't understand the dynamics of these communities, it can sink you. Most in BP, from many responses I see do not have to ability to navigate this. If you don't fully understand screening or the culture, dealing with the wrong people will lead to mass turnover. Constantly evicting people is expensive for a variety of reason and sinks profit. In addition, the wrong people will destroy things and there could be high theft. Over and over, you can be constantly evicting and replacing appliances and doing major repairs. Now, if you are familiar with this type of investing it can be very lucrative and literally lead to vast wealth. 

You also have to take into considerations things like appreciation levels and the current condition. Suppose you have several high end, major repairs in the near future? That, combined with hidden repairs combined with self-managing a low income could all construe to thousands in losses. 

Good Luck. 

You should provide more details!