Would you pay full retail for excellent cash flow?

[Mike R.]

@Brandon Turner and others often talk about making sure you have cash flow AND equity going into every buy-and-hold deal. But are there any circumstances where you'd pay full retail if the cash flow is good enough?

There's a triplex in my area listed at $85,000. Rents are $2,390. 

Using the 50 percent rule to ballpark expenses, and a P&I payment of $315 ($68K loan, 30-year mortgage, 3.75 percent interest), that's $880 per month cash flow, or $292 per door. 

This triplex is listed at full retail; it's an area where houses do not appreciate; and there is probably some deferred maintenance. So that's three strikes against it. 

But, still ... does the cash flow make this house warrant a closer look?

Thanks,

Mike

[Ned Carey]

There is nothing wrong with paying full retain if the property meets your criteria. There is nothing wrong with buying for cash flow and not appreciation. That doesn't mean this is the right deal to do that. 

The condition and ongoing repairs may mean your expenses are greater than 50%. This is certainly worth a closer look. I would the tenant about the repairs that have or have not been done.