All Forum Posts by: Supada L.

@Supada L. I do not hold rentals for this very reason.  I stick to the private lending side.  Forgive me for maybe stating something that has already been stated and asking questions that already have been asked...

~  After all operating expenses were calculated were you expecting a $100 per month cash flow?
~  What was your "turnkey" purchase price? (I assume it was turnkey because you named a company that you bought it from, therefore I am sure they sold it as "turnkey"). Also because it was turnkey, as well your statement "But there have been a lot of fixings and left me with negative cashflow." leaves me to assume you were expecting the property to have been inspected and refurbished of any lacking issues?
~  With you being out of state did you calculate the costs of a PM into your operating expenses?

I am terribly sorry this is the situation you find yourself in, however this is much more common than you may think.  People invest into "turnkey" rentals, with the expectation they will build a portfolio to live off of.  I don't know what your numbers are but $100 net cashflow seems REALLY low.  I guess this is why I prefer private lending.  If I have invested $100,000 into a loan and its a long term loan, to an investor like yourself who is building a portfolio, I may charge 7% annual... just on the interest (not including principal I am making $583.33 per month... and I, as the lender, am not assuming the liability nor responsibility of that asset (taxes, insurance, tenant issues, broken sewer pipes, water pipes breaking etc..). As well if its an amortized loan I am also reducing my exposure over time.  I think more investors who are looking for "cash flow" should at least consider private lending as an option.

My advice, sale ASAP, even if at a discount.  The ownership environment is changing, especially with incoming political actors, and long term hold expectations may be upended with radical shifts in protections for property owners

@Supada L. Just so you know, you are not the only one that this happened. Many years ago I bought a turnkey property, that for many years was in the red (not right away). Not only did I have negative cashflow but I also couldn't sell or refinance it (it was 2008). I would have to probably pay for someone to buy it. So to ease my pain, I tell myself, I'm paying into my future. 

It has appreciated quite a bit since. I never checked to see if I had put that money into the stock market, it would have had a similar return.

Best of luck

Supada There is ways to increase the revenue and decrease expenses, but it may be a little difficult to be new. IF it was me, it's still somewhat of a seller's market. I would just spruce up and look to sell it. Again not knowing the area that you are in, but most of the country is in a seller's market now.  

If you keep taken money out of your pocket to have someone live there would defeat the purpose for you to get into the market. 

DO NOT INVEST IN OUT OF STATE REAL ESTATE..... PLEEEEEEEEEEASE!!!! Hope this Helps and to ALL considering such As investment...(UNLESS you live in California #exodus)

Time to make lemonade from lemons. If this is your first property yo should be using your losses and other investor related expenses to decrease your tax bill back to profitability in the short term.

I had a similar experience on my first deal. I bought an old house that was purported to be "turnkey" - not through a turnkey provider but from a seller who performed some shoddy rehab work. We've had a few surprise big ticket repairs (electrical, plumbing) in the past couple years, and right now considering what to do about a tub that needs to be replaced.

Our cash flow is pretty thin (about $100/mo), and accounting for the repairs it is clearly negative cash flow. On the other hand, the property has appreciated since we bought it. 

A few of things to consider:

1) Cash flow is only one component of return. Appreciation and amortization are the big ones. 

2) Your loan is a dollar short position, and as the dollar loses value, the value of the debt does, too. Inflation-induced debt destruction, though, takes many years to play out.

3) Your tenant is paying down the loan for you.

4) Rents will rise with inflation, putting you in a better cash flow position over time.

As one of my mentors says "Most people feel foolish when buying rental properties" because in the short run, there is very little if any cash flow to justify the problems that come up. Your post is a great illustration of this.

First investments can be a lesson or an opportunity at times. I wouldn't let that deter you from future investments, just take this as a learning step and prepare better! A great way is to have an exit strategy going in. "Can I turn this into short term rental?" "Can I flip this if it doesn't cash flow?" "Should I rent by the room?" Those are some exit strategies. On multi family I am ok with $100 cash flow per door after expenses or "reserves". Property should pay for itself always. Single family homes I would personally do $200 per home after reserves are met. It also depends what kind of market you're in. Cyclical, hybrid or linear market. Rents and property values fluctuate. But the investment should make sense at purchase. I wouldn't expect greater than what you're getting. Anything better is a plus! Best of luck. 

@Ali Boone I've been looking at roofstock for a while now and wasn't aware of other companies out there. Not sure what the etiquette is...so I figured I'd reach out and ask you directly of what/who these other companies are?

I'm curious. When you bought the property, what was the calculated cash on cash return for year 1? I've been browsing Roofstock lately and I don't see a lot of "good" returns there within the 3-stars and above neighborhoods. I wonder what it showed when you bought it.