Rent-wise, comps are about $2500/mo, which is just above break-even, but it's almost 18 years before it will be paid off.From an income tax-perspective, we are in the 24% bracket and both properties at this point mostly offset the principal gains with only ~$250/yr due for our KM condo and ~$100/yr due (estimated) for our Santee condo.Now that I am really attempting to understand these numbers for the first time, I see that we have a ton of equity that is producing zero cash flow.

Hard money on a flip reminds me of people who use margins to purchase shorts, the return can be spectacular, or you can lose all your principal fairly easily. 

You'll still pay 3% of the principal each time doing it, but you can wipe out the first 3 credit card's debt.

I copied this from a search on real estate ROE:Return on Equity (ROE) ratio calculates the amount of return generated in a particular year on the total amount of equity invested (or trapped) in a property.The amount invested (or denominator) is calculated as the initial investment (down payment) plus the entire increase in net property’s appreciation and the entire decrease in outstanding loan balance incurred prior to the year the ratio is being calculated.Cash-on-Cash Return is a similar calculation, but since the two draw backs of the traditional Cash-on-Cash Return are that property appreciation and principal debt payments are not factored into the formula, Return on Equity adds these two components to the traditional Cash-on-Cash Return calculation.A property’s net equity increase is calculated by determining what the “Net Sale Proceeds after Taxes” would be at the beginning of a year, and then again at the end of the year.

The houses are cash flow generative so I would be able to pay down a higher than normal principal % every year. 

. $1,500 rent - $120 vacancy (1 month/year) - $70 insurance (guess) - $280 taxes (assuming 1.75% city/county) - $150 maintenance ( guessing 10%) -  $150 management (10%) - $780 mortgage interest and principal (20% down and 4.5%) = -$50   NEGATIVE CASH FLOW!!!!!!. 

Hi,I was looking at a company to called Investment Revenue Realty based out of Canada and run by principal Cynthia Aasen. 

@Fred W Johnson, sure, you could start paying out the deferred principal once the 20 year amortized principal is paid out early (based on what your Lender told you). 

The zoning key words you will want to look for are "Accessory Dwelling" or "Principal Building".

@Joseph Ziolkowski, yes, vacancy and cap ex are included, as well as maintenance, property management and property tax and insurance (but not Principal and Interest cost).Nobody can know for sure what its expenses will be in future, hence the ballpark "50% Rule", which can be fairly close in the case of middle-priced, middle-aged, middle-neighborhood type properties.