If you can't float a little negative cash flow every month then sure, don't do it.

Hi all,I live in FL (primary home), and we have a STR property (that our family uses a lot as well) in Banner Elk, NC.

I have posted recently about this property I am in the process of purchasing and compared to the numbers I see floating around on other posts, I feel this property is either too good to be true on returns, I am running the numbers wrong, or this property is a gold mine.Purchase Price $145,000Down Payment (20%) $29,000Mortgage (15yr/4.75%) $10,824Rents (6 units)Unit 1 - 4 = $675/moUnit 5 - $650/moUnit 6 - $600/moTotal Monthly Income = $3950Total Yearly Income = $47,400Expenses (Annually)Taxes - $2570Insurance - $1200Heat - $3200Electricity - $2600Trash - $600Water/Sewer - $1200Propane - $300Snow - $800Lawn - $800Vacancy - $3000Repairs - $3000Management - Zero as I will be managingMortgage - $10,824Total Expenses = $30,094Income $47,400 - Expenses $30,094 = $17,306CAP RATE after all expenses/debt services - 17,306 ÷ 145,000 = 11.9%CoC Return - 17,306 ÷ 29,000 = 59.6%Some may argue vacancies and repairs are low, but in my case, based on what I know and see with this property, I am confident in these numbers.

If I had bought a short term rate lock or had a floating loan I'd be very worried.   

I would choose real estate debt over bonds or other forms of debt because real estate floating-rate funds are easily obtainable and eliminate risk of rising interest rates in the future (unlike bonds where principle investment basis is lost if interest rates rise).

sh*t hits the fan (job loss, medical emergencies), are you able to make your car payment, student loan payment, and float a vacant rental property?

Many of the replies have been very informative.I would literally take  piece of paper draw a line in the middle and write down the pro's and cons of the following senario's since this is your first investment as a mental exercise; Keep all tenants, Keep one tenant, and the Band-aid approach which is to just remove them all.In our scenario we tried all three;We personally met with all tenants (one was vacant) and explained the raises in rents at a discount just to "float" the property until the spring.One tenant opted out immediately.

Third party loans can be floating or fixed, fully amortizing or balloon.

If I needed to pay for something immediately (e.g. plumbing issue flooding my building) I could easily float 20k on a credit card; right now I have about 40k of available credit.

Cash reserves is any liquid form of cash that can float you in an emergency.