|
Prev Blog << |
Making the Deal |
Next Blog >> |
 |
Category: Current Grade: A Total Views: 728 Member Comments: 1 |
Posted on: 09/11/2007 Posted by: kidrosey Blog Points: 182 View all blogs >> |
I have been reading a book on real estate finance (aptly titled Real Estate Finance). It really only covers the basics of conventional financing though and it doesn't really get into any type of creative financing. What I really am interested in knowing is: when you buy a multi-unit complex, how do you structure a deal so that you will have a positive cash flow every month as opposed to the tenants making just the monthly mortgage for you and you just breaking even (especially if you are owner-occupant)?
Now I'm not just going to solicit answers to this without trying to answer myself. I've always been one to seek a solution myself and then ask others for their opinions and suggestions. It's helps me learn.
Anyways, one way that keeps coming to my mind is to buy a property that is listed at or below market value and then find tenants that are willing to pay above market value.
I know this seems to be a rather obvious formula, but is it the only way? If anyone has any additional thoughts or insights, please comment here or send me a message. Thanks in advance.
Now I'm not just going to solicit answers to this without trying to answer myself. I've always been one to seek a solution myself and then ask others for their opinions and suggestions. It's helps me learn.
Anyways, one way that keeps coming to my mind is to buy a property that is listed at or below market value and then find tenants that are willing to pay above market value.
I know this seems to be a rather obvious formula, but is it the only way? If anyone has any additional thoughts or insights, please comment here or send me a message. Thanks in advance.
If you are buying a deal Straight out, make sure you can cash flow. Go around the area and collect for rent phone #'s. Call and get details such as - beds, baths, size, condition and rent amount.
Figure in the middle of whats comparable. Then figure out your payment on your financing. Make sure you are least clearing 30% profit. In simple terms - if your payment is $700 your rents would need to be $1000.
If you are buying creatively - use the same formula.
If you are not cash flowing monthly - its not worth it. There are expenses associated with owning a property, and if it costs you money to own a house that is supposed to be a investment - its not a good investment.
Sean