Cash Flow Zone

[loewencc]

Hi all! I am Corene Loewen (27) a new REIN member just starting to figure out how this all works!
Quick Start Edmonton was amazing, my mind is still trying to soak it all up!
I live in High River, AB and as it made the TOP 10 I have chosen to focus on the town and build my portfolio here.
I owned 2 revenue properties prior to joining and plan to increase that in the near future.
however, I am finding that not many of the properties for sale currently (mls / homerent / /high River times / we list etc..) fit into the HOT ZONE. I have researched rent costs in the area to be sure I am using realistic figures, but they are all ending up in the 4 - 5% range!! Now what??
I know that the properties I already own are around 6-7% range and they do have cash flow, but I am trying to implement what I am learning through REIN and the Quick Start Program.
Can anyone explain this or give some insight into my situation??
With the market being a little soft I was expecting better ratios... Is there a more in depth formula? That takes into account $ down etc...?
Also any other REIN members from High River out there?? I would love to connect!

 

[NickStewart]

QUOTE (loewencc @ Oct 22 2007, 03:10 PM) Hi all! I am Corene Loewen (27) a new REIN member just starting to figure out how this all works!
Quick Start Edmonton was amazing, my mind is still trying to soak it all up!
I live in High River, AB and as it made the TOP 10 I have chosen to focus on the town and build my portfolio here.
I owned 2 revenue properties prior to joining and plan to increase that in the near future.
however, I am finding that not many of the properties for sale currently (mls / homerent / /high River times / we list etc..) fit into the HOT ZONE. I have researched rent costs in the area to be sure I am using realistic figures, but they are all ending up in the 4 - 5% range!! Now what??
I know that the properties I already own are around 6-7% range and they do have cash flow, but I am trying to implement what I am learning through REIN and the Quick Start Program.
Can anyone explain this or give some insight into my situation??
With the market being a little soft I was expecting better ratios... Is there a more in depth formula? That takes into account $ down etc...?
Also any other REIN members from High River out there?? I would love to connect!

Hi Corene,

I had this same issue when I joined last year when it was still called the "10% Solution".

I found the only way to accurately figure out what the real numbers are was to go through a full analysis, taking into account condo fees, actual insurance costs, etc. Start with estimated rent at the top and subtract everything you think you will realistically spend per month (PI payment, Tax payment, maintenance fee, vacancy rate, insurance, management fee, etc.), and then see what the final number is.

Once I started doing that, I realized that there are properties out there that didn`t fit the "solution" but actually will cash flow.

It takes a little more time than the simple cash flow zone calculation, but you`ll find some properties that work.

Nick

 

[marcp]

There`s no quick and magic answer...

My very first property (before REIN) was 5%. I took some negative cashflow (accounting for the payments on my LOC), but sold after just over a year and made a 75K profit. I would hardly call this a "bad" deal...

I analyzed two properties that a friend wants to sell to me today, and they both sit at about 6% - but they`ll probably be closer to 8% next year if I can increase the rents.

Russell gave a good presentation this year about maximizing cash flow. In a nutshell, one approach was to buy two or three properties that would cashflow negative for a year, and then sell one or two and pay down the mortgage of the third one to a point where it would cashflow positive.

I`m not sure if these cashflow strategy handouts are available to download for new REIN members. Check with Russell, he put a lot of effort into them, and they`re well worth a read.

We could discuss this in the Calgary mastermind group - I recognized your post in that thread!

 

[loewencc]

Thanks for the Feedback Marc... its all a numbers game and I`ll have to keep shuffeling them until I get it right!
I would love to get a hold of Russell`s info...which meeting was that?
I`ve only been a member since August.
Heard any specific details on the Calgary Mastermind Group??
Thanks
Corene

 

[marcp]

It was either the July or August meeting.

No one has replied to my email yet regarding the mastermind group. maybe I`ll be eating supper alone

 

[loewencc]

Did you propose a date and location to meet?

 

[marcp]

I sent an email to your Shaw address,with a map. Wendy`s on Brentwood Rd, from 5:00 to 6:00pm, just before the REIN meeting, for those who can make it. The location is 5 minutes from the Red and White club.

 

[FayWong]

QUOTE (marcp @ Oct 22 2007, 09:42 PM) I sent an email to your Shaw address,with a map. Wendy`s on Brentwood Rd, from 5:00 to 6:00pm, just before the REIN meeting, for those who can make it. The location is 5 minutes from the Red and White club.Can anyone come?

 

[marcp]

I`m going to use Michael Losier`s advice and just be there, and "allow" it to happen.