How much postitive income?

[jhemlow]

Hi,

I have already received some great info from everyone here at REIN and I thank everyone for their replies. I have another question:

How much positive income on a property should I strive for? Is there a general guideline that people use?

I have a low income and will very little back up money so I figure that if my positive income on my first property is not high enough, things could get quite ugly if something breaks. I understand from Don`s book that it is prudent to save several months expenses in advance however this will take me a GREAT deal of time. Any advice surrounding this subject would be appreciated. I can see in the future how this program will get my to my well defined goals, I`m just having a heck of a time getting started.

The propery I have found could conservatively generate ~ $250/ month positive income (assuming full occupancy), many of my `non-rein` friends and supporters say it`s far too risky, I look forward to any replies!

Jason

 

[Thomas Beyer]

QUOTE (jhemlow @ May 1 2008, 03:01 PM) Hi,

I have already received some great info from everyone here at REIN and I thank everyone for their replies. I have another question:

How much positive income on a property should I strive for? Is there a general guideline that people use?

I have a low income and will very little back up money so I figure that if my positive income on my first property is not high enough, things could get quite ugly if something breaks. I understand from Don`s book that it is prudent to save several months expenses in advance however this will take me a GREAT deal of time. Any advice surrounding this subject would be appreciated. I can see in the future how this program will get my to my well defined goals, I`m just having a heck of a time getting started.

The propery I have found could conservatively generate ~ $250/ month positive income (assuming full occupancy), many of my `non-rein` friends and supporters say it`s far too risky, I look forward to any replies!

Jason

ANYTHING above 0 is good.

Positive cash-flow is VERY hard these days .. especially in year 1 !!

If you are at 0 for 10 years .. your mortgage is down probably 20% .. and values up 20% or likely more .. and assuming 20% down you have doubled or tripled or quadrupled your money !!

aim for a positive 0 after realistic vacancies, expenses, taxes and fees.. and YOU WILL LOOK LIKE A GENIUS IN 5 YEARS !!

 

[JohnS]

QUOTE (thomasbeyer2000 @ May 1 2008, 05:51 PM) ANYTHING above 0 is good.

Positive cash-flow is VERY hard these days .. especially in year 1 !!

If you are at 0 for 10 years .. your mortgage is down probably 20% .. and values up 20% or likely more .. and assuming 20% down you have doubled or tripled or quadrupled your money !!

aim for a positive 0 after realistic vacancies, expenses, taxes and fees.. and YOU WILL LOOK LIKE A GENIUS IN 5 YEARS !!


Although I normally agree with most of Thomas`s opinions, we either disagree a bit here, or I`m adding some caveats to his.

In some cities, that are still excellent ones to invest in, cashflow can be hard to get. (Edmonton springs to mind.) However, in other cities, cashflow is much easier to get. It all depends on the province you`re investing in, the city, its economic future, and your plan.
Depending on these factors, I know a lot of people that use $100 a door as a ballpark figure. So, if this is for a single family home and you`re getting $250, you`re doing well (depending on the future of the town, of course.) If you`re getting $250 total for a 20 unit apartment building....then it`s not as great.

However, I agree with Thomas in that the majority of the money to be made is in the capital appreciation of the property and not the monthly cashflow, so as long as you`re break-even or a bit ahead, and the property is in a good city, you should do ok.

Have a good one!

JohnS

 

[jhemlow]

Okay thanks for the great replies so far, this has always been the one thing about REIN that didn`t quite make sense to me. It seems there is a great deal of emphasis on positive income when as you said, the appreciation is the real key. This is why we do such exhaustive due diligence before jumping on a property. It seems the only way I will be able to get into this game without waiting many many years is to invest in a property that will have marginal (but deffinetely positive) monthly cashflow.

 

[ChrisDavies]

If your properties have negative cash flow then the banks will shut off the taps much sooner, so focus on cash flow and the appreciation will follow.

 

[Thomas Beyer]

QUOTE (JohnS @ May 1 2008, 05:15 PM) ... that use $100 a door as a ballpark figure. ...

JohnS

Interesting, that is a figure we AIM for also .. $100/door/month .. VERY HARD TO GET in year 1 .. easier in year 2 to 5 .. but if you deduct investment in upgrades for future rent increases you are down to 0 usually ..

2 ways to make money: spend NOTHING on upgrades and cash-flow .. but run the asset into the ground .. OR: spend some $s on upgrades, get rents up, and thus the property value .. and then sell or better re-finance ..

We chose path 2 and have done VERY well over the last 8+ years .. but I have seen MANY a slumlord who has many ugly buildings .. and that works also .. but that is why we called our approach "Prestigious Properties" .. as opposed to "Sloppy Properties" .. but a no-spending path works as well .. and is the better path if cash-flow is your (only) goal !

 

[invst4profit]

I have also always used $100/month/door as my bench mark.
You say you have a property that cash flows $250 per month.
Is that after calculating (or assuming) 50% of rental income on
expences or before?
What all have you included in your expense calculations?