I have a property in Hamilton, Ont a duplex that generates +/- $450.00 positive cashflow and am in the process of buying a triplex in hamilton that generates just over $500.00 positive cashflow. Both the houses were purchased just over $200,000 and are not in deadbeat areas, or rented to low lifes. Is this positive cashflow considered good, great, average, or bad. What do you guys think and what do you fellow investors aim for monthly cash flow wise when considering a property
Positive Cashflow
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QUOTE (zorant @ Nov 17 2010, 01:11 PM) I have a property in Hamilton, Ont a duplex that generates +/- $450.00 positive cashflow and am in the process of buying a triplex in hamilton that generates just over $500.00 positive cashflow. Both the houses were purchased just over $200,000 and are not in deadbeat areas, or rented to low lifes. Is this positive cashflow considered good, great, average, or bad. What do you guys think and what do you fellow investors aim for monthly cash flow wise when considering a property
I would say its impossible to judge that without knowing the assumptions going into that calculation, as well as the financing used.
If that was with 0% down and a fixed rate mortgage, as well as good reserves for maintenance and vacancy, then I`d say it was great.
If that`s 50% down, and a variable rate mortgage at current lows, and only including tax, insurance, and mortgage payments, then I`d be much less excited.
Michael
I would say its impossible to judge that without knowing the assumptions going into that calculation, as well as the financing used.
If that was with 0% down and a fixed rate mortgage, as well as good reserves for maintenance and vacancy, then I`d say it was great.
If that`s 50% down, and a variable rate mortgage at current lows, and only including tax, insurance, and mortgage payments, then I`d be much less excited.
Michael
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Do you know how many investors would kill for a $500 per month cash flow from any property. Michael is right. Whether you have a good, great, or indifferent ROI depends on more details than you gave us.
Join REIN so that you can determine this for yourself, and what else you can do to improve that cash flow.
In the meantime, celebrate your positive cash flow.
Join REIN so that you can determine this for yourself, and what else you can do to improve that cash flow.
In the meantime, celebrate your positive cash flow.
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QUOTE (zorant @ Nov 17 2010, 02:11 PM) I have a property in Hamilton, Ont a duplex that generates +/- $450.00 positive cashflow and am in the process of buying a triplex in hamilton that generates just over $500.00 positive cashflow. Both the houses were purchased just over $200,000 and are not in deadbeat areas, or rented to low lifes. Is this positive cashflow considered good, great, average, or bad. What do you guys think and what do you fellow investors aim for monthly cash flow wise when considering a property
Assuming you count ALL costs (management, insurance, repairs) .. and assuming 75% to 80% leverage with a 4% mortgage at 25 year amortization it is EXCELLENT.
Using a 60% levered, 2.2% (prime minus 0.8) 35 year amortization mortgage with self-management and no repair allowance I`d say it is not so good !
Assuming you count ALL costs (management, insurance, repairs) .. and assuming 75% to 80% leverage with a 4% mortgage at 25 year amortization it is EXCELLENT.
Using a 60% levered, 2.2% (prime minus 0.8) 35 year amortization mortgage with self-management and no repair allowance I`d say it is not so good !
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$100/door/month starting is good, $450-$500 is great, $1000 is fantastic, $2000 is over the moon. Should I keep going?
However those numbers need to be more than simply a snapshot in time, they must be sustainable over the long term otherwise they are useless.
What numbers are you basing your cash flow on?
However those numbers need to be more than simply a snapshot in time, they must be sustainable over the long term otherwise they are useless.
What numbers are you basing your cash flow on?
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QUOTE (zorant @ Nov 17 2010, 03:11 PM) I have a property in Hamilton, Ont a duplex that generates +/- $450.00 positive cashflow and am in the process of buying a triplex in hamilton that generates just over $500.00 positive cashflow. Both the houses were purchased just over $200,000 and are not in deadbeat areas, or rented to low lifes. Is this positive cashflow considered good, great, average, or bad. What do you guys think and what do you fellow investors aim for monthly cash flow wise when considering a property
Hi,
Everyone`s comments are correct. Cashflow is really irrelevant without understanding the details and assumptions that have been made. Have you considered coming out to the Hamilton Mastermind Meeting. It is a great place to network and share information with other investors doing the same thing as you. Many of us are REIN Members however you don`t have to be. I believe I read somewhere that the next meeting is November 28th however if you email me through my profile page I can send you an invite.
Hi,
Everyone`s comments are correct. Cashflow is really irrelevant without understanding the details and assumptions that have been made. Have you considered coming out to the Hamilton Mastermind Meeting. It is a great place to network and share information with other investors doing the same thing as you. Many of us are REIN Members however you don`t have to be. I believe I read somewhere that the next meeting is November 28th however if you email me through my profile page I can send you an invite.
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You need to remember that cashflow, however you calculate it, is just one side of the coin.
The other is how much risk you are taking on in exchange for your cashflow or equity upside.
There are many risk factors in real estate...
Property risk - Is your property still functional for the tenant profile of today or is it growing obsolete? Has it been properly maintained by previous owners or not?
Tenant risk - What kind of demographic rents in your location and do they present any challenges that raise the likelihood of vacancy, arrears or damage?
municipal development risk - Are the infrastructure plans of your municipality aligned with your ownership intentions. Will there be any development in your community and if so will it be good or bad for you?
If you are high risk in any or all of these categories then you need a lot of cash flow. If you are low risk then you don`t need a lot of cash flow.
Some investors are ok to break even or even lose money if they have very little property risk and the property is in a very strong location for municipal development. Others want monthly income and manage the heck out of their properties so if it doesn`t cash flow really well they aren`t interested. If you want it both ways you will need to put a lot of money down and as such you will make a lower total return due to decreased leverage.
All depends on what kind of investor you are and what kind of portfolio you want to run.
The other is how much risk you are taking on in exchange for your cashflow or equity upside.
There are many risk factors in real estate...
Property risk - Is your property still functional for the tenant profile of today or is it growing obsolete? Has it been properly maintained by previous owners or not?
Tenant risk - What kind of demographic rents in your location and do they present any challenges that raise the likelihood of vacancy, arrears or damage?
municipal development risk - Are the infrastructure plans of your municipality aligned with your ownership intentions. Will there be any development in your community and if so will it be good or bad for you?
If you are high risk in any or all of these categories then you need a lot of cash flow. If you are low risk then you don`t need a lot of cash flow.
Some investors are ok to break even or even lose money if they have very little property risk and the property is in a very strong location for municipal development. Others want monthly income and manage the heck out of their properties so if it doesn`t cash flow really well they aren`t interested. If you want it both ways you will need to put a lot of money down and as such you will make a lower total return due to decreased leverage.
All depends on what kind of investor you are and what kind of portfolio you want to run.
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QUOTE (RedlineBrett @ Nov 18 2010, 08:49 AM) Property risk - Is your property still functional for the tenant profile of today or is it growing obsolete?
One factor that is important to consider with respect to this is how expensive/difficult it would be to retrofit. I`ve bought a couple of apartment style condos which didn`t have dishwashers in them. I was ripping out the kitchen`s anyway, but it`s not that hard to add a dishwasher if you have cabinet space by a sink.
On the other hand, some retro-fits are very difficult. It is very costly to make an addition to a house that is undersized, for example. Also, it can be basically impossible to install a washer/dryer in some units, as there is nowhere near an exterior wall (for a dryer vent) that also can be reached with water.
I looked at one property (a single family house) that was in such dilapidated condition I`m surprised it hadn`t had an occupancy order against it. The basement was cinder block walls over a dirt floor. When I did my valuation, I took the value of the lot, and subtracted the cost of removing the house. It was unrepairable, but it was currently tennanted, at a low price, to people who appeared to have substance abuse problems. You don`t want that type of cashflow.
Michael
One factor that is important to consider with respect to this is how expensive/difficult it would be to retrofit. I`ve bought a couple of apartment style condos which didn`t have dishwashers in them. I was ripping out the kitchen`s anyway, but it`s not that hard to add a dishwasher if you have cabinet space by a sink.
On the other hand, some retro-fits are very difficult. It is very costly to make an addition to a house that is undersized, for example. Also, it can be basically impossible to install a washer/dryer in some units, as there is nowhere near an exterior wall (for a dryer vent) that also can be reached with water.
I looked at one property (a single family house) that was in such dilapidated condition I`m surprised it hadn`t had an occupancy order against it. The basement was cinder block walls over a dirt floor. When I did my valuation, I took the value of the lot, and subtracted the cost of removing the house. It was unrepairable, but it was currently tennanted, at a low price, to people who appeared to have substance abuse problems. You don`t want that type of cashflow.
Michael
QUOTE I have a property in Hamilton, Ont a duplex that generates +/- $450.00 positive cashflow and am in the process of buying a triplex in hamilton that generates just over $500.00 positive cashflow. Both the houses were purchased just over $200,000 and are not in deadbeat areas, or rented to low lifes. Is this positive cashflow considered good, great, average, or bad. What do you guys think and what do you fellow investors aim for monthly cash flow wise when considering a property
HI,
Im a newbie and thanks for the information that you shared with us here..
It really help for me as a newbie in here..
HI,
Im a newbie and thanks for the information that you shared with us here..
It really help for me as a newbie in here..
A few more details.
The properties were purchased for 5% down, one of the homes is closer to the downtown core (but not actually in it) so I will attach to it the old cliche of being in an "up and coming neighbourhood" which I believe it is and the appreciation on the property is about 8%-10% per year over the last 3 years. The mortgage was a variable at something like 2.65% a few months ago. I do inlcude a vacancy allowance in my calculations to be safe, and I do manitain the property to ensure the longevity of my investment. The other home is in a very stable community which hasn`t seen much change as the City of Hamilton continues to focus on revitalizing the downtown core first then the leftovers will go east of the dt. The area is quite strong with home prices and both properties in excellent areas when it comes to amenities. (Malls, Grocery, Highway, Schools) are all near by to both houses whihc is a huge plus.
The properties were purchased for 5% down, one of the homes is closer to the downtown core (but not actually in it) so I will attach to it the old cliche of being in an "up and coming neighbourhood" which I believe it is and the appreciation on the property is about 8%-10% per year over the last 3 years. The mortgage was a variable at something like 2.65% a few months ago. I do inlcude a vacancy allowance in my calculations to be safe, and I do manitain the property to ensure the longevity of my investment. The other home is in a very stable community which hasn`t seen much change as the City of Hamilton continues to focus on revitalizing the downtown core first then the leftovers will go east of the dt. The area is quite strong with home prices and both properties in excellent areas when it comes to amenities. (Malls, Grocery, Highway, Schools) are all near by to both houses whihc is a huge plus.
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QUOTE (zorant @ Nov 19 2010, 05:45 AM) A few more details.
The properties were purchased for 5% down, one of the homes is closer to the downtown core (but not actually in it) so I will attach to it the old cliche of being in an "up and coming neighbourhood" which I believe it is and the appreciation on the property is about 8%-10% per year over the last 3 years. The mortgage was a variable at something like 2.65% a few months ago. I do inlcude a vacancy allowance in my calculations to be safe, and I do manitain the property to ensure the longevity of my investment. The other home is in a very stable community which hasn`t seen much change as the City of Hamilton continues to focus on revitalizing the downtown core first then the leftovers will go east of the dt. The area is quite strong with home prices and both properties in excellent areas when it comes to amenities. (Malls, Grocery, Highway, Schools) are all near by to both houses whihc is a huge plus.
sounds you have a winner here .. hang on to it .. financially and emotionally !!
Congratulations on a great buy !!
The properties were purchased for 5% down, one of the homes is closer to the downtown core (but not actually in it) so I will attach to it the old cliche of being in an "up and coming neighbourhood" which I believe it is and the appreciation on the property is about 8%-10% per year over the last 3 years. The mortgage was a variable at something like 2.65% a few months ago. I do inlcude a vacancy allowance in my calculations to be safe, and I do manitain the property to ensure the longevity of my investment. The other home is in a very stable community which hasn`t seen much change as the City of Hamilton continues to focus on revitalizing the downtown core first then the leftovers will go east of the dt. The area is quite strong with home prices and both properties in excellent areas when it comes to amenities. (Malls, Grocery, Highway, Schools) are all near by to both houses whihc is a huge plus.
sounds you have a winner here .. hang on to it .. financially and emotionally !!
Congratulations on a great buy !!
Congratulations... great Cash flow/door in my opinion.
I have invested in Barrie/New market and it`s a bit harder nowadays to find deals like that.
I am now looking at Hamilton as my next stop, would be be possible to email me your info so i can quickly get your feedback on few things in this area? my email is [email protected]
much appreciated and thx
Eddy
I have invested in Barrie/New market and it`s a bit harder nowadays to find deals like that.
I am now looking at Hamilton as my next stop, would be be possible to email me your info so i can quickly get your feedback on few things in this area? my email is [email protected]
much appreciated and thx
Eddy
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QUOTE (zorant @ Nov 19 2010, 07:45 AM) A few more details.
The properties were purchased for 5% down, one of the homes is closer to the downtown core (but not actually in it) so I will attach to it the old cliche of being in an "up and coming neighbourhood" which I believe it is and the appreciation on the property is about 8%-10% per year over the last 3 years. The mortgage was a variable at something like 2.65% a few months ago. I do inlcude a vacancy allowance in my calculations to be safe, and I do manitain the property to ensure the longevity of my investment. The other home is in a very stable community which hasn`t seen much change as the City of Hamilton continues to focus on revitalizing the downtown core first then the leftovers will go east of the dt. The area is quite strong with home prices and both properties in excellent areas when it comes to amenities. (Malls, Grocery, Highway, Schools) are all near by to both houses whihc is a huge plus.
Hi,
With 5% down, vacancy, PM, and R&M factored in. $500 per month sounds great. I invest in the same area and although I have fixed mortgages around 4% with zero down (HELOC) my cashflow is around $200 per month for a property in the same area. And I thought I got a good deal!
The properties were purchased for 5% down, one of the homes is closer to the downtown core (but not actually in it) so I will attach to it the old cliche of being in an "up and coming neighbourhood" which I believe it is and the appreciation on the property is about 8%-10% per year over the last 3 years. The mortgage was a variable at something like 2.65% a few months ago. I do inlcude a vacancy allowance in my calculations to be safe, and I do manitain the property to ensure the longevity of my investment. The other home is in a very stable community which hasn`t seen much change as the City of Hamilton continues to focus on revitalizing the downtown core first then the leftovers will go east of the dt. The area is quite strong with home prices and both properties in excellent areas when it comes to amenities. (Malls, Grocery, Highway, Schools) are all near by to both houses whihc is a huge plus.
Hi,
With 5% down, vacancy, PM, and R&M factored in. $500 per month sounds great. I invest in the same area and although I have fixed mortgages around 4% with zero down (HELOC) my cashflow is around $200 per month for a property in the same area. And I thought I got a good deal!
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zorant what percentage of your monthly income do you calculate goes to cover expenses/projected expenses.
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Hi Greg
Why ask the question when you already know what his answer is going to be
QUOTE (invst4profit @ Nov 20 2010, 06:03 PM) zorant what percentage of your monthly income do you calculate goes to cover expenses/projected expenses.
Why ask the question when you already know what his answer is going to be
QUOTE (invst4profit @ Nov 20 2010, 06:03 PM) zorant what percentage of your monthly income do you calculate goes to cover expenses/projected expenses.
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Because I don`t know.
Having stated a positive cash flow amount and then not indicating beyond a bare minimum of costs I am curious as to whether he has achieved a cash flow based on a snapshot in time or if he has a history and a projection into the future included in that number.
It is all well and good to say XXX dollars is a good cash flow but are we actually congratulating someone on a great investment or are we premature.
Hypothetical discussion or factual example?
Having stated a positive cash flow amount and then not indicating beyond a bare minimum of costs I am curious as to whether he has achieved a cash flow based on a snapshot in time or if he has a history and a projection into the future included in that number.
It is all well and good to say XXX dollars is a good cash flow but are we actually congratulating someone on a great investment or are we premature.
Hypothetical discussion or factual example?
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Snapshot in time I`ll guess....
And I`ll guess you knew the answer to that question too
A better question - Why do you keep dropping your avatar?
QUOTE (invst4profit @ Nov 21 2010, 07:01 PM) Because I don`t know.
Having stated a positive cash flow amount and then not indicating beyond a bare minimum of costs I am curious as to whether he has achieved a cash flow based on a snapshot in time or if he has a history and a projection into the future included in that number.
It is all well and good to say XXX dollars is a good cash flow but are we actually congratulating someone on a great investment or are we premature.
Hypothetical discussion or factual example?
And I`ll guess you knew the answer to that question too
A better question - Why do you keep dropping your avatar?
QUOTE (invst4profit @ Nov 21 2010, 07:01 PM) Because I don`t know.
Having stated a positive cash flow amount and then not indicating beyond a bare minimum of costs I am curious as to whether he has achieved a cash flow based on a snapshot in time or if he has a history and a projection into the future included in that number.
It is all well and good to say XXX dollars is a good cash flow but are we actually congratulating someone on a great investment or are we premature.
Hypothetical discussion or factual example?