Cash flow (confused newbee)

  Hello everyone! :)

I have been thinking and trying to do the research online. I mean I was trying to determine the average home price in area and then find out for how much that house would rent for. Of course adding taxes etc. I live in CA, so I think I do not have to explain that I was looking at out of state properties for cash flow or at least break even. I know appreciation is desirable too, but for now I can not figer out even the first thing- will the rent cover the expences or not? I really do not know if what I am doing is the best way. What out of state investors do to determine if the property will cash flow? Lets say I have never been in another state and have no contacts in other states. Should I start contacting real estate agents in different states and ask them if they work with investors, ask for refs, comps etc. What would you do? For me it does not matter where to buy property as long as it cash flows. Any advices are welcome and please correct me if I am getting the whole cash flow idea wrong. :banghead:
Thank you very much in advance!

For us cah flow was money left over (net profits) after mortgage, taxes, utilities, insurance, and estimated repairs. We get the most cash flow from our 4 & 5 unit buildings vs our rental house. Our first 4 plex netted us $1200 cash flow right from the start and that was just with 5%down (which was unheard of). You can read all about it in my blog (link below)

We too live in So California. To be honest, I don’t think it is a good time to invest. Prices are so high right now and new owners are not making cash flows unless they make large down payments. One of our buildings is in an association of 22 four unit buildings. We bought that property on a short sale for $220,000 9 years ago. The original owner paid $380,000. One of the buildings was listed for sale a month ago for $725,000. It sold for $765,000!! We don’t know how these new owners can possibly make a cash flow.

Another concern for me in California is the prices ARE high. We bought at the right time and made huge equity profits. If you buy now, you might no see this. There may even be a slight decline, no on really knows. I would worry about a senario like I mentioned above. People bought high (like now) and had to sell short just to get out ov their cash cows.

I know I rambled on too much, sorry. I’m not saying money can’t be made in California, I just think it’s harder to buy the way we did with very little down.

Good luck

Diana, thank you very much for your reply. But the reason I posted the topic is that I am NOT looking to invest in CA. Without huge equity to start I know it is impossible to just break even.
I just read and hear people say properties in many states can cash flow, but how do I start doing my home work?
P.S. Read your story. VERY impresiive!!! Congratulations on your success!!!

Get a hold of some birddogs in several states, tell them what you what and have them do the leg work for you.

Thank you! I was thinking about that. Let me clarify:
so the birddogs would find props with equity in them
inform me about rents in that area for the props that they find?
What am I missing?
How and where should I start looking for those birddogs ?

This is what I would do…to the upper left hand side of the post is a bird-dogging wholesaling forum (I’m sure you’re aware of that LOL) As you know we can’t advertise on the forums but decide which states you’re interested in investing and start looking for birddoggers in that state…and then PM them…or you can run ads in newspapers where you’re interested, contact rei groups where you’re interested in investing, have them pass the word…lots of things…

Thank you, now I am more aware that I can purchase props out of state with birddogs and get a good deal.
Still my other question is how would I determine at what states to look for cash flow? Should I make a list of median prices in MSA and get the average rents for each of them and do the math? Of course compare 2 beds with 2 beds. I have already eliminated CA, FL, New York and Hawaii. So I am left with the rest of states. I might sound silly, but this is the approach I have been thinking about. Is it a good one or there are better and more effective.
Thank you.

If you’re planning on renting go online and get statwide statistics for states you’re thinking of…look for % of rentals verus owner. If it’s higher and the prices are in your ball park start looking for bird dogs or advertising there.

I know people invest out of state. I wouldn’t simply because my husband and I do the work ourselves. We won’t invest in properties more than 20 miles from us.

Good luck and thanks for the complement

IMHO, you need to do the financial analysis yourself by getting info from the seller/seller’s agent and searching the Internet. If you rely on other people, you are setting yourself up to buy a poential money pit. Where will they be when you have to shovel in $$$ every month to make the mortage payment??? What if they pull rent numbers from a better area than your property??

Is it a lot of work? Yes, but you will quickly find that you can screen out deals quickly and then if something looks even half way reasonable, then spend more time to refine rent, expenses numbers, ect.

Also, with info from the seller, beware of “projected” numbers. Especially, if the place is only partial rented.

Beware of sellers and seller agents who tell you “its positive cash flow”, but fail to provide detailed numbers. If its been a rental, the seller should have these numbers handy since they would come straigh off of SchE in their tax return. My analysis/experience tells me >50% of these so-called cash-positive places are money suckers. A lot fo people throw around the term “cash positive” to mean the mortage is less the gross rent (which is of course, wrong!!!)

That’s my thoughts based upon my experience having invested locally and out of state for a few years.

Mike in SoCalif