There’s gotta be folks here who does REI in metropolitan areas like new york, san diego, seattle, etc. How do you stay cashflow positive with such high priced houses? With 350K-400K houses in Seattle, there’s no way I could stay positive if I do 5% downpayment. Any body out there who has rental property in the big city and still stay cashflow positive with 5% or less downpayment? Is this possible at all?
Based on the comments I’ve heard from vets so far are:
look elsewhere
don’t do it
I’m gambling
don’t speculate on appreciation
For 4), isn’t REI all speculation anyway? You’re speculating that you’d get constatnt rental at speculated $amount for speculated duration of time.
I guess I now understand why everyone’s not in REI. A lot of things has to be rights. It’s really discouraging to not be able to jump in…
OK. Let’s say you did get the 400k house for 320k. you would be still cashflow negative, wouldn’t you be? The avgs rental for 350-400K house in Seattle is around $1600-$1800. That’s still cashflow negative.
If you wanted to stay cashflow positive with 5% down, you have to find a house that costs around $250k, which is next to impossible in Seattle.
If you do find a 400k house for 320k and it does NOT cashflow, then wholesale it. Sale it to another investor that can make it cash flow. Or sale it retail if possible. Flip it for same quickcash. As REO says, “keep the best, wholesale the rest.” Or something to that effect.
sure wholesaling works, but how often do you find houses 20% off the market value? So what I’m hearing is that there’s no way to be cashflow positive in the 250K houses in seattle. sorry if I sound a bit negative. It looks like I’ll have to look elsewhere…
I live in SoCal so I hear exactly what you are saying. You could certainly look elsewhere. However, don’t stop looking where you are. It may not be as easy to find a deal, but they are out there. Don’t look on the typical listing sites like Realtor.com. You won’t find many deals there.
You best bet is to find the deal yourself. In a market where good deals are hard to find it requires more work and lots of creativity. I looked in WA for some deals. The deals I saw were of little interest because as you say, they won’t cash flow. Since I am not living in the area, I didn’t pursue the idea.
Cash flow properties usually don’t “drop” into your lap. You have to pull them in. I would venture to say that any successful investor on this site (multiple properties and actually living on REI) is advertising and letting the leads come to them vs. the other way around.
like carlittle, I’m in SoCal as well and definately agree that its a really, really tough process (to find pos cash flow) that requires a lot of hunting. With that said, it was hard a few years back when prices were cheaper and tougher today since 1)rents have risen slower than values and 2)more people have read the RE section in the Sunday apper and think their piece of crap house is a palace worth $1M ( found to this to be particular true with some FSBO sellers).
I have found that I have got the best deals from older people who motivated to sell, who probably underpiced there properties a bit and tended to have rented under-market (common mistake of long-time landlords).
I have looked in many other areas and finding pos cash flow is easier, but still requires work. Morover areas that will give cashflow tend to be very low apreciating areas with softer rental markets. Thus in my mind, the cash flow has to be better/stronger to justify the investment.
In the end, I think RE invest requires a lot more patience (to look for deals) and discipline (to stick to your investment criteria) than most realize. In terms of finding deals, I think (IMHO) the keys are to know your market(s) and look on a regular basis (the best deals are gone in days)
Ok. so I’m not alone. How do I find the properties that will cash flow? I’m not asking to spoon feed me, but can anyone provide general direction on how to find these deals? Do I look in the newspaper, hire some specialized real estate agents, or what?
In Texas, we have so many foreclosures that we’re doing a lot of short sales. Some of them can be ok deals since you try to get the bank to discount the property as much as possible. Most of the investors are buying at the courthouse or on short sales for ok cashflow deals. Package deals are also pretty popular because you can usually discount each property 5-30% depending on the size and condition.
The Greater Austin market is still hot, but it’s tough finding good deals. Cash offers and quick closes really help.