Here in the Chicago Suburbs, I've seen hundreds of homes and condos that would be great rentals. But even with super low-ball offers, the numbers don't crunch unless I start putting down 30% or more. Anyone living in a metro area encountering the same thing?

That's common in my market too, but I don't mind. I buy investment properties for the appreciation and figure if I have to spend a couple hundred a month to finance my investment, I'm okay with it. Let's say that the mortgage & expenses are $1300/month and you can only get $1000/month income. That's $300/month you're out of pocket which is $3600/year. If the market value of the property goes up $10,000 in that year, you've made a GREAT investment!

None of my rentals have ever cashflowed, but I've made $100's of thousands of dollars in appreciation. What seems to be the norm is that in a market with little appreciation (e.g. Kansas City), you'll cashflow beautifully on a monthly basis. In a market where appreciation is strong, you won't.

Jennifer

Thanks Jennifer. I have seen that approach too, and I know a lot of agents who do that because they want to invest, but they also want to manage their own properties and they don't want to travel an hour to get them to take care of things. I'm kind of leaning toward buying in one of those low-appreciation markets and renting, maybe with a management company.

I have "lower-priced" properties that are cash cows, and nicer properties that are not cashflowing.... I think having both kinds can help off set the overall cash flow.

My cash cows are in a part of town I wouldnt go at nights by myself and my nicer houses are those that are in good parts of town (one of which is my 1st home).

Fatmaxxv,
Do you do the property management yourself? How's business in Frisco, Texas? Very nice website, by the way...

I manage the properties myself. I only have 3. So, it's very do-able. I love the Frisco market. It's going strong, but right now, it sucks to be a seller.

Thanks for your comments on the website.

I manage my own properties and it's easy... but all mine are nicer places with great tenants. For me, the slum-lord places just aren't worth the hassle.

I have six rentals; some of which I haven't "visited" in years. With great tenants and a good handyman, my participation really isn't required often.

Jennifer

I own higher end rental properties and try to stay away from the lower end for resale purposes. I would consider none of them "cash cows" by any means. I've been hanging in there hoping appreciation will pay off in the end. For the most part I have had good tenants, and little turnover, but the monthly profits just are not there. There have been times I have questioned if it is worth it, with little to no profit being made on a monthly basis.

I think your onto something by looking outside of your area, I cant think of anything that would give you a more sour taste in your mouth towards RE investing than having to pay every month on top of having a vacancy for a month or two. Not that investing this way is wrong but in my mind you would be smarter to buy some higher cashflow properties to support the non cashflow properties.

I own 26 rentals right now and manage them myself along with selling real estate. Mine are in the "Ghetto" but for example I just bought a 3 unit for $36,000 (rents for $1500(, a 2 unit for $30,000 ($1,0000 and a decent single family for $18,500 (rents for $550). Having such inexpensive properties would allow room for a management company and still have enough cashflow to take care of more equitable and less cashflow properties.

I make my real money selling real estate and the rental money is a for retirement. If you chose to do so you could make up for the lack of equity potential in "ghetto properties" by buying at least 80%fmv, and then taking the extra cash that you make and contributing it to an IRA, or other real estate investments.

I advise all of the people who buy investments with me to try to create a self supporting ecosystem of rentals, so that they dont have to contribute any more money once the property has been purchased

Eric, you look like a busy guy (after checking out your blog), so how hands-on are you in your management of your units. Do you interview the tenant applicants? How often do you visit your rentals to check to see that your tenants are not damaging things or running them down? And last, how far away are you from your properties?

hey, I'm in Chicago suburbs too. Here is what one landlord investor told me. You can cashflow, but you have to buy right. In other words, if you pay full asking price, you won't cashflow, however, if you buy at a discount, and put some money down, then you are in business.

Example - buy 260K home for 200-220K, put 10% down and you'll break even on your monthly cashflow.

The beauty of buying low is that if you change your mind about being a landlord, you can sell right away and walk away with nice chunk of change.

If you really want cashflow, there is a place about 30-40 mins away from Chicago, called Hammond, IN (and surrounding)

You can buy 75K homes any time of the day and these rent for 700-800/mo may be more with Sec. 8.

The problem is that Lake County, IN decided to raise their property taxes for non-owner occupants which will kill the cashflow (you'll pay about 4-6K yearly).

Though, what I hear is that the high tax is hit or miss. In other words, some investor owners of 75K homes pay 2K/year and some pay close to 6K.

Or you may want to look at Michigan. However, what I found is that you can always buy, but can't always sell.

Good Real Estate markets are more forgiving than the not so good ones. (i.e. properties in Indiana hardly appreciated for the past several years, so if you bought them and now want to sell, you'll most likely have to loose some money, where as in Chicago appreciation has been steady)

What I also found is that true money is made by hard work of learning the market, learning the values and then taking a risk and jumping in.

If your looking for investments in the rental area, you should have an investment plan that you follow. Most real investors want/ require Cash Flow. With out actual Cash Flow the property may well NOT be an investment but a Speculation.

I have no problem with Speculation for knowledgeable investors but many are not and that makes it less of a Speculation, and Far from an investment and more like a gamble. Know the difference and know your market and potential investments role in that market, or you are just a gambler.

I agree with the high taxes and low appreciation of the older cities in Lake County, In. but just 10 miles south in the Schererville, Dyer and St.John area known as Tri-town have experienced decent gains in appreciation. Here is a link from a story idea I emailed the newspaper reporter which landed my office on the Sunday front page of the local newspaper. Great Publicity without spending a dime but that is another topic.


http://www.indianaeconomicdigest.net/main.asp?SectionID=31&SubSectionID=117&ArticleID=24442

ChiBurbsRealtor

Des Moines is a nice metro area to find cash flowing single family homes. our job market is dominated by the finical services industry. Many people are here only for a few years before job transfer takes them else where. So it might be a a bit easier to find the cash flow cup cake you are looking for. Rents have depreciated in the last three years. There are still lots of nice houses that would cash flow with a low down payment.
Give me a call if you want to check out Des Moines more in depth.

10% or 20% down is really all that is needed. if your willing to rehab, and then re-fi you could have one with zero down.

I sold one of our rental properties in December because of the negative cash flow. Here in So.Florida the property taxes are eating us alive! I figured, since I purchased it in 2003 right before the real estate boom & the property appreciated very well it was time to sell. I believe the property values will not increase much for the next few years so instead of having all the stress every year when I get the tax bill it was time to sell. I have another property, which use to be our primary residence, that once we lost the homestead taxes went from $3400 to $7500! Our tenants just left & it's getting hard to rent. It's a tough market out here. We have a condo under construction in downtown Miami, which we got at a great deal 3yrs ago which we would like to live & then rent out but with so many going up, we will have to feel the market. I want to start to purchase & flip or hold unto for about a year or so then sell. I am going to start looking to see if I can find a really good deal. They are expecting many foreclosures in our area due to high loans & people unable to pay them so we will see if that happens. There is a lot of talk about the property tax situation and we are all pushing government to do something to lower them. We all hope something will be done. It is hard for the investor here in my area.