Calculating a rentals cash flow

I just tried it with something i was looking at.

explain please?, i don't understand the $170,000 part, actually all of it, 'im with you as you said "rent $1,200 and you could not have a mortgage over $140,000 @ 5.75% and blah, blah, blah, SULLY.

VERY interesting. Rents are not coupled to prices but D is working backwards from rents anyway.

He is basically saying that it will cash flow at a purchase price of X so I will pay at most X and if not then I wont buy.

exactly.

how do you all do it?

I start with FMV and purchase price then look at what the cash flow will be. Im not expecting much in the way of cash flow from SFRs in the very near term.

you buy first then figure out how much to rent it for?

the formula that your doing is working the deal BACKWARDS? SULLY.

yeah kinda....I figure out what it can rent for first. Then I figure what I will want/need to put down. Then I figure how much of a loan I can carry in order to cash flow.

So my dwn pymt plus my loan amount is what I offer.

No...no.. I know before I make an offer what it will rent for. But when I am deciding whether to make an offer I start with the purchase price not the rental rate.

A house that rents for $1200. You can't have a mortgage for anymore than 140k @ 5.75% (PITI)

So it makes it extreamly hard to find a cash flowing prop in my area.

How do you guys find out what a particular house will rent for?

I check the newspapers.. craigslist is also a resource for ASKING price.

A good realtor can also give you an idea.

Eventually, you will get a feel for certain areas of town.

Between papers and realtors you get an idea of what people are asking, like wmark1963 said. Realtors can also give you some actual real numbers on rentals they handle as well. The way I figured my first deal is that I ran the numbers to make an offer to profit on a resale, but I also know that current rents will cover my expenses if I have to go that route. So if you can, in this unstable market, having all bases covered is the best if you can find that deal. And you will, you just gotta look,look,look and look some more!!!!

Hey my buddy, the whole investing ideal is using leverage. If i had 30k, i would leverage it instead of using all in one property. You want to get a deal with no money down or use something with the same values. For example, ask to do repair yourself and cut the prized down or ask the owner to finance it for you.

As far as looking for cash flow, you want to do your calculation before you could make an offer. Keep in mind in order for you to make a cash flow works, you have to have at least 20% below the market value of the property. For example, if the house is appraised at 120k, you want to purchase the house at 90k. Given those figures, you have 30k equity on the property, and now you have room to work with.

Let say you bought the house at 90k, 30 years terms, 6.0 interest. Give these figures, your payment would be $540 per month, taxes probably around $150 per month, and insurance probably another $60 per month. Give these figures, your total monthly paymet would be $750.00. Knowing those figures, if you would rent the house for $1,000.00, your cash flow would be $250 per month. Not only that, you also have 30k equity on the property, and you could either hold on to it or sell it. I would take a deal like that any day of the week.

I hope this example help, good luck and happy investing!

Lloydsap