Should I put money on deals to make them positive? - Posted by Al

Posted by Doug Pretorius on September 21, 2003 at 21:37:21:

You said you’re a cashflow investor and you also mention appreciation, so I assume you’re a landlord?

If cashflow is more important to you than appreciation, I highly recommend selling your properties with some form of owner financing.

Every market is different so you’ll need to explore what your market will bear. In mine I can comfortably get 20-30% above market rent for owner financing, which works out to about 3.5-4% higher interest than my underlying loan. That makes 100% financed deals cashflow without a problem, considering you also pass on much or all of your maintenance costs.

Should I put money on deals to make them positive? - Posted by Al

Posted by Al on September 21, 2003 at 20:41:26:


I’m a cashflow property investor. I have been focusing on acquiring cashflow positive properties (from day one) with no money down for the past couple of years. I have noticed that the properties have went up significantly therefore I feel that especially in my area it is getting really difficult to find properties with positive cashflow with no money down. I prefer not to trade off cashflow over appreciation.

Should I start putting some money out of my pocket on the deals to make them positive or should I still go with 100% financing (ie through creative financing or multiple loans) even though the result would be that for the first couple of years the property would have negative cashflow but internal rate of return would be higher? Also, what is the maximum amount of money should I put on the deal to make it positive (putting over 50% is too much, I think cause the cash on cash return would not be that great)?


Kind regards,

Choosing - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on September 21, 2003 at 22:46:22:


Should you live with negative cash flow because you are buying with no down or should you put enough down to create a positive cash flow? That is the question, right?

I don’t know the answer to that question. I’m also wondering, though, why you don’t have an answer. You’re the one that has to live with the decision.

You mention cash on cash and internal rate of return. So it sounds as though you know how to do the numbers and analyze investments. So, again it seems strange to me that you don’t have an answer here. Which measure is more important to you? If you look only at that measure, which course seems better?

Maybe you like the bragging rights of saying you did nothing down deals? What is that worth in dollars to you?

I’m sorry I can’t give you a definitive answer to your question. I’ve mulled it over and can’t decide what you should do.

Good InvestingRon Starr*