What do you mean they cash flow very well but the price is high? Do you mean you can buy similar properties cheaper and they will cash flow even better?
In that case buy the cheaper properties that cash flow better.
Or do you mean they are the Boardwalk and Park Place of your local Monopoly board and therefore the price and rent are both high?
In my opinion you can’t go wrong buying pos cash flow. The boom never ends until prices get so inflated properties go into negative cash flow.
As long as the local economy is not sinking to a 3d world level.
A seller has 2x 5 unit residential properties in NY that he’s packaging at 1.41 mil. They cash flow very well, 26% COC ROI, however the asking price is very high, pretty much top dollar considering the surrounding area. My investing goal is, for the most part, monthly income but I’m afraid of not having an exit strategy unless there is another future investor looking at simply cash flow to sell to. Also, it seems to me that the property values in the area are stabilizing and that raises my fear. But if you look at stricly the cash flow it still works great. What are your opinions on deals like this?
Gil,
I’d double and triple check the expenses on this one. If it’s priced at the very top of the market and has this type of cash on cash return, I’d be looking for what the seller’s leaving out.
Plus your other warning signs, like prices stabelizing, etc. sends up more red flags to me.
Last thing you want is to have to rely on the greater fool theory to find a buyer.
I’d be looking for problem properties that you can turn around and get them at a discount.
Good luck,
Bill