The $1,000 Per Month Cash Flow House

I want to build an image for you, but I am going to tear it down by the end of this article so be prepared.

If you’ve been looking at property, you may have seen people advertise a house with so much in cash flow per month and thought, “hey, that sounds like a pretty good amount of cash flow” and then you read more to discover their idea of cash flow and your idea are very, very different.

Here’s an example… if I ran an ad that claimed to have a property with $1,000 per month in cash flow after expenses for only $100,000 you might get pretty excited. You called on the house and asked some questions to find out how they were getting $1,000 cash flow.

The seller goes on to tell you that they pay about $200 per month is taxes and about $100 per month in insurance and they collect $1,300 per month rent. They happen to own the property without any debt, so they conclude it is a $1,000 per month cash flow property. Hmmmm… I’m not so sure about that on several levels.

First, if you have read any of my articles on deal analysis about how I believe deals should be analyzed you will see there are more to expenses than just taxes and insurance. There’s property management (whether you do it yourself or hire it out–there is still a cost), property maintenance (even for lease options and rent to owns), marketing costs to get and keep tenants and vacancy expenses including utilities while you are finding tenants. So, the $1,000 per month cash flow that is advertised is subjective at best.

Could you buy that house–even for all cash–and see a true $1,000 per month cash flow? No.

I see them all the time and you probably have too: properties advertised as great cash flow properties and when you actually look at them, yes they are cash flow properties: NEGATIVE cash flow properties.

Some properties that are offered for sale as cash flow properties are NOT good cash flow property prospects while some unsuspecting properties really are great ones. You need to be able to run your own numbers on them and determine it for yourself.

Until my next post,

James

P.S. For a very limited time you can download our real estate investing course on deal analysis called How To Analyze Deals Volume #2.

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