If you have been following me then you know that I crunch numbers and have presented these spreadsheets before. Since I have been working in Summit County, it’s always been very difficult to achieve cash flow positive returns at the outset of a purchase with a conventional loan (80% LTV).
I provide my general rule that with cash, one can earn 2-3%, 50% LTV breaks even, and 80% LTV requires an owner to subsidize the property. Of course there are exceptions, but those guidelines are a good starting point.
That general rule analysis also doesn’t take into consideration appreciation or tax benefits. That is why we use the more in depth spreadsheet called the ten year APOD. When looking at a long term hold of a property, the return on investment is still quite good even though you may not be cash flowing huge profits.
Cash Flow With Different Rental Scenarios
I put together a couple of quick videos with updated numbers to illustrate two different concepts. The first is four different purchase and rental scenarios and how the monthly cash flow looks at the outset of the purchase depending on whether you pay cash or finance and whether you use a property management company or rent it on your own.
And when it’s time to sell your investment property, what is the best option for the proceeds? Many people decide to keep the money and just pay the capital gains tax. Others prefer to keep that wealth in real estate and do a 1031 exchange into a new investment property.
Interactive Cash Flow Map
I recently came across this AMAZING interactive map that shows areas in the country that generate the best cash flow from a real estate investment. If you think this is interesting, we can help you find the right agent in the right market to reinvest your proceeds. You can also always reinvest in the Summit County market where long term holds have been very lucrative for most owners.