1% Rule Or Rent X 75%
I'm just wondering do most of you, when looking to purchase a property look at the 1% rule of total price or take the rent x75% - mortgage amount to see if it's positive flow? I own 1 condo that I paid 99,500 for it rents for 750 with 20% down it turns a positive flow of 50, I think most of you on this site would look down on that. I'm looking at doing another for the same price with 20% down before rates get to high to make any + cash flow, this one rents for 850. I f I take 850x75% it makes it 637.50 and the mortgage is 500. I just have trouble making numbers work like some other people but the appreciation is great here. I know it's turning into a run on but do any of you buy for appreciation and 50+ cash flow?
Not Really, an extra 50 bucks a month isn't worth a headach and buying a boiler if it lets go with my own money. I usually look for 200 or better a month
[addsig]
I will say it's 50 positive whne you take rent x 75% other wise it's + 135 a month it took 1 week to lock in a year lease. I feel the other would be the same way but would be +140 a month I'm also including hoa's and insurance into my positive numbers.
Better than doing this is to use the Proformanator in the Tools Section.
Click on MyTCI> My Tools > Proformanator
Click this link to an older topic posted in this Forum titled realistic cash flow?. Maybe the discussion thread will give you more insight to cash flow analysis and answer your question.
I make about 130,000 a year so i do need the right off's. I also have my real estate lic. so that help's as well. I appreciate that thread dave it was a good one. I would say that I ran the numbers through the proformnator and it said it was a go based on managing my own property. I also would say this area is appreciating at 10 % a year and the condo is less then 2 years old.
If your ordinary income is $130K, then you can only use $10K in net passive losses to offset your other income (passive loss allowance limitation rules make the passive loss allowance go to zero when your other income reaches $150K).
With such a minimal tax benefit, and almost no cash flow, you should do this deal only if you are extremely optimistic about future appreciation. One problem with breakeven cash flow rental condos is that any increase in the association dues could put you (deeply?) into negative territory with no compensating tax benefit.[ Edited by DaveT on Date 04/07/2004 ]
thank you for those pointers. the things behind the obvious is what can nail you after its to late. 8-)