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Real Estate Investing for Cash Flow

Investment Real Estate now generates positive cash flow for the first time in many years. In the past, Real Estate Investments would often only generate positive cash flow with substantial down payments of 50% or more, or with “negative amortization” or “interest only” loans that were fraught with risk.

Today, competitive Investor Financing requires full income documentation and a minimum of 25% down, but very competitive fixed rate loans are available. We have been quoting rates recently from about 5.5% to 6.0%. So we will use 5.75% for our analysis.

For a $200,000 Property with 25% down, the numbers will look like this:

PRICE: $200,000
DOWN: $ 50,000
LOAN: $150,000

P&I: $ 875 (Assumes 5.75% rate at a cost One Point)
Prop. Taxes: $ 208 (Assumes 1.25% rate)
Insurance: $ 60
TOTAL: $1,143.

With this payment and the current rental market, it is very likely that this property will have positive cash flow in most California markets.

If you are trying to estimate a payment for a client, use this “$10,000 incremental payment multiplier”. Assume the loan will be 75% of the purchase price, and then for every $10,000 of loan amount, the payment will increase by about $58 if the rate is 5.75%..

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167