I'm interested to know how many people have IPs that are 100% financed at current interest rates and are yielding sufficient rent, after costs, to service the interest payments? In other words, they're returning positive cashflow.
The reason I ask is that with my first two IP I paid more than I should (an expensive lesson that will not be repeated) and so we are subsidising the income slightly. But as I look around for other potential purchases I am using a spreadsheet to model and project cashflow, return on equity etc. I'm finding that very few properties I look at seem to have the potential for +CF, even assuming I could negotiate a heavily discount price and add value, given current market rentals.
Of course by putting more equity in the properties from the start I could reduce interest payments to achieve +CF but that ties up capital that could be used for other purchases, renovations etc. I would prefer to continue financing at 100% if I can.
I'm fairly certain the spreadsheet is sound in its calculations so what am I missing here?
Cheers
Simon
The reason I ask is that with my first two IP I paid more than I should (an expensive lesson that will not be repeated) and so we are subsidising the income slightly. But as I look around for other potential purchases I am using a spreadsheet to model and project cashflow, return on equity etc. I'm finding that very few properties I look at seem to have the potential for +CF, even assuming I could negotiate a heavily discount price and add value, given current market rentals.
Of course by putting more equity in the properties from the start I could reduce interest payments to achieve +CF but that ties up capital that could be used for other purchases, renovations etc. I would prefer to continue financing at 100% if I can.
I'm fairly certain the spreadsheet is sound in its calculations so what am I missing here?
Cheers
Simon
Comment