Positive Cash Flow on Rental Property

A rental question from a reader:

....do you have positive cash flow on all your rentals? The reason I ask is that my wife and I have 20% for a home and are not sure we would cover the mortgage of our condo if we decide to rent it out. The rent would be $50 to $100 less than the mortgage and I know you can take the tax loss.

We have positive cash flow on both our rentals. Both properties had 20% down and were originally financed with 80% 30 yr fixed rate mortgages (purchased in 2002 and 2006).

Do you need positive cash flow on rental properties to be profitable? To me thats a different discussion. Either way I would really need to crunch the numbers to understand what kind of return I would expect before I decide to purchase or convert a rental property. Another factor would be whether or not I would have positive cash flow.

Here is another post detailing an analysis of the performance of our first rental property.

Im not surprised your not achieving positive cash flow with a condo. I have found that non-trivial HOA dues (like those on condos) really hurt a rental investment analysis. Anyone have success with condo rentals?

Related in Rental Property:

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Why Invest in Rental Property (Mar 13, 2012) The real estate investing infomercials of the housing boom suggest that real estate could make you rich - the benefit of real estate being exponential returns of your investment. While I only have a few small real estate investments there...

Rental Property Investment Breakdown (Sep 27, 2011) Here is some overdue financial record keeping from our latest rental investment in August 2011. This breaks down all our out of pocket costs to purchase the property and get the 1st tenant in place. Out of Pocket Investment in...

Comments (3)

I live in rental property, and I'm positive that my cash flow is impoverishing me.

Posted by Terry | September 10, 2009 4:17 PM

We have a cash-flow positive rental property. This is a *huge* generalization, but if you can recoup 1% of the purchase cost monthly in gross rent, you will be cash flow positive. (excluding condos) We paid $54,900 for our rental and put 20% down. It rents for $695. The numbers work nice!

My parents had cash flow success with condos. The first one they bought for 75k, rented for 700, and took a 2nd mortgage on their house to purchase it "outright" if you will. They paid it off quickly. Their second one they picked up in a foreclosure sale for $30k same size condo, also rented for $700. They paid cash for that one. The second one obviously cash flowed a LOT more than the first one. Condo fees were reasonable. But clearly, the rough numbers worked for both of them on day one. They 1035'd them when they moved south into freestanding homes which are rarely if ever vacant.

We're saving to buy rental #2 for ourselves and if we hadn't sunk $6500 into a share of a family vacation home last month, we would be ready by now. But that was the right decision for us at the time- and we are saving like crazy to replenish that money!

Posted by danielle | September 11, 2009 9:16 AM

We currently have two rental properties and are considering a purchase of another that includes 7 units. We used to have a condo that did not do well at all. We sold it and put the money into a similarly priced (but cheaper!) single family and have done very well, with positive cash flow of about $7-8k per year. I would suggest selling the condo and using the equity elsewhere.

Posted by Todd @ Personal Finance Playbook | September 15, 2009 2:39 PM