is break even good enough? - Posted by townhouse117

Posted by townhouse117 on August 11, 2004 at 21:26:40:


yes, I am in for the long run, and I live within 10min drive from these rental townhouses, so I can manage them myself.

I have enough reserve to last more than 6 month.

is break even good enough? - Posted by townhouse117

Posted by townhouse117 on August 11, 2004 at 18:07:59:

I live in the up part of the Westcoast, not a steaming real estate market, but very warm as well for the last 6yrs or so.

Now, I am looking into getting a duplex, brand new construction, o.k. area, 100% financing. With conservative estimate, the rental income should cover the mortgage interest and tax – I am break even. But if consider the tax savings, I am having positive cash flow.

Is this good enough?

Thanks in advance.

Re: is break even good enough? - Posted by Gavin Wilkinson

Posted by Gavin Wilkinson on August 12, 2004 at 18:43:17:

I have a house that I bought when it was new in 1993. We lived in it for a short time, and then we moved and I rented it out. We never made much money from renting, but it more or less paid for itself. Each year, I got about $1500 worth of tax relief. Because it was new when we got it, our problems with maintenance were much less than some older houses I have bought since.

Well, now we are selling it and our profit should be about $200,000.

I see no problems with break even. But you should be in a position so if it is empty for 6 months or longer, you will not be worried or have problems. That could be reserves or it could be you have a good enough income or job that can cover for a long time.

Not break even - Posted by ken in sc

Posted by ken in sc on August 12, 2004 at 14:16:59:

I think this property will drain you financially more than you think. You should factor in at least 5% for vacancy and 10% for maintenance and reserves.

As an example, if rents were 1000 per month total and payment and tax are 1000 per month, you would lose 150/month on average. Not every month (typically we look at annual cash flows), but you will have vacancies and need to paint between tenants, etc. Since yours would be new the maintenance would be low for awhile, but not nothing.

There is nothing like negative cash flow to sour you as an investor, make you sell and give up on one of the best wealth building things you can do, leveraged RE. I suggest you keep looking until you can find a deal. It is rare to find a deal on new construction, so older properties may need to be looked at.


Re: is break even good enough? - Posted by john-Fl

Posted by john-Fl on August 11, 2004 at 20:03:44:

If you are planning on looking back 30 years from now and wondering if you did ok buying it you’ll probably think you it was a good decision.

If you are buying to pay next months bills, you’ll probably let out a Homer Simpson “Doh!”.

Can you afford the break even (negative if you count in misc. repairs, vacancies, marketing during vacancies) and possibly a couple months in case you get a dead beat tenant in there? If you could bump up rents on both sides this could kick off a small positive cashflow that would go up every year assuming you always raise rents…

Good luck!

Re: is break even good enough? - Posted by E.Eka

Posted by E.Eka on August 11, 2004 at 18:55:25:

What’s your strategy? It all depends on what you’re trying to accomplish. A buy and hold technique is for the long run. As long as you have enough reserves to deal with contingencies, you should be fine.