Is Positive Cash Flow A Bad Word?
With the California market being as hot as it is; it seems that as soon as you tell the RE agent you expect positive cash flow on your investement with as little down, I just see the expression on their face like he's one of those.
Let's face it, don't you think it is safe to assume that there are a lot of dreamers, wannabes, and recently laid off husband/wife teams who think mlms are actually credible business models for them, that have decided to make real estate their next career, they have just gotten done spending $5000 on some guru, read all the books and are now setting upon the local real estate market to make their fortune. They are going to try out all the new tricks they have learned and expect them all to work exactly like the gurus told them they would. Within 3 months they will be done with real estate and be looking at that other mlm they passed over for realestate 6 months ago.
Who do you think sees these people come and go week after week, month after month? Realtors. So I think the reaction you are getting from realtors is to be expected. Some of them are professinals who have been in their market for a long time and have seen what works and what doesn't. Some of them know what the outcome of the majority of the strategies will be even before their new client has decided to try and use it. In high priced markets it is difficult to get a property to cashflow when the ratio isn't correct for purchase price to average monthly rent, without reducing the purchase price significantly with large amounts of money down, or huge discounts.
Some of those realtors just might know what they are talking about.[ Edited by The-Rehabinator on Date 12/23/2003 ]
And, I must say, some realtors know nothing and are, at best, incompetent dolts.
I'm one of those folks who spent the money on a "guru." I'm also one of those folks who, as of June 30, '04, will no longer be working for anyone other than myself.
I've run into the similar reactions from realtors. I've continued to work with some since last March (when we began), and now they call me!
What's the difference between those folks who get into REI, leave and me? I'd have to answer drive, determination, and being sick and tired of being sick and tired of working for someone who has my financial future in their hand.
If they don't want to work with you, move on. There are realtors out there who know what is going on in your market.
So, that's my rant for the day.
Thanks, and have a merry Christmas!
OnTheWater
It's all a numbers game. You have to run your numbers and determine whether it is a good investment for you because even $1 + can be considered positive cash flow. It is how much you want that makes the difference. So nomatter what anyone else says, positive cash flow is achievable in any market - it just depends on how much you are REALISTICALLY looking to make and how much you can live with. Hope this helps
Also,
Positive cash flow is nothing more than making money on rentals. That's not "creative" in and of itself, it's what a lot of conservative investors do. They buy property, rent it out, and create positive cash flow.
Why don't you try telling them you are looking to purchase rentals and leave off "positive cash flow" on the front end. I don't understand why this would turn a realtor off, it's not like you said "flip".
But Realtors come a dime a dozen and you don't necessarily need one to purchase property.
I am getting my realtors license next month so I can do this more on my own terms and be an agent strictly for investors, especially those who think "creatively."
Maybe it's the "little to no money down" part that's turning them, that's sounds "rookie" or "guru student." And that's primarily up to the terms of your lender, not the real estate agent, unless she/he is a mortgage broker OR has access to a mortgage broker that you'll be working with for lending.
Otherwise the only thing they can do is to negotiate with the seller to pay all of your closing costs.
Dee [ Edited by DeeLewis on Date 12/23/2003 ]
I'm a little confused...
Aren't the REAL deals not on MLS? Shouldn't we be marketing directly to motivated sellers, and aren't most props on MLS by sellers who are not that motivated? And aren't most of the discounted properties on the MLS rehabs? And aren't the great deals pocket listings that just get fed to the rehabber who has been around for 25 years? That's the way it is in my market. I don't touch listed properties after viewing 30 of them, all mediocre deals at best, and all properties that I bird dogged to real rehabbers, who turned them all down.
Don't get me wrong, I will succeed, but I question the value of finding deals on MLS, and see the value in marketing privately, where less people are competing.
Am I missing something? Please email me at **Please See My Profile** if I am. To me, realtors are good for expired listings. I will pay them a referral fee when I do a deal marketed to those listings, so we both win.
I am open to learning. Thanks, Dave
If housing prices in your area are above the national average, as I imagine they are, you will have a difficult time finding a property that will cashflow with little down. Your best bet would be to look for a rehab in a part of town that is largely rentals.
Hi jpulido
I have had the same experience. Realtors, of course, are looking to make a sale. In CA, if you are looking for positive cash flow with a low down payment that makes it tough for them to sell to you.
Rehabinator, you are right of course, they probably do see this all the time. But from my experience I am guessing their negative reaction isn't because they are right, it is because they just aren't familiar with creative real estate. Most of the realtors I have spoken just can't get over the concept of "down payment + loan = real estate sale." They don't even want to think about other options. If you find one that does it might pay to hang on to them.
OntheWater, congratulations to you. Sounds like things have worked well for you. You are also right about the drive and determination aspect of success. I like to think I have those qualities too, but I haven't been able to get anywhere with real estate in CA. It is possible that the market here makes it a little more difficult. And I am not just making excuses, I believe it can be done here, and my lack of success is a result of my not finding the right system, not because it "can't be done in California."
I agree with DeeLewis. When I am asked about how much I would put down I respond "I could put down up to 25%." That 25% could be someone else's money, and I said I could, I didn't say I would.
And finally, as per davehays, the realtors that I have tried to work with have not produced any properties that have been worth pursing. I mean, a complete junker 3/1, needing $40K of work, in a medium part of town, FMV of $375K, sells with 8 offers for $310K. What can you do?
And a belated merry Christmas from me.