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Yes! I have many negative cashflow properties!

(2010-08-04 07:14:33) 下一个
I have posted several articles b4 for this questions, please do a search to find out details

here is a brief summary:

whether or not to buy this investment property, should be decided based on (at least to me)

1) profitablity
2) liquidity
3) solvency
4) stress testing results

for example, I bought a property at 50k, I borrowed a 10 year term loan on this property at 100k 5%, so my monthly mortgage payment is 1085.26, tax+hoa+insurance monthly is 120, so total ongoing money on balance sheet is 1205.26

then I sold this property at owner refinance for 100k. My loan to the buyer is 30 years term loan at the rate of 7.9%, the buyer(tenant) has to pay me monthly payment for 726.81 plus the escrow tax+hoa+insurance monthly: 120

so my cashflow on my monthly balance sheet is

-1085.26 - 120 + 726.81 + 120 = - 358.46

See, my cashflow is negative every month!

Is this a good investment? Sure it is according to my expectation, but maybe not for you.

I know some people cannot see just a little bit further than the so called cash flow, because they don't have a solid overall liquidity, solvency, credibility and safety. Since this is a negative cashflow, some people cannot handle it.

But for me, it's a big profitablity ($50k upfront profit, plus after 10 years, $ 726.81 profit every month for 20 years!

for liquidity, it cashed out $100k at the beginning, what else i need to expect more?

for solvency, I have huge cash in the bank for long term fixed expenses, my overall assets far exceed the liabilities.

Well, this is just my experience, different people have different styles. You'd better develope your own.

I still remember Miat's strategy is all about cashflow. If you use his stratedy, you have to put more downpayment to make your cash flow positive. This might work for me, but definitely not my style of investment.

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