4 Markets With The Highest Rent

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Cash flow real estate is hard to find. In almost any big city, making financial freedom-producing cash flow is becoming a pipe dream. But that doesn’t mean there still aren’t pockets of cash flow throughout the United States; you just need to know where to find them. Thankfully, we’ve done the work for you, putting together a short list of cash-flowing real estate markets with the highest rents and lowest home prices.

In this episode, we’re talking about cold, hard cash flow. More interested in building equity but still want some passive income on the side? We share four different strategies ANY investor can use to find cash-flowing rental properties in ANY market. Looking for a new market? You’re in luck; we’ve got a list of four top cash-flowing real estate markets—but the real question is, would WE invest in them?

Finally, we’ll share our takes on whether or not cash flow is crucial, especially as it becomes harder to find. You’ll see why Kathy and Henry have stopped caring so much about mailbox money and are focusing on something much more important when building wealth.

Dave:

Hey everyone, welcome to On the Market. I’m your host, Dave Meyer, and today we’re going to be wading into one of the most heated conversations in real estate, which is, can you even find cashflow in the first place these days? And where can you actually find cashflow? To join me for this conversation is Kathy Feki and Mr. Henry Washington. Do you guys hear this debate a lot, Kathy? Do you hear people saying that cashflow is impossible to find these days?

Kathy:

Sometimes, yeah, but only from people who I guess don’t know how to find it or are new to the business.

Dave:

All right, well you just took my second question away. I was going to ask if they’re correct, but it sounds like no. Henry, what about you? Do you hear this question come up a lot?

Henry:

All the time, especially since interest rates have gone up, that people’s favorite phrase is, “You can’t buy cashflow anymore,” and it’s just not true. I actually tell my students, I don’t know if you guys are aware, but every deal cashflows, every single deal ever cashflows. It just doesn’t cashflow at the price you’re comfortable offering or at the price the seller is asking for. But that doesn’t mean you can’t analyze that deal, figure out the price it does cashflow at and make that offer.

Dave:

And also every deal cashflows, depending on the amount of money you put down as well. If you buy something for cash or you buy it for 50% equity, it will, probably, cashflow. So that’s a very good point. So Henry, where do you think this notion comes from that cashflow is impossible to find?

Henry:

Yeah, I think, well, if you look at most traditional or new investors, what they want to be able to do is just call up an agent or hop on Zillow, Redfin or the MLS, find something that’s listed, make an offer at what they’re asking, maybe slightly below, and get this deal that cashflows. And if that’s the method you’re using to find deals, then yeah, nothing’s really going to cashflow. You’re going to have to have some special niche of being able to monetize that property in a different way, that’s going to allow you to buy cashflow, paying retail.

And a special niche, what I mean by it, it could be that you’re going to rent by the room. So you could buy a property potentially on the market, rent it by the room, that increases the amount of rent you’ll get, and then you can make it cashflow, or you can be strategic, like Kathy does, and buy houses that are listed but that are in areas where you can use them as a vacation rental. I think Kathy, you just bought one, where in Tulum? Right?

Kathy:

Yeah.

Henry:

I’m sure that will cashflow, right? It’s a different thing, but if you think you’re just going to find something on the MLS at retail price, that’s going to be a long-term rental and make you cashflow. Yeah. No, that doesn’t exist. And so I think people just see that and say “You can’t find cashflow.”

Dave:

That’s a great point. There are a lot of different strategies that work to generate cashflow in pretty much any market. And just for everyone listening, so you know, we’re also going to share, towards the second half of this episode, four markets that we have identified that will be really easy to find, basically off the shelf cashflow, you can just find it off the MLS. So we’re going to be sharing those four with you. But before we get to them, I want to talk a little bit more, Kathy and Henry, about strategies that you can use to generate cashflow in other markets. So Kathy, what are some of the ways that you approach finding cashflow in some of these higher priced markets or some of the growing markets that you invest in?

Kathy:

Well, for me, I’ve just found over the years that you have to find some form of distress, and that distress changes with the economy. So just in the last year or so, one of the big stressors was with builders. They couldn’t sell their inventory because, as interest rates went up, a lot of people couldn’t afford those, and builders were sitting on a lot of inventory that they needed to move. And builders are not like individuals selling their primary residence. They are in the business of selling, and they have loans, they need to pay them down. They got to sell and move these properties. So that was just one form of distress in the past year, where it was a little bit easier to negotiate with builders. Either they have to lower the price to make it work or they have to make the interest rate lower. Something needs to give, if I’m going to take this inventory off of your books, basically. So what we discovered is they were more willing to pay down the rate because then that kept the price up so it doesn’t affect their comps.

But when they’re paying down the rate, we’re actually finding these brand new homes cashflow really well. The other thing about cashflow is you got to look at all the numbers. So maybe day one, a certain property looks like it’s going to cashflow, but if it’s going to be breaking down all the time and you’re constantly feeding it, there’s no cashflow there at the end of the day or the end of the year or 10 years or whatever. With a newer home, we don’t have those issues. The insurance is way lower because insurance companies like to insure newer properties. Tenants like to live in newer properties, so rents go up faster. So over time, we’ve also found that these nicer properties actually cashflow better. So again, it’s just we look for the distress, I don’t want to say take advantage of it, but I guess that’s what I am saying, and you negotiate and work the valves that are going to get you to where you want to be.

Henry:

And just to be clear, I don’t want to say you’re wrong, but you’re not taking advantage, Kathy, because no one’s selling you a home that they don’t want to sell. Right? You’re offering a solution to that distress. They’re making a call of whether they want to sell it or not. And I will bet that these developers that you ended up buying these properties off of, were very relieved to now have these off of their books so that they can go deploy their capital in places that are more important to their business. It’s offering a solution, and people will take advantage of your offer, then you’re not taking advantage of them.

Kathy:

Thank you.

Dave:

Kathy, so that is one excellent way to generate cashflow, which is looking for distress. Henry, what are some of the other techniques or strategies that you use to find or create cashflow in your deals?

Henry:

Yeah, absolutely. For me it’s a volume and numbers game. It’s the same. You do have to identify… Distress is just one thing to look for, but what you need is this, I call it situations. I don’t buy houses, I buy situations. There are situations that people get into that cause them to need to sell at a discount and not want to sell. Everybody who just wants to sell lists on the market with an agent, they can get retail value. That’s amazing. I want them to do that. But there are situations where people need to sell, and can’t. And if you can identify what those situations are, get yourself in front of those people, and then offering a solution to their problem, by being able to make an offer, and then they then can make a decision on, “Is this offer going to provide me the solution that I need?”

If it does, maybe they take it. If not, then you move on. Now if you make 20 offers, there’s a high chance that 20 or 19 of them get turned down because you are going to have to offer at a price point that allows you to create cashflow if you’re only going to use a long-term rental strategy. And so that just means you have to make offers in volume. So I just try to find situations, analyze every deal that I can. I’ll make the offer to provide a solution if that works for them. That’s fantastic. And if it doesn’t, that’s fantastic as well.

Dave:

Now that we’ve discussed how to identify properties in distress, or asking for buy downs on new construction to generate cashflow, we have more strategies right after this quick break. Welcome back to the show. Great. All right. So looking for distress, buying these unique situations, two great ways to identify and create cashflow. I’ll add something that, Henry, you touched on earlier, but there are other ways to rent out properties that generate more revenue than long-term rental. So we talked about short-term rentals a little bit. And short-term rentals, generally speaking, get more revenue per night. So if you averaged out how much you can get from a long-term rental on, let’s just say, on a two bedroom, maybe you get $50 a day. On a short-term rental might get a hundred dollars a day, just for this random example. So that is a great way to generate cashflow. Now, short-term rentals tend to have more expenses too, so you need to be careful about that, but short-term rentals can offer more cashflow as are other alternative strategies like midterm rentals.

Similar to short-term rentals, they offer more revenue per night. And the third one that I would offer here is rent by the room. I’ve never done this personally, but I know people who do, either in a co-living model or in just finding a property manager who does rent by the room. But if you just rent out individual bedrooms to individual tenants, you usually get more dollar per bedroom, and that’s another way that you can generate cashflow. Of course that comes with more property management complexity. But these are all ways that you can consider generating more cashflow for your properties. Kathy and Henry, do you use any of these strategies yourself?

Kathy:

Yeah. I haven’t done midterm rentals yet. That’s next on my list, and I want to learn that. I know BiggerPockets has a great book on it that I wrote the forward for, so I have no excuse for not trying, but short-term rentals for sure. We did it by accident, just to try it, and we’re so surprised at the success of that. Of course, that was during 2021, at the peak of that whole short-term rental thing. So you got to understand that that’s a little bit more of a volatile market too, the short term, because it’s just dependent on when people want to travel. There’s more options now. They have hotels and so forth. But yes, we have found that the short-term rental, if the timing is right and the price was right and you’re in the right area, it can be so lucrative.

Henry:

We do short term and we are launching our first midterm this Friday.

Dave:

Oh, cool. Congrats.

Henry:

Thanks.

Dave:

Eager to hear how that goes.

Henry:

Me too.

Dave:

And I do want to just caution people, with both of those strategies, short-term and midterm, you do typically have opportunity to generate more cashflow on an ongoing basis, but a lot of times the upfront costs are more significant because you have to furnish those apartments or those properties. And so again, with all things in real estate, it’s just a trade-off and that if you were prioritizing cashflow, then these are some of the trade-offs you might want to make.

Kathy:

I just want to jump in on that too and say that with short-term rentals, you can talk to your CPA, but you can get some pretty significant tax deductions, which, in the end, that helps cashflow too. If you can write off a bunch of taxes.

Dave:

Yeah. Get to keep more of that revenue.

Kathy:

Mm-mm.

Dave:

All right, so we’ve talked about distress buying situations, and then some of these alternative leasing options for generating cashflow. And the last one I wanted to bring up was using less debt. Henry was talking earlier about that, depending on what price you offer, every deal cashflows. Well every deal cashflows as well, depending on the down payment that you choose to put down. If you were to buy something for cash, it will cashflow because you will have much fewer expenses. Of course, not everyone has that opportunity, but I do encourage people, especially in these high interest rate environments, to consider putting down more than 20 or 25%.

And I think a lot of times when debt is cheap, why wouldn’t you get the maximum amount of leverage? But in today’s type of environment, if you do prioritize cashflow, if you want to generate some money, consider putting 30 or 40 or 50% down on a deal, because that will quickly increase your cashflow potential and it’s honestly a good low risk way to buy rental property. So I would offer that as a fourth way of generating cashflow. Do you guys ever do this or you pretty much try to put down the minimum amount on most of your deals? Kathy?

Kathy:

I try to put the minimum down. We’ve helped a lot of Californians fix their mindset, I want to say around this. Because I’ve had so many people come to our events and say, “What do you mean you can’t cashflow in California? I’m cashflowing.” And I say, “Okay, tell me more.” And it turns out they have no debt. Maybe they’ve owned it for a long time or very low debt, and it’s like, “Well, I sure hope you can cashflow on your property. There’s no debt.” So really I think it’s important to understand the equity at play and could you take that equity instead of putting 40% down on one property, find a place where it works, where you could buy two properties with 20% down on each. I feel like in the long run you’re going to do better over time, but it just depends on what you’re trying to do. If you’re trying to build wealth and you’re young, I would try to leverage more and acquire more, versus as you get older, then maybe your goal really is cashflow and you want more security and you want more money down.

Henry:

I’m in a growth pattern still. And so the more capital I can keep in my pocket, the more I’m able to grow my business and my portfolio. So I want to put as little down, sometimes I want to put nothing. I would much prefer someone else pay for my equity. And so I’m going to have the seller pay for my equity by buying at a discount, and I’m going to have my tenants pay for my equity by paying down my mortgage. That’s the strategy that I want to employ so that I can acquire more now. And at some point, once I’m done acquiring, at a higher scale, I might look to pay cash for properties or put more down, because then essentially you’re playing the cash on cash return game. If I can put $50,000 down on this hundred thousand dollar house, I have a very low mortgage, but the return, the cash on cash return that I get in the rents is extremely high. And so I’m using my money to generate income. It’s more like a stock market game at that point, right?

Dave:

Yeah, absolutely. It makes total sense. If your goal is to maximize your equity and your long-term appreciation, then using maximum leverage or using more leverage, and it’s just another word for debt, for everyone listening, using more leverage and more debt, is a faster way to grow because you can spread your equity out across multiple properties, as Kathy said. But if you do want a cashflow, if you’re getting close to the end of your career, you want to slow down, you want to reduce risk, reducing that amount of debt can be very helpful to you in that effort. So those are four different ways that you can produce cashflow, buying situations, looking for distress, using alternative revenue models and lowering your total debt. But now we’re going to talk about four markets where you can generate cashflow right off the shelf off the MLS. Kathy, let’s start with you.

Kathy:

Yeah. This market is Youngstown, Ohio. Personally I do love Ohio. I think there’s a lot of opportunity in Cleveland and Cincinnati, Dayton, certainly Columbus. Youngstown has had a really tough time recovering from the crash of 1977. A lot of people don’t realize that places like Youngstown, where it was a really wealthy city at one time in the 20s and 30s, it was in the steel industry, just like Pittsburgh and Cleveland and Detroit. These were the New Yorks of the time. It’s where the wealthy people lived. And especially in the 30s, at its peak, is when they had the most population, because we had a war and steel was needed. But then in 1977 that all changed, and those companies left and people, I think 5,000 people were laid off in one day or something like that.

Dave:

Oh my god.

Kathy:

It has not been able to recover. There’s been a few attempts bringing in… I know Chevys were… GM had a plant there for a while and then that shut down just in 2019. So this town has had a hard time bouncing back like some of the other rust belt cities that have really invested in themselves. So right off the bat, I want to say this would not be a market that I would personally go to for cashflow, even though it’s on our cashflow list.

Dave:

I appreciate you bringing this because it is one of the highest ranking markets in terms of the metrics. And we measure cashflow potential in different ways. For the purposes of the show, we’re using a metric called the rent to price ratio, which basically just compares how much rent you can generate for every dollar of the purchase price that you put in. And Youngstown does pretty well. And Kathy, you did a good job explaining the reality of the situation in Youngstown. Do you see this often with cashflow cities that they are lower price or have lower economic potential?

Kathy:

No. No. I think you can get great cashflow in a market that is reinventing itself and that is creating job growth. I don’t know why this town hasn’t been able to recover. Rent to price ratio in this town is 0.65%. That’s not good. That’s terrible. So if I’m going to get that kind of ratio, I’m going to be in Florida, I’m going to be in a growth market. For me to buy in a cashflow market, I want to see a much better return than that. Because you’re not getting appreciation, so you’re going to have to make enough cashflow to cover any repairs that happen, any vacancies. And if you have a vacancy, who are you going to bring in? This is not a population that’s growing.

There’s not job growth, so you might have to lower your rents to get your property rented. So I know a lot of people might look at a price point and say, “Oh, this market has a median home price of $144,000. That’s a lot lower than the national average.” But the median rent is $937. So I would want to buy a house under a hundred thousand dollars, all in, for me to make this market make sense, because it’s a non-growth, linear, not even linear, a downward trending market. So again, you got to be careful when you say it’s cashflow. Sure there’s cashflow that might be better than LA or San Francisco, but the difference is that at least in those cities, you’re probably going to see rents go up over time.

Dave:

That’s a great point. And just to be clear, when we’re talking about the rent to price ratio for these markets, we’re talking about the average. And so there are certainly deals that would be better than 0.65. There are deals that would be worse than 0.65, but when we look across the country, the average rent to price ratio is about 0.6% or 0.55%. So this does offer better than average cashflow potential, just for the average deal. Again, there are plenty of other caveats around that. But to Kathy’s point, if this market is not going to appreciate, maybe that slightly better than national average cashflow potential is just not enough.

Kathy:

Yeah. And I’m not saying that you can’t make money in this market, but you better be buying some incredible deals, way lower than that median price, and be able to maybe improve it and provide the affordable housing. It just makes me nervous that there’s not a really strong job center there.

Dave:

All right, great. Well appreciate your candor and honesty about this, Kathy. Thank you. For our second market. I’m going to be talking about Syracuse, New York, which is very close to where I went to college, and is actually a market that I looked at, not super seriously, but did look into a bit, because there are some interesting things in Syracuse. The rent to price ratio there is almost 0.7, so it’s a little bit better than Youngstown. But what I like about Syracuse is, first and foremost, there’s a giant university there, it’s a growing university, and that’s a major economic center for the city. The second thing I really like is that Micron, which makes processors and computer chips, is moving into the area, and they said that they’re going to hire something like 10,000 people over the next couple of years, and those are really high price jobs.

So similar to what Kathy was saying earlier, some of these cities, Syracuse is also one of those cities that has had difficult economic times over the last few decades, but something like a huge booming industry with high price jobs moving in, can really turn the tide for an entire region. And that’s something I really like about Syracuse, and the numbers are bearing that out. So even though population has been growing, their forecasting population growth due to these new jobs in the next couple of years. And Syracuse was one of the fastest growing appreciation markets last year, with more than 10% year-over-year growth. So I think Syracuse is worth considering. I have looked at it a little bit and would consider it again in the future, because I do think that it’s showing signs that it’s turning the tide, as Kathy was saying. Now that we’ve covered our first two markets, we have two more markets right after a word from our sponsors. Welcome back to On the Market. We have two more cash flowing markets for you to consider. All right, so for our third market, Henry, what do you got?

Henry:

All right, we’re going to talk about Pittsburgh, Pennsylvania. And on the surface, Pittsburgh has some pretty good metrics in terms of cashflow and in terms of affordability. So if you look at the median home price, you have homes that are around $201,000. And if you look at the median rent, you’re at $1,300 or closer to $1,400. And so to me that says you can probably find a deal right there on the MLS that’s going to cashflow, because that’s a pretty decent rent for a low entry price home market. And what else I like about the numbers is the median income is 65 to $66,000. And so people can afford those homes and you can get cashflow in those homes. So those are some pretty stable market dynamics. Pittsburgh has some other strong dynamics as well. If you look at homes on the market, days on market is around 72 days, and things are selling with an average of just 1.8% below list price.

And so that means people are listing homes and people are buying homes. And so that shows that people do want to live here. But if you look at population growth, it’s down 0.6 or 7%. So definitely that is something you want to keep an eye on or have watch on, or have some sort of understanding of Pittsburgh as a whole. If you’re just an out-of-state investor, you need to understand why is the population growth down right now? Is it just a blip on the radar or is this something been trending year over year? Because if you can get cashflow, that’s great, but if people are moving out, your rents are going to start to go down and your property values are going to start to go down.

Kathy:

I can talk a lot about Pittsburgh because, first of all, I know this city really well. We started investing in 2009, I believe, in Pittsburgh. And when I went there, what I saw was a city, like I said, a different kind of city in the Rust Belt that was investing billions of dollars in its revitalization. There are really big universities there. They’re investing in biotech and-

Dave:

Robotics, right? Isn’t it a huge robotics city?

Kathy:

Yeah. There’s some really good colleges in Pittsburgh. We bought very cheap back then. It was right around the downturn, so I think we bought a duplex for $60,000. Today that rents for 1300, total. So the cashflow is pretty fabulous. Believe it or not, we’re selling that because there’s a lot of deferred maintenance and these tend to be older homes. It’s cold weather. We just didn’t want to deal with the deferred maintenance, so the person who’s been living there, it’s a dad on one side and the son on the other side, and it’s like, “Hey guys, this is your chance to buy this from me. You’ve been living here forever, paying me. Why don’t you buy it?” And they can do that deferred maintenance.

Turns out that that’s what they do. They’re contractors. So I bought cheap enough in that city that it really has worked for me, but there doesn’t tend to be appreciation. However, it still is growing, and there’s pockets that are growing. We bought a property, downtown Pittsburgh for around 200. After all renovation and everything, came in around 200. That just appraised for 350. So there can be appreciation if you’re in the right neighborhood, you know where the growth is. So again, just like Henry said, know the market before you dive in, because you could end up in one of the suburbs that just doesn’t ever show appreciation. Whereas there are parts of the city, closer to the universities, that are really taking off.

Henry:

Yeah. Pittsburgh’s showing a 4.2% increase in home value since last year. So there’s been some appreciation there. And there are some strong [inaudible 00:26:02] you’re right, the university, so you’ve got University of Pittsburgh right there in the middle of town. You’ve also got Carnegie Mellon, a rocks throw away from that, which is a huge technology school. Some of the smartest minds in the world go to school at Carnegie Mellon. And so these things aren’t going anywhere. They’re going to be there. They’re going to continue to draw people in there. And obviously the Steelers are a team that people… I think I read somewhere that 20 million people a year go and visit Pittsburgh, and I bet a lot of that has to do with football. So there is some draw there. And so I would just… The only caveat for me here is you got to watch that population growth.

Dave:

Yeah, totally agree. So some interesting stuff here, even though Kathy’s selling, but that’s super helpful to know, Kathy. I think that’s really important for people to understand that. A lot of these markets and a lot of properties that cashflow do have deferred maintenance, or are in neighborhoods that have less appeal, and that’s kept the price low, which is why the rent to price ratio is higher because the denominator is lower. So, that’s another market to consider if you want some off the shelf cashflow. The last one we’ll talk about quickly is Jackson, Mississippi. I’ve never been to Jackson. I’m going to ask you, Henry, have you been there because you live in that area?

Henry:

I do. Well, it’s like a, I don’t know, a five or nine hour drive. I can’t remember, but no, never been to Jackson.

Dave:

Oh, not that close. Shows my geography skills.

Henry:

I’ve driven through Jackson.

Dave:

Okay. I don’t know much about it other than what I’ve read on paper, but the rent price ratio is good at 0.7%, and the median home price is under 200,000. So definitely an affordable market. And what I really like about Jackson, just on paper, is the unemployment rate is extremely low. It’s at 2.2%. And so to me that suggests that the economy is doing pretty well. The whole country has a low unemployment rate rate now at 3.7%, but 2.2 is darn near the closest, lowest I’ve seen. So that is really an interesting thing. And what I’ve learned about Jackson is that even though the area surrounding is mostly agriculture and farming, the economy in Jackson is based off more manufacturing processed food, fabricated metal, machinery production, and that stuff is starting to come back in the United States a bit. So there’s some encouraging signs here for Jackson.

Again, it seems like all four of the markets, they all have interesting potential, but just like the other three, Jackson does have modest population declines of 0.7% in the last year. And just so everyone knows, population decline is something you should be thinking about, because when you want to forecast rents, if you want to forecast appreciation, you need to be thinking about supply and demand. And if people are leaving a market, you are inherently going to have less overall demand. But there’s some caveats that, if tons of young people are coming but older people are leaving, that can still increase demand because that’s who buy houses. So there’s a lot more to consider about this, but it is something that you should dig into if you’re going to look into any of these markets. Why are people leaving? What demographics of people are leaving? Are renters leaving? Are homeowners leaving? Because that could really inform how seriously you should take population growth versus decline in a particular market.

Kathy:

And crime, Dave. Really understanding crime rates in the certain areas. I know that’s a problem in the first city we talked about, Youngstown. There’s a big drug problem there. When you don’t have jobs, and that can be what people lean on, is the drugs. But what’s interesting about Jackson is that it’s one of the five top loneliest cities.

Dave:

Oh, that’s so sad.

Kathy:

It’s so sad.

Dave:

That’s terrible.

Henry:

The song is even sad. It’s just so…

Dave:

Oh man, I hope that turns around for Jackson.

Henry:

Poor Jackson.

Dave:

Poor Jackson. Wow.

Kathy:

I think because there’s so many people living alone, potentially. Yeah. I used to give Jackson a really hard time. I went there years ago to check it out because I knew somebody who was fully, almost completely invested in Jackson and doing really well. So if you know the city well, anywhere, you can make money anywhere, I want to just say that. If you know your city and you’ve got the connections, you can make it work. And I know people who did. I went there and I was like, “Wow, I don’t see really much chance of appreciation here. I don’t see a lot of growth. Nothing too exciting.” And I’m just not a flat cashflow person. I need to see growth. I just need to see growth. Otherwise… I’ve done it too many times where you have one renovation and it wipes out the cashflow for two or three years.

Dave:

Yeah. Absolutely. Well, that’s a great way to segue to the end here, Kathy, because next week we’re going to be doing a show on some of the best appreciation markets and ways to generate equity growth in your market. And so before we move on to that next week, I wanted to ask you both about where you fall on the spectrum, because really it is a spectrum. You can find great cashflow, but that’s usually in a market that’s not going to appreciate that much. Oftentimes the markets that have the best appreciation potential have lower cashflow, at least off the shelf. You’re not going to find it just off the MLS. And so Kathy, it sounds like you fall more on the appreciation side of the spectrum. Is that right?

Kathy:

Well, for years our business plan, when you could do this, was to put as little money down, even nothing, like Henry was saying. If you can get your money back out and still cashflow, my goal was like $300 per property per month with as little money in it as possible. That’s what I looked for. It is hard to do that today, but it can be done.

Dave:

And Henry, what about you?

Henry:

My goal is to buy value. From day one I want to walk into equity. I would love both. I want to walk into equity no matter what, and I would love the cashflow to go with that. But I may still buy a property where I walk into equity that doesn’t cashflow, because cashflow is only one of the ways real estate pays you. And in my opinion, it’s the least important way that real estate pays you.

Kathy:

Yeah, that’s what I was going to say. So when I started, that was my goal. And then I realized I need a lot of properties for $300 a month to really make a difference in my life. And then I started to see other properties that didn’t cashflow so well, but I was making 50 to a 100,000 a year, just on the appreciation. So that changed my mind. And then when I ran a real estate rental fund with that mixed, super high cashflow with super high growth, hands down, the growth properties ended up being about 28% return per year, and the cashflow ones were like six.

Dave:

For me, I like to look at it at a portfolio level and just make sure that my portfolio is at least breaking even in terms of cashflow. Because then I can look at individual deals and say, “Okay, if we’re going to do a renovation that takes one or two years, that’s fine.” Because on a holistic level, I’m still breaking even. I’m not having to come out of pocket regularly to support my portfolio, but I’m not carrying that much that every individual deal is earning some great cash on cash return, as long as my portfolio is relatively self-sustaining.

To learn more about this debate and the trade-off between cashflow and appreciation, make sure to check out our episode next week where we’re going to be digging more into the appreciation side of things. Thank you all so much for listening to this episode about cashflow. If you liked it, please make sure to give us a review on either Apple, Spotify, or YouTube. Thanks again. We’ll see you next time for On the Market. On The Market was created by me, Dave Meyer and Kaylin Bennett. The show is produced by Kaylin Bennett, with editing by Exodus Media. Copywriting is by Calico Content, and we want to extend a big thank you to everyone at BiggerPockets for making this show possible.

 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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