The Swamidass Sez

Friday, July 27, 2007

What is wrong with this picture?

Here is a quote from a seller trying to convince me that their property will have positive cash flow:
...with 25k down and with me financing the remaining balance of 119k @ 6% interest, the payment would be $713.47 every month. You would be recieving rent of $975 every month. So there would actually be a positive cash flow for you.

This is both pitiful and insulting. I'm not sure if they don't know what they are doing or they think I am a fool.

In reality, $975/month rent would certainly not produce a positive monthly income. There are many expenses to owning rental property: Maintenance, Property Management, Insurance, Home Owner's Association, Property Taxes.

It isn't necessarily bad to have a negative cash flow, but simply subtracting the mortgage from the rent is a faulty income analysis.

1 Comments:

  • Yes, quite insulting. The seller also seems content to mooch off you to the tune of $595/mo interest (at least initially). Then again, perhaps "recieving" (sic) rent is somehow better than "receiving" it.

    By Blogger Leeton Lawdoc, At 9:28 PM  

Post a Comment

Subscribe to Post Comments [Atom]



<< Home