It’s been a crazy week at Land Chasers with investors in and out of town and therefore my time has been limited to get Tuesdays Tip up. My apologies.
I want to focus today’s tip on learning how to talk with realtors or birddogs who are helping you to find cash flow properties. I find a major communication breakdown is happening between too many property locators and the investors they serve, and since the investors seem to trust them, they’re getting screwed.
I’d like to suggest that wearing the name Realtor doesn’t mean they know jack squat about investment real estate. I find this misconception has really hurt investors and they’re all too trusting of these agents.
I’ve got a couple of questions I like to ask a realtor when they send me properties to send to my investors and it immediately eliminates a lot of time and hassle for me. I hope it does for you as well.
First, “how will this cash flow?”. You should expect to hear things like “this is a great cash flow property” or “this one is perfect for cash flow; it cash flows $2,000/month.”
Next, in order to run the numbers, all you need to ask for is the price, the taxes, and the rents. The rest are estimates and you can run them fast. Sadly though, most Realtors never seem to run the numbers and if they have, they must believe you’re paying for the place with cash, because they’re likely to believe a $200k duplex rented for $700 per side will make a great cash flow property…and they’re wrong.
For that $200k duplex to cash flow, after you pay a mortgage, the property manager, the insurance, taxes, vacancy loss, and maintenance, you’re going to have to offer $80k to make a maximum of $100/month. Tell them that and they’re likely to fall out of their chair. At that point, I like to kindly explain to them that just because it can generate rents, doesn’t mean it’s an cash flow investment property and then you should hang up the phone.
Tuesday’s Tip: If it walks and talks like a duck, it probably craps like one too…so stay away from ducks and invest in cash flow.
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