Why Your Rental Property “Cash Flow” Isn’t What You Think it Is

Рет қаралды 18,754

Күн бұрын

Rental property cash flow is one of the most important metrics to calculate when analyzing real estate. Your cash flow not only helps you make a little extra money every month but also keeps your property afloat during months of heavy expenses or when large repairs need to take place. If you don’t do the correct cash flow calculations, you could find yourself with a cash-hemorrhaging property.
This is why running (and re-running) your “true cash flow” number is so important. It’s also what Pam, today’s guest, might need to do to figure out which rentals to sell and which to keep in her portfolio. Pam owns nine rental properties, which is doubly impressive since she declared bankruptcy just a decade ago. She’s been able to rebuild a financial position that many would envy. And even though Pam and her husband make a great income, they’re struggling to figure out where it’s going every month.
As six-figure earners, they’re barely breaking even on some months and overspending on others. Is Pam being too relaxed with some of her budget categories, or is there another cash flow leak coming from somewhere she isn’t looking? Scott and Mindy go through Pam’s current financial situation and quite quickly come up with a solution that could save her thousands every month.
~~~~
Show Notes at:
www.biggerpockets.com/blog/mo...
~~~~
Join the BiggerPockets Money Facebook Group:
/ bpmoney
~~~~
Try the BiggerPockets Calculators on Your Next Property:
www.biggerpockets.com/investm...
~~~~
Get Unlimited Access to BiggerPockets Tools and Calculators by Upgrading to Pro:
www.biggerpockets.com/members...
~~~~
Follow Along Mindy’s Live Budget/Expense Tracker:
www.biggerpockets.com/mindysb...
~~~~
How to Run a Rental Property Cash Flow Analysis:
www.biggerpockets.com/blog/re...
~~~~
Want to Be a Guest on the BiggerPockets Money Show? Apply Here:
Guests: www.biggerpockets.com/guest?u...
Finance Friday: www.biggerpockets.com/finance...
~~~~
Connect with Scott and Mindy on BiggerPockets:
Scott: www.biggerpockets.com/users/s...
Mindy: www.biggerpockets.com/users/m...
Episode 322
00:00 Intro
04:14 Income and Expenses
12:05 Assets and Liabilities
13:25 From Bankrupt to Buying 9 Rentals
19:18 Recalculating Your Rental Property Profits
39:50 Selling the Properties That Don't Work
47:37 Fixing a Low Cash Flow Situation
01:00:17 Reevaluating Your Rental Portfolio
#biggerpockets #biggerpocketsmoneypodcast #ep322

Пікірлер: 53

@jeannej19 Жыл бұрын

Can I just say I am so glad Scott asked for the background story. I was already on my, here we go again interviewing another rich couple who always did everything right. Lol

@lolabrownphd Жыл бұрын

They need to delete their current spreadsheets and get someone to do their income/expense sheets properly. Yes, I heard her say she’s a bookkeeper and CFO and I keep the position they need to get someone else to run their numbers.

@holdencawffle626 Жыл бұрын

For a bookkeeper...shes sounds super unsure of her numbers. No wonder why they're living paycheck to paycheck or worse. Scott did a good breakdown

@MadelynKerby Жыл бұрын

This came at this perfect time for me! I'm hearing about all the people who have positive cash flow with their new real estate assets, but I'm not seeing it after accounting for capex and operating expenses.. This shows me that many real estate investors are not properly considering these costs. Bravo!

@betterhomesnc2437 Жыл бұрын

I don't know, sometimes I feel like they can be overly conservative. My Capex has been pretty low due to doing rehabs on the front end, and so have my maintenance, vacancy rates etc. We self manage though.

@alexa574 Жыл бұрын

Great episode! Most importantly is the stress that that one or several rentals are causing you now. I had a rental similar situation figured it was paying for itself, just keep it since it was paid off,,,that was fine when I was younger, but now I'm 59 and that property once covid it was stressing me out, even thou it was still renting, and was continuing to go up in price. I finally realized that I had entered into a different stage in my life, and simply wanted more simplicity and freedom. The stress disappeared as soon as the property sold and money was in my bank,,I sleep well with cash in my bank, I love real estate, its a great "game", but you have to know when you need to get out as well!

@maxwellknauss8619 Жыл бұрын

This episode is fantastic. I would love to see more along these lines: in-depth breakdowns and examinations of real estate investing (especially how to evaluate things like whether specific properties remain worthwhile investments & how to make decisions about whether to invest in a property) within the context of overall personal finances and money management. Having an actual, real life example of someone who is more like the average early stage real estate investor (as opposed to someone with dozens of properties) was particularly helpful.

@mega1689 Жыл бұрын

THIS WAS AWESOME!! I am about to start my investing journey and have learned so much key points from this interview!! Love this content please do more interviews like this!!!

@JakeRichardsong Жыл бұрын

Very interesting. Yes, some people think cash flow is rent minus mortgage, but of course its more than that.

@MissaLifeStyle Жыл бұрын

I always ask friends who own boats, if we should buy or rent a boat and they say rent. Boat = break out another thousand.

@jacmac9996 Жыл бұрын

New here! Brilliant the way this fellow manages to tease the actual info and figures out this lady. He wonderfully assessed her total picture and gave great advice...for her sake I hope she follows it...regards from 🏴󠁧󠁢󠁳󠁣󠁴󠁿

@mjf5049 Жыл бұрын

Great show. Love hearing someone from a BP pod talk about realistic expenses and positive cashflow 💸

@kg3436 Жыл бұрын

She and her husband are not managing this rental business effectively. They should go ahead and just sell out of all these rental properties and pay off all their debt while they still can. Next, move all that equity into dividend paying stocks and they'd be all set with less work, less stress, and less risk.

@jtowensbyiii6018 Жыл бұрын

Wtf horrible idea? This is a real estate channel

@giftedtoserve Жыл бұрын

Scott did a great job getting to the meat of her finances

@paramtung8264 Жыл бұрын

One of the best episodes I have ever watched on BiggerPockets. All in details and calculations . Most of the deals out there are all negative cash flow even if you put 50% down . I didn’t find any property with good positive cash flow since 2020 . So I didn’t buy any . And I don’t buy out of state , learned much lesson in 2008 .

@tarawalton6778 Жыл бұрын

What is your specific reason for not buying out of state?

@onlinestorytime6875 Жыл бұрын

This was super informative! Love digging into the numbers.

@nydyar4040 Жыл бұрын

I learned so much in today's show.

@JT0007 Жыл бұрын

My wife won’t let us do loans for our rentals. Let me say that having $0 loans on 7 rentals makes things very simple.

@mouwlylee5014 Жыл бұрын

Meaning you have 7 houses 🏡 paid off

@jtowensbyiii6018 Жыл бұрын

Then you're a rich pos who isn't in need of any of this channels advice 🙄

@janetvalencia597 Жыл бұрын

Too much leverage at a very high cost. This is a situation in which one should never be in.

@charmedcole2007 10 ай бұрын

This was a great episode. Thank you, Pam, for being vulnerable and breaking down the numbers and issues here. It's not easy. But it sure is useful for a beginner like me to understand the breakdown of capital expenses, maintenance, etc to see how to calculate the numbers to figure out if a property is worth it for my financial situation. Thank you!

@stephanimeyers9570 Жыл бұрын

The first problem is investing in places with no water - Flint and Arizona.

@christinemcliesh7628 Жыл бұрын

Wow, this was a very informative episode. I will r/a my rentals. Thanks

@pmack8537 Жыл бұрын

Great podcast! Keep up the good work!

@toddspangler6669 Жыл бұрын

Yeah, it sounds like they didn't budget enough for maintenance amongother things. I just try to keep a buffer of 2-5k per rental. If it's paid off, it can be around 2-3k.

@emac6961 Жыл бұрын

A boat will keep you broke

@SergioB-MakingMillionaires Жыл бұрын

Great episode. I have some rentals that are also negative cashflow. I need to get rid of them and reallocate my equity into something better.

@nnice2250 Жыл бұрын

Get rid of the dang boat! Problem solved lol

@TheFirstRealChewy Жыл бұрын

Wow, I am surprised they only have that much in cash. We also feel like we are living paycheck to paycheck. I started an income and expenses sheet to see where the money is going. We'll have to make some changes in order to retire.

@HappyPenguin75034 Жыл бұрын

Would be cool to download before and after numbers and the analysis. To see.

@donaldlyons17 11 ай бұрын

Well no it is what you think it is as long as one has counted. Even thing is not accounted for but the more the rent cost the more money the owners, investors etc. have.

@betterhomesnc2437 Жыл бұрын

I would question the property management side. If you have owned some of these for almost 10 years and you aren't cashflowing that sounds very off to me. I have had one for about that long that cash flows about $600 a month. Not bragging, I just don't understand how you can't cashflow at that price point. Usually when I meet people who are losing money it is a management issue. That coming from a guy who's wife worked in property management for quite a few years.

@ovidioarroyo7816 Жыл бұрын

Very interesting

@chuqing99 Жыл бұрын

If nothing else, pay off the 10% interest private money first.

@RobSaslow Жыл бұрын

Without a spreadsheet analysis for each individual property, the guest has no idea how her properties are performing. I'm guessing their margins are tight in a market like Michigan ... doesn't take much to swing any one property from cash flow positive to negative ...

@devinfitzgerald4462 Жыл бұрын

A CFO that doesn't know how to do a real cash flow statement. Hope she listens to the advice here as well as read some of the Biggerpockets books.

@YasinNabi Жыл бұрын

I love investing in any asset that can grow and generate more income ...../.././

@Plagius8 Жыл бұрын

I like the lady because she's in the game.

@MuhammadAli-bp6iq Жыл бұрын

I can’t find any positive cash flow property in sacramento. Should I buy cheap house or nice 3 bed 2 bath house?

@jtowensbyiii6018 Жыл бұрын

Bad area to look in if you're not already rich

@MuhammadAli-bp6iq Жыл бұрын

@@jtowensbyiii6018 I’m not rich 😢

@pinchasjm Жыл бұрын

Rental property can be costly especially when you have a lot of loans. What I do is try and get enough studio apartments out of my property. Reinvest the profit I earn. I do over business that I earn money that is used for my personal expenses.