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Blog--How_Much_Downpayment_is_needed_for_Positive_Cash_Flow

How Much Downpayment is Needed for Positive Cash Flow?

When purchasing a home that you intend to rent for profit, there are many steps to consider when trying for positive cash flow from it. The most important thing to consider is the down payment that is needed; depending upon the area of town that the house is in, there can be a variety of things that can affect the end result.

Specifically, HOA fees, property taxes, and the average rent for the equivalent house on the market at that specific time. Achieving a positive cash flow is possible some of the time. Here is a chart with some examples :

positive-cash

These are relatively similar priced houses in fairly different neighborhoods; that, of course, can radically alter the total that we are looking at here. The bottom line we want to look at is the “break even” number. This number is figured out by taking the possible rent that you can get for the house and subtracting both the property taxes and the HOA fees from it. What that means is the amount that you need the mortgage to be under in order to make a profit on the house.

In the example above, some houses could not make a profit even with up to 35% down; that can happen depending upon the area. There will be a cutoff point where the interest earned on any possible down payment will be greater than the profit past the “break even” point. Assuming this is not the case, then purchasing and renting a property can be a good investment.