Positive Cash Flow in Property Investment

Where can I find cash flow positive properties?

Positive cash flow on 100% financing? Not impossible, but highly unlikely. Unless you can buy at a significant discount, or much higher rents can be supported once you do buy, your chances of positive cash flow are slim and none

Example:
bank installment is 1430,
monthly installment + maintenance = 1430 x 12 = 17160
Monthly rental = 1450+200 =1650 x 12 = 19800
rental is 1450 add 200 maintenance making it 1650

Some rule:
Higher downpayment == Lower monthly loan repayment == higher positive cashflow.
But higher downpayment == higher positive cashflow != higher COC.

Story to learn: (my refer to the story provider)
Here's my 1st property story, and I believe its rather unconventional :

Bought my run-down 3r/2b condo for 140K 2 years ago. Location is superb that it took me less than 1 month to rent it out, and I didnt fork a single cent to rent this out, as I only advertise online. Im renting below market value to my current tenant, and boy he is damn happy to learn that I decided not to jack up the rent. My tenant is a gem, so I'll settle for lower income for better peace of mind. No late payments, and he doesnt bug me at all, what more can i ask? :)


Why I bought the property?
1. Superb location, close to LRT & amenities.
2. Good, positive yield.
2. Other similar condo's in the same area cost minimum 200k, but rental is about the same.
3. I got a good price for it, and I believe even at market rate it was undervalued given all the good fundamentals.
4. I luv the condo and the area, hence I really dont mind staying in it if things go bad.
5. There were at least 3 commercial centers coming up within the area (all within 5 min walking distance), and early this year a developer is building a grade A shopping + office complex RIGHT NEXT to my condo. There plenty room for capital gains over the next few years.
6. Decent management + cheap maintenance fee (RM0.12 for a condo).


d/p = 16K (Market value was 165 back then, now slightly higher if im not mistaken )
All other charges (S&P, Legal fees, quit rent ,TNB deposit , 3month maintanence+service...) = 10k
renovation = 3K
Total capital = 29K
Total cash I use to buy this property = RM 0 (Some hanky-panky ;) which I doubt anyone would want to elaborate further...)

Yearly instalment + maintanence + quit rent + assesment fee's = 1040 x 12 = 12480
Yearly rental = 1120 x 12 = 13440 (Market rental is about 1.2k-1.3k)

Nett cash income per anum = RM960
Nett return or COCR = 13440-12480 = 1200/0 x 100% = ???

Since my COC denominator is RM0, this property has NO COCR. So technically, I didnt pay anything to buy a property that gives me RM1k income per year.

COC = Cash receive / cash invested
If the cash invested = ZERO due to positive cash flow, you get the highest return.


ANY property can produce positive cashflow, as long as you put sufficient downpayment.
Or,
take a longer loan tenure aka 30 years loan. Big down payment is NOT the only way.

Note:
But it doesnt mean that all cashflow positive properties will give you fantastic COC. You should be able to understand this if you use my example to calculate the COC based on 2 scenario's :
a. Scenario 1 - I use 10% down payment to purchase the property.
b. Scenario 2 - I use 50% d/p
Notice the diff between the 2 COCs? ;)

One of the way to achieve break even cash flow is to put a HUGE down payment. Let's take your example and I have break even cash flow by putting down payment of 200K. If I sell the house after 30 years for 100K without putting additional money in, I lose money.
You can make money or lose money with positive or break even cash flow too. It all depends on how big is the down payment.


Additional points for considering to invest:
2 main rule when looking for rental properties for NOW, apart from the location :
1. COC return must be at least 7% p/a.
2. Must be positive cashflow at 90% financing for 25 years.

Break even in cash flow, you still gain
I don't view as don't pay anything to sustain the property as being "break even", ok let say you don't pay anything for and earn nothing extra from the property aka "break even" to sustain the property because the rental is just right to cover everything, 30 years later the property is paid up just by renting alone, and what you get? a FREE HOUSE that worth 100k++ of value!even you sell it under market price you still have hefty amount of money extra! is that a break even?!