Reply to Why are people so obsessed with rental properties yielding positive cash flow?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Is there a firecalc type app that compares the ROI between a RE investment compared to S&P?  Assume a 20% down payment and a 1% gross rental return vs. a one-time S&P investment of the same 20%?  How would one fare if they did this in 1900 vs 2000 vs 2015, etc. over time? [/quote]

Of course real estate would give you more due to leverage on initial investment. Because with stocks you only get income on those 20% that YOU invested. In real estate, you get return on the whole 100% (your down+ remaining 80% financed by the bank). Of course if real estate prices call you are at a loss more than you would be in stocks. But in reality they don’t fall that drastically at lease in urban areas, and when it works well as a rental covering your mortgage and carry costs you can continue holding it . There is no point in selling real estate unless you want to do 1031 exchange or reinvest [/quote]

I'm the OP and people that keep calling me dumb don't seem to grasp this concept.  (BTW, for all those saying I should take a course in finance, I have a degree in math and understand finance/investments just fine.)  What these people don't get apparently is the value of leverage in generating returns.  And leveraging a property makes it more likely that it will not yield a positive cash flow, hence my initial question.  Of course, any property that you buy with no mortgage will give you positive cash flow.  However, you can boost your returns with leverage, and sometimes that means covering a $500 monthly shortfall between the rental income and PITI/other expenses.

But so what?  Most people put much more than $500/month (i.e. negative cash flow) in their 401(k)s and Roth IRAs.  And yet you never see the pearl clutching like you do with negative cash flow properties.[/quote]

I am the poster/real estate developer who wrote this post. From perspective of finance, there is no point of worrying about negative cashflow. But it depends if you are ok in practice to have this outlay from your monthly cashflow. I am not feeling as secure leveraging at 80-90% which would mean negative cashflow, so I never had actual negative cashflow on my properties. My W2 "main" salary is also not high so I don't want to be stretch financially before retirement and need financial freedom. Also, if you can find properties which bring POSITIVE cashflow while being 80-90 % leverage financed, it's even better. I try to only deal with these types of properties (not condos for sure, but 2-3 units townhouses), and then "minimize" this factual positive cashflow with depreciation, mortgage interest and maintenance expenses on tax returns. I have 3 separate entities open to do this. 
Condos in general are poor investment: in DC market, single family and townhouses nearly doubled in price since 2010. Condos only appreciated by 11-15%. The condo fees and restrictions on renting it making poor investment, both from income and equity increase standpoint
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