Where are rental deals still cash-flowing after honest expenses

teaAndPath

Property investor
Established
I’ve modelled several Buenos Aires new-build flats around ARS 808,500,000. Once I include vacancy, management, maintenance, insurance and financing at 5.12%, cash flow turns negative. Are buyers using more equity, accepting weak current returns, or waiting? I’m interested in real operating assumptions rather than headline gross yield. What would you verify first?
 
First, separate the property from the financing. Calculate net operating income before debt, then apply several loan amounts. If the flat is weak without leverage, a bigger deposit only hides the issue rather than improving the underlying rental deal.
 
What monthly rent are you assuming, and is it expressed in the same currency and on the same basis as the ARS 808,500,000 price? Also, does 5.12% mean interest-only or an amortising payment? Those details could explain most of the negative result.
 
I’d build from annual collected rent, not advertised rent: subtract vacancy, management, routine maintenance, insurance and property tax, then keep tenant-turnover costs visible as a separate line. Only after that would I deduct financing.
 
I’d challenge the expectation that a new build must produce strong cash flow. Buyers may pay for condition, lower near-term repair uncertainty or future value rather than current income. That can be a valid strategy, but it shouldn’t be described as a cash-flow investment.
 
A useful test is the break-even rent. Add annual operating expenses and annual debt service, divide by the expected occupied months, and see what collected monthly rent is required. Then compare that number with defensible rental evidence rather than asking the model to justify the purchase price.
 
The 5.12% figure needs unpacking. Rate, loan balance, term and repayment structure all matter. Run the same unit with no debt, your proposed debt, and a higher financing cost. That shows whether the problem is the flat, the leverage, or both.
 
Don’t let vacancy absorb every rental risk. An empty month is lost rent; tenant turnover may also bring cleaning, minor repairs, marketing or management charges. Keeping them separate prevents accidental double counting while still showing how frequent changes affect returns.
 
There’s another possibility: ARS 808,500,000 is simply too high relative to achievable rent. More equity will improve monthly cash flow because debt service falls, but it won’t necessarily produce an attractive return on the larger amount of cash invested.
 
I’d compare three columns: advertised case, realistic case and stressed case. Change only a few items—collected rent, occupied months, maintenance and financing—so you can see what actually breaks the deal. A giant spreadsheet can create precision without clarity.
 
Agreed on the three columns, but I wouldn’t automatically use the lowest imaginable rent and highest imaginable expense together. That tests survival, not the most likely outcome. The realistic column still needs evidence for every important assumption.
 
Property tax and insurance are the two figures I’d stop estimating from broad percentages. Ask for the amounts tied to the specific property and confirm what the owner, building and tenant each cover. Otherwise one omitted charge can make the apparent margin meaningless.
 
New build does not mean zero maintenance. The reserve might be lower initially, but setting it to nothing makes different properties look more profitable than they are. I’d retain a reserve and separately note any uncertainty around early ownership costs.
 
There’s also a distinction between maintenance inside the flat and building-level charges. Make sure management, insurance or common charges aren’t being counted twice under different labels. The model should preserve both categories where applicable, not merge them blindly.
 
For vacancy, I’d model actual collected months rather than deducting a vague percentage after already reducing the rent. Then add a separate turnover scenario. It is much easier to audit twelve potential rent payments than several overlapping allowances.
 
My order would be: achievable collected rent, all recurring property costs, vacancy and turnover, then debt structure. Purchase price comes back at the end. If the resulting value is materially below ARS 808,500,000, that is a pricing conclusion—not a spreadsheet failure.
 
Currency consistency deserves its own line. If purchase price, rent, expenses and financing are not all being modelled on compatible terms, the projected cash flow can look healthier or worse for reasons unrelated to the property. Don’t bury any conversion assumption inside the rent cell.
 
And if the 5.12% financing is associated with a different currency from the rental income, show that mismatch explicitly. I wouldn’t pretend to forecast the movement; I’d just test several conversion outcomes and see whether the deal depends on one favourable path.
 
A compact sensitivity table would help: rent across one direction, occupied months across the other, with net cash flow in each cell. Repeat it for two financing structures. That answers whether a small operational improvement fixes the deficit or whether the gap is fundamental.
 
If nearly every plausible cell is negative, wait or negotiate. More equity changes the financing result, not the rent-to-price relationship.
 
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