Mundo Sanchez warns that real estate deals at break-even are dangerous: one vacant month wipes out a year's cash flow. He cites a deal requiring $44,000 at maturity, a sign of over-leverage. Aim for cash-needed at maturity to be zero or negative instead.
I will tell you from experience that being at a break-even point is a very— is a very dangerous position to be in because real estate is expensive. Real estate is very expensive. And what all it takes is one month of vacancy and your entire annual cash flow is gone for the whole year. So we want to make sure that we have some stuff on the bottom line. But the major problem that's with this deal is that our cash needed at maturity is $44,000. So what that means is we're actually overleveraged quite a bit. So you will want that as close to zero as possible or even negative because
