The impact that the COVID-19 pandemic has had on the economy has forced people to re-assess what to invest in. If you are wondering where to invest money, one thing that can help you identify good investments is the potential cash flow. If you have enough cash coming in, you will be able to weather emergencies while having funds to make more investments. For savvy investors, cash is king. But what are the best cash flow investments?
While there are several investment opportunities that promise cash flow, not all options will work equally well for you. If you are looking for the best way to invest money to generate good cash flow, you should consider real estate investing. In this article, we’ll look at some of the key reasons why real estate is among the best cash flow investments.
Why Real Estate Is One of the Best Cash Flow Investments
1. More Resilience
One key factor that makes real estate among the best investments for cash flow is its stability. Investing in real estate offers an opportunity for more consistent cash flow than other investments. While consumer spending usually declines when there’s an economic downturn, people will always need a place to live. Moreover, populations are always increasing, which increases demand for housing each year.
Many industries have been adversely impacted by the ongoing COVID-19 pandemic, but the US real estate market has remained resilient. Unlike in other industries, real estate cash flow can still be expected despite the struggles facing the economy. If you want an investment strategy that can weather a pandemic, consider real estate investing.
2. Ability to Earn Passive Income
You can earn passive income with real estate investments
If you are thinking of how to make passive income in 2021, real estate investment is a great option. The ability of real estate to generate passive investment income makes it among the best cash flow investments. However, this is not possible with all real estate investment strategies. Three common ways to earn passive income with real estate are to invest in rentals, REITs, and real estate crowdfunding.
Managing your rental properties yourself can be time-consuming and stressful. However, you can decide to hire a professional property management company to operate the rental property for you. Although hiring a property manager will eat into your profits, you will have more time to focus on other things. You also don’t have to deal with tenants yourself, which can be a headache. However, be sure to do your due diligence before hiring a property manager to ensure that they are competent and experienced. That’s the right way to turn income properties into one of the best cash flow investments.
3. Capital Appreciation
Apart from monthly cash flow, what makes real estate one of the best cash flow investments is real estate appreciation. If you hold the investment property, it will appreciate in value with time. You will, therefore, make a profit when you decide to sell. Rents also go up with time. So, you will be able to generate even more cash flow in the future, thus keeping your rate of return constant or potentially even increasing over time.
4. Better Control Over Your Cash Flow
When you invest in stocks or bitcoin, your returns are completely dependent on the competence of the company’s managers as they will influence performance. Investing in stocks and cryptocurrency basically has a higher risk since you are not guaranteed future returns on your investment.
Rental property investing is among the best real estate investments for cash flow because the opportunity to maximize investment income is in your hands. For instance, you can upgrade your property and add amenities like a gym and a pool. This increases its value and allows you to charge higher rent, thereby increasing your real estate cash flow.
You can also maximize rental property cash flow by cutting expenses. For instance, you can opt to cut down on management costs by managing the property yourself. Alternatively, you can refinance your mortgage when interest rates are low and lower your monthly mortgage payments.
Related: How to Maximize Real Estate Cash Flow
5. Predictable Real Estate Cash Flow
For most investments, it’s hard to predict the amount of cash flow you will get. With real estate, it’s possible to predict the potential cash flow even before you make a purchase. As long as you buy a rental property in a good location and keep it occupied, you can be assured of monthly rental income. To know what your rental property cash flow will be, you simply need to determine what you’ll be charging for rent and deduct the monthly rental expenses.
Related: Learn About Real Estate Cash Flow Analysis in One Blog
How to Find the Best Cash Flow Properties
Although real estate is one of the best cash flow investments, not all rental properties are guaranteed to generate positive cash flow. The best way to ensure positive cash flow is to buy the right property in the right market. You don’t want to use your hard-earned money to buy an income property only to end up with negative cash flow. So, be sure to do your due diligence before you make a purchase.
Related: Why Positive Cash Flow Is a Must with Income Properties
If you want to find the best cash flow properties in the US housing market, the easiest way to do it is to use Mashvisor’s real estate cash flow calculator. This tool estimates monthly rental income and rental expenses and does the cash flow calculations for you. The cash flow calculator also computes other key real estate metrics like cash on cash return, cap rate, and occupancy rate.
The Bottom Line
If you are thinking about how to invest your money, investing for cash flow is a great way to achieve your financial goals. With many investment strategies available, it can be confusing which route to take. Should you invest in stocks, bitcoin, real estate, or another business? Based on the reasons we’ve discussed above, it is evident that real estate is among the best cash flow investments. If you are intrigued by the prospect of owning a rental property, be sure to use Mashvisor’s real estate investment software to find income properties in the US housing market and analyze them.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.