Regardless of whether you have ever dealt with real estate investing in any way, you must know this: the way to make money through real estate investments is by having positive cash flow properties. Or if you want to say it in a less fancy way: if you want to make money in real estate investing and be one of the successful real estate investors, your rental properties should always make more rental income than the costs you need to spend on them. This simple fact leads us to a simple question with not such a simple answer: How do you find an investment property with positive cash flow? Well, let’s take a look:
Step 1: Choose the right real estate market
The first step to find an investment property that will generate you positive cash flow is to study carefully the available real estate markets and select the one with the best investment opportunities at the moment. The US housing market is as unlimited as it sounds: you can choose between urban and rural locations, between large metropolitan cities and small towns, between the South and the North, between the West and the East, etc. This means that you can always identify a real estate market within the US where you will find an investment property with positive cash flow. Just make sure to conduct diligent real estate market analysis to select the right location. Location is key in real estate investing, there is no doubt about that.
Related: Real Estate Market Analysis: The Basics
Step 2: Select the right type of investment property
Real estate investing is all about diversity. Just as you can choose from so many real estate markets, you can similarly choose from so many types of properties for your next purchase of an investment property. Once you have selected your housing market, see what the best – meaning most profitable – types of investment properties are there. Investment property calculators like Mashvisor’s can be of great help in this endeavor. Mashvisor’s rental property calculator shows you the optimal property type (condo, single-family home, etc.) and the optimal number of bedrooms for each major neighborhood once you have selected your preferred city. If you want to find an investment property with positive cash flow, you have to be smart and to use any help you can get a hold of, including all real estate investing tools and technologies. Once you have chosen the best type of property in your housing market, you should move to the next step.
Related: What are the best types of property for new real estate investors?
Step 3: Find the right property
Choosing the right real estate market and the right property type within this housing market doesn’t guarantee you to find an investment property with positive cash flow. Even in the best and most profitable real estate markets you can find an investment property which is just a bad investment decision. So, when you know what type of property you might be interested in buying, start looking for such properties in your market. Use diverse sources such as newspapers, magazines, websites, and other platforms. After you have been able to narrow your choice down to a few potential properties, keep on with some careful investment property analysis. Figure out how much you expect to be able to receive from each of these rentals in the form of rental income and how much owning and managing each one of them will cost you. Instead of wasting tons of time and energy on manual investment property analysis, you should find a good rental property calculator and make the best of it. For one of those, check out Mashvisor, whose investment property calculator will let you find an investment property with the maximum potential to generate positive cash flow and make money for you.
Step 4: Figure out the right financing method
Once you find an investment property which you think is a good option, you are not done. Then you have to see how to finance the purchase of your rental property. Your cash flow will largely depend on whether you buy your investment property in cash or with a mortgage, what kind of mortgage, etc. To find an investment property with positive cash flow, your financing has to be affordable. So, budget carefully.
Step 5: Choose the right rental strategy
There are income properties that will make tons of money through short-term rentals while not generating nearly anything as long-term rentals. And vice versa, of course. Once again, Mashvisor’s rental property calculator will help you figure out the optimal rental strategy – traditional or Airbnb – after you find an investment property that is specific to this property.
Step 6: Minimize your expenses
Cash flow is the difference between the rental income and the costs of running the rental property. One way to find an investment property with positive cash flow is to make sure that you bring the expenses to a minimum. This doesn’t mean that you should not perform regular maintenance or furnish your rental nicely. It simply means that you should be smart about your choices related to your investment property. Be creative to extract the maximum benefit from any dollar that you spend on your rental property.
Step 7: Maximize your rental income
On the other side of cash flow you have the rental income that you receive from your real estate property. Even after you find an investment property and start renting it out, there are ways to increase the rental income. For example, you can add some small appliances and raise the monthly rent. Or you could offer to pay the utility bills of your tenants while charging them a small fee for the service. Once again, just be creative and smart in your property management decisions and choices.
Related: Real Estate Investing 101: What You Need to Know About Positive Cash Flow Real Estate
To find an investment property with positive cash flow is not a one-step decision, it is a process. If you want to be a successful real estate investor who makes lots of money from his/her rental properties, make sure to follow the steps above to finding the most profitable investment properties in the US housing market. Check out Mashvisor for thousands of real estate properties available across the US.