The ultimate guide on real estate investing for beginners: Why are positive cash flow properties the best investment property?
We bet you’ve heard a thousand times that positive cash flow properties make for the best types of real estate. So, before we get to the reasons for that, let us talk a little about these income properties in general.
What are positive cash flow properties?
In order for us to explain what positive cash flow means, it is important that we explain the concept of cash flow first. So, let’s suppose you invest in rental properties that produce a monthly rental income of $1500. From that sum, we deduct all the expenses associated with that rental property. So, if we suppose that the amount of monthly rental expenses adds up to $600 each month, you are left with $900 for your own pocket.
Now, the $900 is what we call the cash flow. Since the figure is positive, it means that your rental property is a positive cash flow property. Hence, it is the best investment property you could put your hands on. On the other hand, let’s suppose your rental expenses exceed the $1500 rental income you receive. You will be left with a negative figure, therefore, making it a negative cash flow property.
How to find investment properties with positive cash flow
Making money in real estate is a process. Therefore, your number one priority is to ensure that your portfolio is filled with income generating assets- positive cash flow properties. So, here’s how to become rich with real estate:
#1. Pick a location
First things first in the real estate business. Start by choosing the location you wish to invest in. However, this does not mean that whatever location you choose is actually profitable. Therefore, once you have a location in mind, it is only logical to perform some analysis. This is where the role of the real estate market analysis comes into action. So, go ahead and have a deeper look at the area through appreciation analysis and real estate comps. This, in fact, is the only way you can ensure that you buy the best investment property in the best location.
By the way, your decision should also include the investment strategy you are going for (which the real estate market analysis will help you with). For example, many real estate investors would go for residential real estate while others would take further risk and invest in commercial real estate rentals. Also, there is the traditional rentals and the Airbnb rental business. After all, it is up to you to decide what investment strategy to go with.
#2. Have at least 3 different options of income properties on your list
Once you are done with the location, start by choosing at least 3 rental properties to analyze. One of the rules you must know when buying an investment property is that you can’t just buy the first property you lay an eye on. Therefore, you must have a few to compare to each other and to other properties around them to come up with the best investment property amongst them.
#3. Perform the investment property analysis
The best investment property comes with the highest return on investment. This is exactly what you need the investment property analysis for. By calculating the potential cash flow, you can also calculate the rest of the real estate metrics and profitability indicators.
Wait for a second, if you think that is too much to deal with, you can check Mashvisor’s investment property calculator and find out how it can help you find the best real estate investments.
#4. Pick the best investment property
Now that you have all the numbers laid before you, it is time to make a decision. Which one is the best investment property in your opinion?
Now, why do positive cash flow properties make for the best investment property?
There are so many reasons why a positive cash flow property makes for the best investment property. First of all, it produces income. Whether it’s base income or extra money, it provides income.
Another reason would be flexibility. Whether you have a full-time job or not, it does not matter when investing in real estate. You get to choose to invest either actively or passively. Therefore, you choose the amount of time you want to dedicate to the business.
Also, positive cash flow investments are the best when it comes to equity. You start with a 20% down payment and as the rental property pays for the mortgage, you build equity faster that way. That is considering the fact that the property rises in value over time. Thus, any increase in the property’s value adds up to your equity.
An important advantage to point out is the ability to start in real estate with no capital on hand. Regardless of whether you have the money or not, you can always find a way to buy an investment property with the least capital. With the variety of investment property financing methods, you won’t have a problem in that area at all.
Where can you find the best investment property?
Finding the best investment property is a matter of access to the right real estate platform. So, allow us to tell you a little about Mashvisor here!
Mashvisor is considered amongst the best real estate platforms in the US. With the variety of services and products it offers, real estate investors are able to find the best investments in the business. Moreover, when it comes to beginner investors, leave it to us to teach you all about the business in almost no time and cost-free.
You can start by surfing our blog for the best real estate articles and then go ahead and check out the best real estate investment tools that will help you land the best investment property for your portfolio. So, what are you waiting for, click here to sign up and make sure you dedicate some time to consult with our experts.