We’re always saying that you should treat real estate investing like the business it is.
And as in any business, your goal is to make profit. Profit, in real estate, is cash flow. Cash flow is the amount of money that is pumped in, and that is generated from your property. In other words, it’s the income generated by a property minus the expenses incurred that month/year. You could have positive cash flow at best, or negative cash flow; no investor wants the latter. You always want more cash generated from the property, as opposed to spent on the property. Cash flow investing is investing with the purpose of generating cash flow.
What other reasons do people invest for? Well, there’s a couple more. When investing in real estate, it’s usually for cash flow, or for appreciation. When investing, you don’t usually go for one or the other – it’s the package deal, as they say. Some investors focus on appreciation, and others focus on cash flow investing.
Related: Learn All About Real Estate Cash Flow Analysis in One Blog
Why is cash flow investing the key to success in the real estate market?
It’s pretty simple.
If real estate investing is your main source of income, you need constant cash flow to sustain yourself. And cash flow is an indicator of how much money you’re making from your investment. In that sense, you can consider it a determinant of your investment. If you’re making positive cash flow, you’re on the right track as an investor.
Like we said, it’s pretty simple.
Cash flow investing in general is a good evaluation for your investment efforts. If a property is not generating enough cash flow, you can gather that there’s an issue concerning either the property or something that you’re doing with that property. In this sense, it can help you in figuring out any errors that are occurring. Cash flow also allows you to make comparisons between different investment property options. Say you have two properties in mind, and you’re weighing both out. Cash flow is a good indicator of how well an investment would do.
How to conduct cash flow investing analysis using Mashvisor?
Cash flow investing analysis is much easier than you think! For the best cash flow analysis, use Mashvisor’s different features including our investment property calculator. Our calculator helps you attain instant results, and saves you the time and effort of using spreadsheets, and model and chart projections. Mashvisor uses analytics from the market, in addition to variables and numbers provided by you, to view details on how good an investment is. You can view and plug in information on costs and profits, and that will give you projections of cash flow.
What are the best cash flow investing markets in the US?
Searching for the best location when investing for cash flow in real estate is not the most difficult task, but it’s very determinant of how well your investment will do. This is why it’s very important to search for the best location and consider different elements such as job growth, affordability, and population growth, among others, when doing so.
It’s no secret that 2017 was a great year for real estate. Among the best cash flow investing markets in the nation are Kansas City, Nashville, Orlando, Tampa, Dallas, Atlanta, and Seattle, among others. For breakdowns of neighborhoods and specific properties in these cities, make sure to visit Mashvisor and look up the city you have in mind for advice. Our Mashmeter will help you make the optimal investment in the city you choose to invest in.
Related: These Are the Best Cities for Investment Properties in the US Right Now
What are ways to increase positive cash flow when investing for cash flow?
To make the best out of cash flow investing, you need to figure out ways to increase positive cash flow. For one, you can increase the rent on your investment property. This one’s a bit tricky because deciding on how much you’re charging your tenants is a separate matter on its own. Plus, if you have existing tenants and you decide to increase the rent, they may not like it and want to move out. Make sure to explain to the tenants the reason for the increase, whether you’re doing fix-ups on the property, offering a complementary service, or simply covering increasing costs. So, just make sure that if you do decide to increase the rent, you do it fairly. It’s also important to note that it’s easier to increase your rent if you’re investing in a short-term rental because tenants change more often than they do for traditional rentals.
A less obvious tip is to choose good tenants. When you choose the right tenants, you can almost guarantee that you won’t be spending too much money on fix-ups and renovations, which means you’re more likely to achieve higher cash flow simply by not spending as much money. Another tip we have to increase positive cash flow for cash flow investing is to invest in more than one rental property. Having more than one source of cash flow means you’re less likely to have negative financial turnout.
Related: What Every Real Estate Investor Needs to Know About Cash Flow
Cash flow investing: A summary
So, what should you take from all of this with regards to cash flow investing?
Understandably, cash flow investing is important because it is a measure of how well you’re doing as a real estate investor. You should always aim to invest for positive cash flow to be able to make money in real estate. Finally, if you’re investing for cash flow, it’s important to consider aspects like location, the tenants occupying your property, and the amount of rent you’re charging. And always remember to use Mashvisor to help you make insightful decisions as a real estate investor!