“How to become rich in real estate?” as well as “What is the best way to make money?” are some of the most commonly met questions in real estate investing. However, in the real estate investing business, there are many investment strategies from which the real estate investor can choose. Yet, investing in positive cash flow rental properties is seen as the best way to make money by the most successful real estate investors. Moreover, by selecting positive cash flow real estate investing properties, the investor ensures an immediate process of making money in real estate as well as a good return on investment. Intrigued by all the perks of positive cash flow real estate investing? Then keep on reading as there is more useful information!
#1 What Is Cash Flow?
Before exploring cash flow real estate investing, let’s define what is cash flow. Well, cash flow is simply the money that inflows- the rental income that your investment property generates and the money that outflows-the rental expenses that the real estate investor covers in order for the rental property to successfully exist on the real estate investing market.
Moreover, your real estate investments can be either negative or positive cash flow properties. This depends on the amount of rental income generated by the rental property and the amount of expenses the landlord needs to pay. Positive cash flow, for instance, is when the rental income is higher than the rental costs. Therefore, there is money left as profit for the house investor. Additionally, there are many ways that the real estate investor can choose from in order to increase the rental income. Curious to learn more about cash flow? Make sure to read “What Is Cash Flow and How Does It Let Real Estate Investors Make Money?”
#2 Investing in Positive Cash Flow Rental Properties Is the Best Way to Make Money
The reason you should start researching the most profitable real estate investments is simple. Investing in positive cash flow properties is the best way to make money in real estate. Moreover, rental properties are those real estate investments that the most successful real estate investors prefer to work with. Yet, why is investing in rental properties the best way to invest money exactly? Well, rental properties are categorized as low risk investments. The reason such income properties are seen as low risk investments is due to the fact that people always need living accommodation. Consequently, real estate markets that are economically strong have potential for professional growth. Tourist destination points are also seen as the best places to invest. These locations ensure low risk investing.
However, it does not mean that every investment property will provide the real estate investor with a positive cash flow. You should know how to invest money as well as how to make money in real estate. Consequently, we have prepared the certain steps every real estate investor should take in order to own positive cash flow properties. Furthermore, after following these steps, the real estate investor will know how to make money in real estate.
#3 Finding Positive Cash Flow Real Estate Investing Properties Step One: Real Estate Market
The first thing the most successful real estate investors do is carefully select a real estate market. There are plenty of options as the US housing market is vast. Yet, the investor’s task is to select the one with the best opportunity to implement a rental property in the market. Consequently, in order to find a positive cash flow real estate investing market, the investor should do a proper real estate market analysis in order to pick the optimal location. Choosing the right location for real estate investments is crucial to your success. That is why we suggest using Mashvisor’s investment property calculator when selecting real estate markets.
#4 Finding Positive Cash Flow Real Estate Investing Properties Step Two: Selecting the Most Profitable Real Estate Investments
Well, selecting the most profitable real estate investments is the way how to become rich in real estate. However, selecting positive cash flow real estate investing properties is not as easy as it may look. Even in the best housing market, you can find negative cash flow properties that will drag you and your business down. So, if you do not know how to invest money, there are plenty of sources and tools that may help in the decision-making process. At this point, your task is to narrow your selections down to a few. Then, the real estate investor should conduct a proper investment property analysis. Moreover, you should determine whether a certain investment property will be a negative or positive cash flow property through the cash zone formula:
Cash zone = (Gross annual rent / Purchase price) x 100
Investment properties with results between 8% and 10% should be positive cash flow properties. Moreover, if the results are above 10%, then it is pretty much guaranteed to be a positive cash flow real estate investing property. However, values below 8% represent negative cash flow properties.
As you can see, it is a lot of work to do when searching for a positive cash flow real estate investing property. That is where using Mashvisor’s rental property calculator can come in handy to save your time and energy.
#5 Finding Positive Cash Flow Real Estate Investing Properties Step Three: Selecting the Best Investment Strategies
This part is very tricky. You should carefully analyze the market when determining rental investment strategies. There are some rental properties, with which you are going to make a fortune if you adopt a long term rental strategy. Nevertheless, it may turn out that the best way to invest money is in Airbnb rentals. However, if you have a difficulty in choosing the optimal rental strategy. Interested to learn more about rental strategies? Make sure to read “Airbnb vs. Renting Out the Traditional Way: Which Rental Strategy Is Better for You?”
#6 Finding Positive Cash Flow Real Estate Investing Properties Step Four: Increasing Rental Income & Decreasing Rental Expenses
At this point in your journey as a real estate investor, you have the choice and the possibility to increase the rental income and decrease rental expenses in order to make more money. So how to make money in real estate? Let’s examine two options:
How to Make Money in Real Estate: Increase Rental Income
There are many ways to increase the rental income. For instance, the landlord may renovate the investment property by changing carpeting to a wooden floor. Moreover, adding various amenities is another possibility to receive a higher rental income. Curious to know the ways of increasing rental income? Make sure to read “Boosting Your Rental Income: 8 Bulletproof Methods.”
How to Make Money in Real Estate: Decrease Rental Expenses
As previously mentioned, cash flow is the difference between income and expense. Thus, by decreasing rental expenses, the landlord’s investment property has a higher chance of generating positive cash flow. So, how to become rich in real estate? Decrease your rental expenses! However, it does not mean to cut down the routine maintenance. You should make smart decisions in regard to renovations and manage the upkeep costs well.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.