As a rental property investor, obviously, you are investing for cash flow. However, the question is how to find the best cash flow investments in the market.
Rental properties are a type of income properties that are supposed to generate income for you. This income comes in the form of cash flow. Obviously, you want a positive cash flow investment in order to stay on the right track.
Related: How to Find Positive Cash Flow Properties
Before we get into the methods to find the best positive cash flow investments, it is important that we explain why you would want to invest in these.
Why invest in positive cash flow investments?
Positive cash flow means that you get some profit each month. This also means that you can enjoy an extra income to pay the bills and maybe allow yourself to take a vacation every now and then. Therefore, the first reason you would want to invest with this type of strategy is the income it provides.
The second reason would be flexibility. You see, many people want to find a source of passive income and keep their original 9-5 job. An income property can provide just that. Once you decide to buy that property, it would be a matter of renting it out and enjoying the rental income it provides.
Another reason is business growth. After a while, you’ll find that the positive cash flow piled up to a good sum of money. This allows you the opportunity to grow your real estate portfolio. Not only that, but you can also buy more properties by refinancing based on your equity. This makes positive cash flow properties amongst the best real estate investments.
Finally, even though property appreciation is not guaranteed, it is still a possibility. If you manage to buy a good positive cash flow property, you will not only enjoy the monthly rental income but also the rise in property value. By the time you decide to sell, in some locations, you’ll find that your investment property is worth twice the original price.
Related: Cash Flow vs. Appreciation: What Should Drive Your Real Estate Investment Decision?
How do you find the best cash flow investments in real estate?
Finding the best cash flow investments is all about the procedure. IF done properly, we promise it will be a matter of time until you start seeing some positive outcomes. Therefore, here is what you need to do:
Hire an agent:
As a new real estate investor, it would be better if you just hire a real estate agent. Working with a professional is never a bad idea. Moreover, they know exactly how to find the best cash flow investments as they have the expertise to do so. Later in this article, you’ll come to realize that finding such opportunities is more than just a nice view or a beautiful property setting. There is more to it than that. Therefore, it would make more sense to work with someone who has done it before and knows the characteristics of profitable investment properties.
Related: The Best Ways to Find a Real Estate Agent
Search for “for sale” properties:
Many real estate investors prefer to search for investment properties themselves. They might hire a real estate agent, but it makes sense to them to be involved in the process. In our opinion, it does 100% make sense to be involved. After all, it is your property and you want to like it too. However, always consult with your agent and make sure they approve based on reasonable criteria.
Perform investment property analysis:
The process of investment property analysis focuses on the return on investment. To put it simply, it means how much you’ll be making in return for what you have invested on an annual scale.
There are a few ways to calculate the return on investment. However, the most common ones for rental properties would be through the cap rate and the cash on cash return. These two metrics take into account the net operating income which is the rental income minus the rental expenses for the whole year. The cap rate estimates the ROI by dividing the NOI by the total purchase price. The cash on cash return estimates the same measure by dividing it only by the number of actual dollars invested. This makes the cap rate more generic than the CoC return. But still, they are both great ways to get an accurate figure for the potential of making money in real estate through the best cash flow investments.
By the way, Mashvisor offers the best rental property calculator to ensure you always get the best cash flow investments for your business! Check it out.
The best cash flow investments also require proper neighborhood analysis:
Finding the best cash flow investments is also about thoroughly analyzing the location. Understand that it is never enough to look at the property itself to determine whether it is a good investment or not. Really, the best cash flow investments are also determined by the surrounding area. The only way to know that is to conduct the real estate market analysis, in other words, the comparative market analysis.
The significance of this procedure is that it reveals the fair market value of the investment property. It is no secret to anyone that the asking price is not always what the property is actually worth. Therefore, in order to avoid losing money on a property’s price, you want to go through the said analysis. Basically, you compare the investment property of interest to other similar ones around it. This can also help you decide how much you want to charge for rent so that it’s not very expensive nor very cheap so that you end up with a negative cash flow.
Use Mashvisor to Find the best cash flow investments!
Luckily, the best cash flow investments are what we specialize in. Therefore, if you really want to know what it means to acquire the best real estate investments for positive cash flow, you want to check Mashvisor. We have a great listing section for all types of investment properties for sale. Once you choose a property of preference, you can find all its data in terms of investment property analysis in addition to CMA.
You can also use Mashvisor to learn all about investing if you are just starting a real estate business. A real estate guru is never a bad idea especially if you are dealing with the best of the best in the field of real estate.
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