Owning a positive cash flow investment property is one of the main goals of every real estate investor. After buying an investment property, there are two options: the real estate investor is either making or losing money. After all, this is business we are talking about, where risk is a common thing. Consequently, time will show if you are going to be a successful real estate investor. Yet, this blog intends to help every beginner real estate investor as well as experienced one to invest only in the best real estate investments. How? Today, we will explore how to make any income property a positive cash flow investment property. Intrigued? Then do not waste your time and keep on reading.
#1 What Is a Positive Cash Flow Investment Property?
So, what is actually defined as a positive cash flow investment property? Basically, those are the investment properties that are making money. However, where is the catch and doesn’t every rental property make money? The answer is Yes and No. You see, every income property makes some sort of revenue when it’s being occupied. Still, in order for the income property to be categorized as a positive cash flow investment property, it should generate enough rental income to cover rental expenses and have money left as profit. Wondering how to turn your investment property into a positive cash flow investment? Make sure to read “How to Turn a Negative Cash Flow Rental Property into a Positive Cash Flow Rental Property.”
Let’s explore one example of the positive cash flow investment property. Just imagine being an Airbnb host of the income property that generates you about $2,800 of rental income every month. However, like any other investment property, it has its rental expenses. Let’s imagine that rental expenses are reaching $1,200 at the end of the month. Consequently, the real estate investor is the owner of a positive cash flow investment property with $1,600 of pure profit.
#2 How to Make Any Income Property a Positive Cash Flow Investment Property
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Positive Cash Flow Investment Property: Rental Income
Curious how to make money in real estate? Establish the optimal rent that will be enough to cover rental expenses. Determining the rent isn’t the hardest part if you know how to do it, of course. The best way is to use Mashvisor’s rental property calculator. This tool can help you in performing real estate market analysis and establishing the market value of your property. The rent is usually 0.8% to 1.1% of that value. Besides using the investment property calculator, be sure to compute the expected costs of the property while establishing the rent.
Keep in mind that if you charge too little, your rental income will not be enough to cover rental expenses. Moreover, if you charge too much, you simply won’t have enough demand to manage an occupied property. Therefore, the real estate investor will be losing money. In both cases, if you do it wrong, your investment property will not be a positive cash flow investment property. Interested to learn more about the rental income? Make sure to read “Real Estate Lesson #1: Rental Income.”
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Positive Cash Flow Investment Property: The Upkeep Costs and Other Rental Expenses
You should know that you cannot expect your investment property to be a positive cash flow investment property if you have huge rental expenses that rental income cannot cover. However, this is understandable as every beginner investor wants his/her investment property to look attractive. Thus, investing a lot in furnishing, decoration, etc. is what many do first. What you should know is that many tenants prefer decorating their home themselves, as it brings a homelike feeling. So in order to make your long term rental property a positive cash flow investment property, consider reducing rental expenses. Moreover, split the rental income into two categories: maintenance and your pocket.
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Positive Cash Flow Investment Property: Location
In order to make any property a positive cash flow investment property, you should adapt your property to the external factors, such as location. What is meant by that? When the investment property is located in the top tourist destination, do not bother yourself by establishing long term rentals. The chance you will be making money in real estate is small. The optimal rental strategy strongly depends on the location of your investment property. Ready to learn how to find the right location? Make sure to read “How to Choose the Right Location for Rental Properties.”
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Positive Cash Flow Investment Property: Selecting the Optimal Rental Strategy
Making money in real estate is the sweet part of this business. However, if the beginner real estate investor chooses the wrong rental strategy for one of his/her income properties, making money in real estate may remain a dream. It is commonly seen that the decision of a rental strategy for the investment property- either traditional rental properties or Airbnb income properties– is based on the investor’s preferences. However, this decision-making process might not always be the right thing to do. This is why we strongly advise you to use Mashvisor’s investment property calculator. This real estate investing tool will choose the optimal rental strategy depending on the market the real estate investor is interested in.
#3 Use Mashvisor’s Investment Property Tools to Find a Positive Cash Flow Investment Property
The beginner real estate investor may wonder: “Is it possible to start with buying an investment property that is already a positive cash flow investment property?” The answer is yes! However, there is one condition. The beginner real estate investor, as well as the experienced one, should use real estate investing tools. More specifically, use Mashvisor’s real estate investing tools for finding the best real estate investments. Everything is calculated in seconds, like return on investment, for instance. Moreover, many tools will show you which rental properties are seen as the best real estate investments in a current housing market. All you need to do is to use them and VOILA, you have the most profitable real estate investments that will make you rich eventually.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.