Positive Cashflow Real Estate
Yes, it does exist
You may have heard of Positive Cashflow Real Estate, and many talk about it, but few people believe that it still exists. Iâm here to tell you that it does, and the opportunities to secure a positive cashflow real estate portfolio should not be ignored. Using positive cashflow property to build your property portfolio is the perfect way to get started â especially if you have little or no cash to contribute to a second mortgage on your investment property.
What is Positive Cashflow Real Estate?
Simply put, positive cashflow real estate is property which, after all income and expenses are taken into consideration and budgeted for, results in money in your pocket. That is, the rent you receive for the property pays for the mortgage repayments, the rental management fees, insurances, and maintenance. Sounds impossible? Well no itâs not. Sure most properties are not positive cashflow, but there are a lot that at least result in neutral cashflow. That is, the income from the property pretty much pays for the expenses. Positive Cashflow Real Estate is better because not only does the property pay for itself, youâre left with surplus cash.
Positive Cashflow Real Estate and Tenants
Tenants are probably the biggest unknown quantity when you are thinking of purchasing an investment property, and there certainly are some horror stories out there. However if you have a good managing agent and insurance, your worries in this regard will be negligible. Yes there may be some period where your property will lie vacant and not command any rental income, but thatâs where your research before buying becomes really important. If you purchase a piece of real estate for investment in an area which has high vacancy rates, then you can expect to see your property vacant â and that will affect whether your property remains positive cashflow, or if it becomes a liability.
Positive Cashflow and Multiple Properties
If you buy multiple properties that are all positive cashflow, then not only will your income from these properties in your real estate portfolio increase, but so will your allowable margin for error if something does go wrong and you incur an unexpected expense on one of your properties. If everything is sailing along smoothly, then I would strongly recommend using the extra money you receive from all your properties to pay off one of your mortgages earlier, therefore saving you interest and building your equity base.
Using Positive Cashflow Real Estate to Buy More Properties
Once you build your equity in your positive cashflow property you are then able to go out and look for your next positive cashflow real estate gem. Financial institutions love to see investors come to them with multiple properties on offer as security, all with flawless repayment histories (thanks positive cashflow) and equity which continues to grow. It display excellent financial management on your part (even though itâs your tenants who are paying for your loans) and makes them likely to lend you money on your next venture into positive cashflow property, using the existing equity as a deposit. Positive cashflow real estate is just magic â lots of fun and super profitable!