The best cash flow investments are easy to find if you put your mind to it. Cash flow is our specialty here at Mashvisor! So let us tell you how to find these cash flowing investments in any housing market!
A cash flow investment refers to a rental property which generates more rental income in one renting term (week/month/etc.) than what it costs in rental expenses during the same term. Therefore, this type of investment can be classified as an income producing asset. Here’s an example:
A certain rental property produces $1500/mo. The steady rental expenses include:
Mortgage payment – $500
Insurance/mo. – $50
Property management fees – $150
Other expenses – $300
Of course, there could be other unexpected expenses along the way, but these are some of the regular ones you might have.
Cash Flow = Rental Income – Rental Expenses
= $1500 – $1000
Cash Flow = $500/mo = Positive Cash Flow Investment
Why is learning to find cash flow investments so important? It might be obvious after you’ve reviewed the basics, but let’s see exactly what you stand to gain.
Related: How to Calculate Cash Flow for an Investment Property
The Importance of Cash Flow Investing
Cash flow investing comes with so many benefits for a real estate investor:
1. Profits
Well, it is cash flow which means the property’s income production is greater than its rental costs. And you can use that profit however you see fit. Some people choose such ventures to support their lifestyle. Others decide to save up the money for other types of investments. Moreover, some people aspire to grow their real estate investment portfolio, so they use that cash flow to expand and finance more properties.
2. Passive Income Opportunity
Good cash flow investments provide real estate investors with a variety of options. One such option is passive real estate investing. In other words, you can choose to hire professional property management to keep up with your rental properties. Meanwhile, you can go on with your career and only check performance reports from time to time. The rental income will take care of the professional property management fees while also providing you with a steady income with little involvement.
3. Surviving Through Tough Times
No investment is safe from market fluctuations. Many property owners lost fortunes during the 2008 recession. However, with cash flow investments, you can rest assured that it is a low-risk investment which will survive through the ups and downs of the housing market. People always need a roof over their head. Therefore, the rental demand won’t go anywhere so residential cash flow investments will typically continue to produce profits even during hard economic times.
How to Find Positive Cash Flow Properties for Sale
Now that you know why spotting cash flowing properties is a skill you need to acquire, let’s find out how to find such real estate investments in any housing market:
1. Learn More About Cash Flow (It’s Not as Simple as the Formula)
Knowing what you’re doing is vital for investing in real estate. Learn all about property and cash flow investments in particular. Find out for yourself what rental expenses you can expect and how to calculate them, the ROI, the cap rate, and the CoC return. Also, you should learn about other factors that influence your cash flow property such as tax deductions, tenant turnover, and vacancies.
There are many sources where you can acquire proper education such as real estate books, real estate blogs, or courses. You can even try to find local real estate investors who have found success and ask them for some advice and information.
Learn More: What’s the Value Added of Learning from Real Estate Blogs as a New Investor?
2. Choose a Neighborhood
A suitable neighborhood is your best friend when investing in real estate for cash flow. Start by choosing what cities you are interested in investing in. Compare the local market to other markets. What you are looking for is the median property price, rental demand, occupancy rates, job market, and the population rate. In this way, you will also be able to determine the optimal rental strategy which yields higher rental income for a certain neighborhood.
Use Mashvisor’s heatmap analysis tool to find and thoroughly analyze neighborhoods in any housing market. Regardless of where you invest in real estate, you can always find cash flowing neighborhoods for your rental business using this tool!
Mashvisor’s Heatmap Analysis Tool
3. Use Multiple Search Tools
After you’ve done the real estate market analysis, the time has come to search for positive cash flow investments for sale. In reality, there are numerous ways for how to find investment properties. You can always do it the traditional way which is driving around or looking in real estate magazines. Or, you can use real estate platforms such as Mashvisor. Our property listings provide a wide variety of real estate. You can find single family homes and multi family real estate for sale. Not only that but all rental properties for sale come with data that can help you estimate the cash flow from investments of your choice. The cap rate, the CoC return, and Airbnb and traditional rental occupancy rate are all part of that data. Moreover, you can set your own criteria in terms of property price and the type of rental property you are looking for.
4. Narrow Down Your Options Through Cash Flow Analysis
Once you’ve used the previous tools to find cash flow investments, it is time you narrow down your options. How do you do that? Through a cash flow analysis, of course. A cash flow analysis means using the data for an in-depth examination of the possibility for positive cash flow. This data includes things such as the mortgage payments, the mortgage rate as well as the data you find on the analytics platform. This will help you eliminate all rental properties with the lowest ROI potential from the get-go.
Instead of performing a manual calculation, you can use the cash flow calculator to save time. All you have to do is provide data for required fields and you’re set to go. The calculator will display all the numbers you are looking for in a matter of seconds which means that you can actually process as many rental properties as you want in a short time.
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