Is location the main determinant of positive cash flow in real estate investing? That is the million dollar question. It is true that location is extremely important in the housing market. When investing in real estate property, it is not simple. You are aware of your goal: Starting an investment business that generates positive cash flow. In order to achieve the goal, it is time to do your due diligence. Getting to Mashvisor is a great first step. We will help to put you on the right track from the start with our knowledge and resources.
Every real estate investor knows that location is a main determinant when investing in real estate. Starting off on the right foot when investing in real estate can be the difference between positive and negative cash flow. For that reason, knowing your location puts you in control of running a successful business from the start. Following are the main factors which affect location, which will give you an idea of how the market is trending and the type of tenants you will be attracting.
Housing Market Trends
Before investing in rental properties, it is wise to start searching for areas that are trending upwards. Finding a location with growing businesses, schools, and hospitals surrounding it is a great start. A safe, good neighborhood for the tenants to want to live in is a must. All these factors will make a big difference when buying a property for rental income. This is why when looking at the investment property, it is good to also look at the surrounding area. It would be unlucky to get a great deal on an investment property only to find that most of the real estate properties in the area are vacant. Lucky for you, you can use the Mashvisor heat map to find which areas have positive cash flow and how they are trending.
Related: Real Estate Investing 101: What You Need to Know About Positive Cash Flow Real Estate
Cater to Your Tenants Needs
In order to make money from the rental property, it is recommended to consider what kind of tenant you wish to have occupy your rental property. Families will look for places close to schools, parks, recreational centers, and grocery stores, really anything that will make their life easier when raising their kids. Students may be more concerned about being closer to the bar scene, cafes, and bus depots, generally speaking places of interest. That is why it is important to invest based on the tenants’ needs. Tenants will pay more for theses amenities. Higher rental income will give a larger positive cash flow to you as the real estate investor. It would be a shame not to mention how simple it is to find a place with Mashvisor. Go to Mashvisor to find the right location for you!
Location is absolutely essential when starting a real estate investing business. However, it is not the only determinant. There are other main factors to consider such as the financing and the condition of the investment as well as the rate of return.
Related: Positive Cash Flow Properties: What Are These and How Do You Get One?
Financing
Before buying an income property, it is crucial to consider the financing. It should come as no surprise that a down payment will be required when buying a real estate property. As a real estate investor, you have to be ready to consider how much money you are willing to pay upfront. Bigger down payment means lower mortgage rate which translates to higher positive cash flow. However, it may be wise to keep some money with you for a rainy day. The real estate investment business is a business like any other. It will come with regular predictable expenses as well as other surprise expenses.
Condition of the Investment Property
Inspect EVERYTHING before buying a real estate investment. Real estate investors will always advice that when looking for cash flow properties, you should go with the mentality of “What is wrong with this place?”. Hire professional property inspectors to check everything, look for every fault. The more thorough you are, the less surprises you will receive in the future. A common mistake that is made by real estate buyers is that they let the picture of the property sway their decision when investing. This is a bad idea. The right photographer will make any investment property look appealing. Inspect the investment property, find the faults, and assess if they are worthy of your time and troubles. Less faults means less fixes which translates to less expenses. Like previously mentioned, less expenses means more positive cash flow.
Rate of Return
If there is ever a number that is needed to be calculated when determining whether to invest in real estate or not, it is this one: Rate of return. Rate of return on any real estate investment is absolutely essential. It cannot be expressed enough. Real estate investors will openly advice other investors that any return on investment should bring back a rate of no less than 8-10%. Positive cash flow is achievable with a higher rate. A rate of return lower than 8% is a bad investment. The rate of return will allow you to understand how much earnings to expect over the financing time period. Mashvisor’s investment property calculator is a great tool to use in order to find all the numbers required when owning an investment property.
Related: How to Find Positive Cash Flow Properties
Location in real estate investing is essential to achieve positive cash flow on the investment property. A good location will allow you to make money on a larger volume. It can, and will, generate higher demand which will afford the opportunity to ask for a larger rental income. Market trends and amenities are of utmost importance when deciding on a location in real estate investing. However, these are not the only main determining factors when trying to attain a positive cash flow from the investment property. Pictures and people can be deceiving, but numbers are not. A smart real estate investor must explore the numbers and the condition of the real estate investment property before making the final decision on the rental property. These are all factors to consider before attaining a positive cash flow real estate investing business. For more tips and advice on all your real estate investing needs, visit Mashvisor!