Real estate investing is a business model that highly depends on an investor’s ability to make consistent profit. The same concept applies to any business or investment among different market sectors. Generation of money through an investment is called positive cash flow, which means that your income exceeds your expenses, thereby creating profit. Real estate investors always target positive cash flow properties.
Related: 11 Costs First Time Real Estate Investors Should Consider
No investor should buy a property that shows no promise or potential. And while such properties are priced lower, investors have to make renovations, repairs, and advertise the property accordingly to make it a positive cash flow property. This method is usually for experts in real estate investing, due to their ability to identify a hidden gem when they see one and their understanding of the market.
Positive Cash Flow Properties: Why are they so important?
Less renovations to deal with
Investing in an already successful business means the investor doesn’t need to worry about extra costs of renovations, upgrading appliances or repairs. This is where investing in a positive income property pays off because the investor won’t need to spend extra costs. Another advantage is that the income generated gives them the chance to improve the property later on without paying from their own pockets and taking a risk.
Related: 6 Rental Renovations Tips to Know Before Spending Any Money
Profit leads to expansion
For an investor to expand, they need to feel that the risk of having more properties is lower. Having one positive cash flow property is an encouragement for an investor to invest more in more properties. Positive cash flow can be used to pay off the property, save for another down-payment for an additional property, which is one of the cycles investors follow in order to make money in real estate.
Related: Buy a Second Investment Property: Why and When?
Easier to pay off the investment
Purchasing a property that will already provide its owner with profit is extremely crucial in order to make back the money invested. For example, if an investor is grossing $2,000 monthly but their added expenses (mortgage payments, property management, repairs, marketing plans, etc.) amount to $1,200, then the owner is able to pay all these expenses while making a profit of $800 every month. With a positive income property, the risk becomes significantly lower if an investor is worried about the expenses that need to be paid monthly.
Investing in positive cash flow properties must be the priority of every real estate investor. It is easier and faster to lay the building blocks of further success if you’ve already started out with profits. Finding positive cash flow properties is not easy because they get snapped up quickly by investors who see the opportunity regardless of the costs. Mashvisor’s interactive property calculator is one way to find the best property deal for you based on your budget and your cash flow expectations. If there is one platform that makes the search for positive cash-flow investment properties for sale easier, it is Mashvisor.