Where to Find Positive Cash Flow Properties For Success

The top secret on real estate wealth is in positive cash flow properties. Since this is becoming very popular nowadays, many people find it as a good investment. And it really is. Indeed, it is a great opportunity in terms of gaining profit whether it is on a weekly or a monthly basis.iStock_000010196024XSmall

Another thing that is great about this kind of investment is that properties are not really that hard to find. If you just know how to find them, you will realize that they are scattered right before your very eyes in the business scene. As proof, you can take note of these following tips for you to easily locate any positive cash flow property:

· Economic cycles. Bear in mind that a property always starts out to boom from the center of the city down to the suburban or rural areas. So try to check the commercial center in your area wherever and whenever there is a boom in terms of properties.

· Mining towns. Yes, mining town areas really offer a lot of positive cash flow properties. It is great to look for these kinds of properties in this kind of area. However, you need to be very careful in choosing a site because if the mining closes down for whatever reason, you can end up paying all the mortgages for the properties by yourself.

Advantages You Gain When Investing In Cash Flow Property

Cash flow property advantages are truly hidden from the general public. Think about it. Have you ever sat down with a financial planner and wondered why he has never recommended that you take your money and invest in cash flow properties? I mean really… many of the wealthiest people in the world have used cash flow property to literally build empires! Trump, Kiyosaki, Hilton, Kroc, and Donald Bren come to mind. Yet, how often are you advised to look into it?

While you are are pondering that question, think about this: cash flow property when compared to “traditional” investments peddled by many “financial planners” may provide higher returns with less risk and more control to you, as the investor.

Since many are unfamiliar with the importance of cash flow as it relates to any business. Let’s start there with a quick definition:

Cash Flow: Is the amount of cash that an investment or business venture creates over a specified period of time. Since cash flow or cash is the primary driver of a business and gives business owners the freedom to create more products, services, or even pay dividends to shareholders, most analysts believe cash flow to be a company’s most highly regarded financial statistic. Organizations and businesses with big cash flows are almost always takeover targets because the buyer knows that the cash can be used to help balance the costs of the purchase deal.

Isn’t that interesting… (Note the underlined sentence above) But, how does that relate to property? Think of it this way; each cash flow property that you own can be considered its own “company”. That is each cash flow property has income in the form of rent, and expenses in the form of taxes, maintenance, or debt service. So, just like large companies have income and expenses, you as an cash flow property investor will as well.

So, first and foremost, understand that there is a difference between investing and speculating. An investor will buy cash flow, while a speculator will bet on a rise in price or buying low with the hope of selling in the future at a higher price. In the investment property world, speculators are known as “flippers”. This is a topic for another discussion, yet just know there is a difference.

Now, what are the advantages of knowing how important cash flow can be? And, why do I prefer cash flow property to speculating or “flipping” a property?

Advantage 1: When buying cash flow property, I am creating a recurring income stream. So, when I invest my cash in a property that I will in turn rent to a tenant, I am effectively being paid for having put my money at risk. The tenant will pay me to live there which creates my income for the property. Having income from the property gives me a steady stream of cash flowing to me which I am free to use.

Contrast that with the scenario of flipping the property. If i put my cash into a property for the purpose of fix and flip, then while the property sits vacant, or is under repair, or being advertised for sale I am not receiving any cash flow. My cash is effectively tied up and not available for me to use until I sell the property and I will only benefit if I sell for more than I have put into the property. I personally would prefer not to have to sell a property in this market given the current conditions as it may take some time. During the time I am holding the property and waiting for a sale, that property is costing me money in maintenance, taxes, and advertising.

Advantage 2: Buying cash flow property creates an asset. What does that mean? It simply means that you now control or own something that pays you! The real difference between assets and liabilities is that assets pay you and liabilities require payment from you. Your personal residence is not an asset, it is a liability! It requires payment from you in the form of mortgage. Even if your home is paid for, it requires payment from you in the form of taxes, insurance, and upkeep to name a few. In reality your house is an asset for the bank that owns your mortgage, or the state and federal government that collects your property tax, and the maintenance man who does your lawn… For you though, your home is a liability!

Buying cash flow property creates an asset because you put a tenant in the property who pays you. The rented property throws off cash flow that you can use or reinvest. Every time you buy a true asset, you get one step closer to financial freedom and a life of liberty.

The Four Critical Factors in Finding Your Ideal Cash Flow Properties

Buying cash flow properties is a lot like finding your ideal mate. Ideally, you’ll put together a list of exactly what your looking for in your ideal mate. Then you go to work trying to find that person. The good news is that finding your ideal cash flow property is a whole lot easier than finding your ideal mate. The types of rental properties to buy are those that are easy to manage, low maintenance, single family home, and have a cash flow that makes sense. I break down each of these points in this article.

1. Management. Ideally, you want properties you can almost forget about because they run like clockwork for years. Do you remember the 80-20 rule? The 80-20 rule also applies to managing rental properties. Twenty percent of your properties (the ones that have a high turn over) will take up 80% of your time. This type of problem may be fixable if it has to do with the house. For example, if the drain plumbing is a problem and the toilet is always getting clogged, or the attic is not well insulated causing the heating and cooling bills of the tenant to be too high. However, if the problem is the neighborhood, their may not be anything for you to fix. In those cases, you can either bite the bullet and do your best, or sell the property.

One trap to watch for is that you may be tempted to start buying the lowest priced properties in your city. Just keep in mind those properties may be more difficult to manage depending upon the people who want those properties and the level of demand for housing.

2. Low Maintenance. Buy properties that are durable and not prone to on-going maintenance problems. For example, brick houses are preferable to wood sided houses because you have to scrape and paint wood sided houses perhaps every 5 years. Certain types of properties are difficult to maintain, such as properties with an old water well, two story houses with upstairs plumbing, and houses with very old plumbing, heat and air, and/or electrical. There are a number of other particular things to look for when inspecting a house that will be covered in Chapter 6 on renovations.

Be on the lookout for properties like the one that Goldie Bucks found. Many times the construction of houses in a particular neighborhood is very similar, so when you find that type of house, concentrate on finding more of those same types of houses in that neighborhood.

3. Single family homes versus multi-family dwellings. We recommend that you start out dealing with single-family homes. They are generally in highest demand in terms of residential properties. Another big reason is they are also easier to manage than multi-family properties in general.

The type of tenant you will attract with a house tends to be a family that will stay in the property. The type of tenant you will likely attract with a multi-family property is many times single (multi-family will have a lower rental rate than a house). Tenants do not tend to stay as long in a property like a duplex as they stay in a single-family home.

Depending upon the situation, multi-family properties can have a better cash flow than single-family homes. For example, in my market you can find about a 1,200 square foot duplexes and houses both for $40,000. The house will rent for $500 per month, but the duplex will rent for $700 with both sides full. The downside of the duplex is you will have higher maintenance (two of just about everything instead of one), and higher vacancy. The right duplexes, four-plexes, and small apartment buildings can be a great investment under the right conditions. However, we recommend that you get experience with single-family homes before you start buying these.

4. Cash Flow that Makes Sense. One rule of thumb is that the monthly rent should be 1.5% to 2.0% of your total investment in the property. Avoid negative cash flow. If you consistently buy cash flow properties with these things in mind, you’ll wake up rich one day.