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When Is Zero Cash Flow On A Rental Property Still A Good Deal? |
Lets first of all define what cash flow is. Some people define cash flow as the difference between the rent that you can get and the mortgage payment. Any difference in there is cash flow. What I am talking about here is true cash flow. This is when you subtract out the mortgage payment from the rent, but you also have to subtract out a certain amount for vacancy rates, maintenance and repairs, taxes and insurance, property management, and any other expenses that come up on the property. If you looked at all that and at the end of the month the cash flow would be zero, it would be a great deal. I would do this deal if the property is in fairly good shape and I wouldnt have to put a lot of money into it to get it rent ready. I would want to make sure the property is in a good family rental area that is appreciating. I dont look at rentals as a way to replace income today. It is not about trying to create a cash flow today that is going to sustain my way of living. The way I look at rentals is a way to build wealth for the future, so cash flow already isnt that important to begin with. Lets say I am picking up the house and after all the expenses I make zero per month. My tenant comes in and starts paying down the mortgage so its costing me nothing per month. Im not making anything, but its costing me nothing and now I own the property. Year after year the property appreciates and my tenant continues to pay own the mortgage so I build equity. My equity is constantly growing. The amount of money that is in it for me is growing. By the time I get 15, 20 years down the road I have a significant amount of equity. I might even have paid the property off by then. Over time the rents will also go up but your mortgage rate will stay the same. Even though you started out with a zero cash flow, you will start to make money. Essentially you have gotten this property for free. The reason I am bringing this up is because I would like you to expand your thought process when you are evaluating properties.
Lou Castillo has been successfully investing in real estate since the early 90s. Castillo was on his way up the corporate ladder until he recognized that real estate offered a greater opportunity for financial freedom, and for the lifestyle he desired. Lou has a knack for developing powerful & proven systems that work in real estate and has authored more than 7 books and courses on the subject.
For more information or to sign up for Lous Powerful real estate Investing Tips go to: http://www.FreeRealEstateStrategies.com
About AuthorLou has been successfully investing in real estate since the early 90s. This informative website is dedicated to his favorite subject - how to create massive wealth through real estate - and how to do it more quickly and more easily.Lou has Master Degree in Business and Marketing, and for 12 years he worked managing a $50 million business for American Express.
Source: ArticleTrader.com
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