How to Find
“Cash Flow” Real Estate

By Carol L Johnson, Real Estate Investor, Real Estate Broker and Mortgage Broker. Reed

 

What is “Cash Flow” Real Estate?

Put very simply Cash Flow real estate is single family, multi-family or commercial rental property which after all expenses, i.e. mortgage, taxes, insurance, repairs, and management fees produces a positive cash flow which gets paid to you the property owner. Cash Flow real estate is inexpensive with a small steady appreciation rate in an area where there is a large population that can afford to rent for more than your payment.

Why “Cash Flow” Real Estate?

Cash Flow real estate investing involves buying a property and renting it out. Since rent payments cover the mortgage payment, insurance and taxes what is left is Cash Flow. This is the kind of Cash Flow that allows people to leave their jobs. You can see how a positive cash flow of $200 or more for several properties could quickly add up to an amount that would make your life more comfortable.

Where do you find “Cash Flow” Real Estate?

First you have to find the part of the country that has a stable housing market.   Stable markets are those that have not experience high appreciation rates in the past and are now not being hit as hard by the mortgage crisis because they didn’t grow a bubble (over appreciate) to burst. Stable markets include cities in California and Florida but overall housing prices make it nearly impossible to have positive cash flow.

You should also look for areas with low median homes prices. Cities like Garland Texas have a median home price of $116,000 but higher than average median rental rates of $862. 

How does “Cash Flow” Work?

Let’s run some numbers on an example property that can be purchased in Garland, TX.

123 Main St. was a foreclosure listed at $44,000; it needed approximately $20,000 in repairs. Repairs included paint inside and out, refinishing the hardwoods, re-tiling the bathroom, new vanity, toilet, kitchen cabinets, countertops, sink, garbage disposal, finishing the 1 car garage into a bedroom and laundry area, new HVAC unit, etc. When completed the total cost would be $64,000. Principal and interest would be approx $420, taxes $136, insurance $62.50 for a total of $618.50. This unit rented within one week for $875 a month. $875 less $618.50 is $256.50 in positive cash flow each month. Multiply that a few times and soon you have another full time income coming in.

When is the right time to buy “Cash Flow” Real Estate?

This short answer is now. There will be no real estate market like this again in our life time. It is time to take advantage of the opportunities that are available. The mortgage crisis has created a situation where banks have to lower prices in order to sell off non-performing assets, and due to foreclosures there are more tenants than usual, those who weren’t really ready to be home owners and those who were tenants of investors who got themselves into bad loans are also looking for new places to live. Rental markets are tightening up and prices go up along with that.

Contact a Real Estate Investment professional in your area, if your area qualifies as a good cash flow market. If not find one or call me. The DFW area is a great area for cash flow properties.

 NOW TO FIND CASH FLOW PROPERTIES

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