Even in this day of plastic credit cards and electronic fund transfers, the old adage still rings true: cash is king. Without plenty of if it, you find yourself in financial distress, struggling to keep your head above water. But when you have plenty of it, life is good?the sun is brighter, the sky is bluer, the grass is greener, and you just breathe so much easier. With that in mind, the only logical question to ask is how can we make sure we always have enough cash? Well, different people answer this in different ways. Some of their answers work?some don?t. Here?s an answer we?ve found to be correct for us: generate a recurring cash flow through real estate investing.
Imagine this scenario. Each month, renters pay you thousands of dollars. What have you done? Well following your initial real estate investment, not much.
You have a property management company you pay to run things for you and you just check up on things here and there to make sure all is running smoothly.How the cash flow associated with real estate investing works
Obviously, the ideal situation would be to purchase a property for cash and then begin renting. At that point, all the cash you received, minus operating expenses, would be yours for the taking. Eventually this recurrent cash flow would exceed your initial investment and then you?ll really be a happy camper.
Of course, most of us are not in the right place to be able to pay cash for a real estate investment. So instead you might consider taking out a loan to aid in purchasing the property. At this point, a portion of your cash flow would go towards your mortgage, principle and interest. However, this shouldn?t be looked at as a loss, as essentially someone else is paying your mortgage for you. Another portion of your monthly cash flow would go towards property management.
The idea is to have money left over from your cash flow each month after paying all expenses. This is referred to as ?cash on cash return.? In other words, it?s profit. How can you make sure this happens when real estate investing? Well, it?s all about identifying a bargain and pouncing on it when the time is right.
Single family or multi family? Which is better for cash flow?
You will certainly hear people make decent arguments for both sides. However, we believe multi family is the way to go. Let?s just look at the basic difference. When you rent out an apartment building, there are many different tenants paying you rent each month. If one moves out, it impacts your cash flow a bit, but you still have others paying you. And the odds are good that you?ll rent the apartment out again soon. But when you rent out a single family home, your cash flow is reliant on a single person. If they move out, the cash flow stops until you find someone to move in. Which sounds better?
Multi family real estate investing is the way to go for cash flow
Multi family real estate investing can help you generate a reliable source of cash flow. For more information on how to get started, find a real estate advisor online.
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Source: http://kandaras01.blogspot.com/2012/08/real-estate-investing-to-generate-cash.html
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