What is Cash Flow Real Estate Investing?
Cash flow real estate investing is the purchase of an asset, such as a stock, bond, or rental property, from which you receive regular cash profits or distributions.
Cash flow generated from flipping houses is not cash flow investing, because the asset (house) is sold to generate cash; it does not repeatedly distribute cash on a regular basis, over and over again, month after month. Cash flow generated from rental properties, on the other hand, is cash flow investing, because the owner receives cash every month from rental proceeds. More sophisticated investors, therefore, who flip houses and also generate monthly income from rental properties, track both types of cash flow separately.
Cash Flow Real Estate Investing Builds Wealth
The beauty of cash flow real estate investing is that it can build long-term wealth that continues to grow throughout multiple generations.
Many investors use the cash flow and leverage from their real estate investments to purchase more investment property. And, many investors also use the cash flow to fund retirement, fund college education for their children and grandchildren, take exciting vacations with family and friends, and much more. Most importantly, for many investors, wealth generated with real estate cash flow investing can continue to grow over multiple generations, funding charitable organizations and providing a better life for future generations.
Cash Flow More Important Than Appreciation
Investing in rental properties is different from other types of real estate investing, such as flipping houses.
When investing in rental properties, investors should put together deals on properties that will generate monthly cash flow profits. Investors are not necessarily concerned about appreciation of the property, especially in the short term. Appreciation, therefore, is not the top concern; generating monthly positive cash flow over the long-term is most important.
Cash Flow More Important Than Location and Curb Appeal
Location and curb appeal are important to consider when purchasing any type of investment property. But, more important than these is generating positive cash flow.
An investment property can be in a great location, and have amazing curb appeal, but if an investor cannot purchase the property for a good price, and cannot collect rent at the rate needed to produce reliable cash flow, it should not be purchased. On the other hand, location and curb appeal are important to attract appropriate tenants to the rental property. So, an investor must analyze all three of these factors to determine if the property can attract and maintain good tenants, while also generating positive monthly cash flow.
Increase Cash Flow with Rent to Own / Lease Purchase
Rent to own (lease purchase) is a popular method of buying a home for buyers with less than stellar credit. Besides the benefits to the buyer, investors can also benefit because rent to own properties typically generate more cash flow, and can have lower maintenance cost if the tenant is responsible for repairs and maintenance. Additionally, tenants in a rent to own home often lease the home for a longer period of time, usually two to three years, which also increases cash flow compared to finding a different tenant every year.
Finally, not all tenants in a rent to own property close on the home as prescribed in the contract. In those cases, the investor finds a new tenant, having produced more cash flow by collecting higher rent than he would have otherwise, and possibly with higher profits due to decreased repairs and maintenance costs.
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