The Importance of Positive Cash Flow in Real Estate Investing
When it comes to real estate rentals, thorough research, and a great understanding of how a rental property is going to get cash flow is an important part of the process.
What is a positive cash flow in real estate investing?
Cash flow is the amount of cash coming in and out of a business such as rental property business. A positive cash flow means the total amount of money coming in exceeds the total amount of money needed or used up to operate the rental property.
Why Positive Cash flow is important in real estate investing?
So that it would provide you freedom
If you have a real estate rental that is generating a positive cash flow, you will not be trapped in the investment as the property pays itself. Positive cash flow can help you simply pay off the cash that you initially invested, reduce your work hours and it can help you fund other things as well.
For the growth of your portfolio
Expanding your portfolio means that you are likely to take more loans. If you have a good cash flow or if the property that you have is generating positive cash flow, then you can fund your investments in the future and help you in your portfolio expansion.
Protects you from other risks.
If you have a good cash flow coming on a monthly or regular basis, then it can help you be protected from other risks – the savings fund can be used in contingency situations. For instance, you have a period of vacancy in your rental property, but you still have to pay for the utility bills and mortgage, where will you get the cash to cover all those costs? Positive cash flow in your rental property can reduce the risk as in contingency situations, it can help you out until the situation improves instead of losing more money or losing your investment property.
Finding a real estate investment property with good cash flow is important when conducting your property analysis because no investor should buy a property that shows no potential in generating cash flow.
Your Home 901 is a real estate investing company based in Memphis, Tn. If you would like to know more, call us at 901 308 2815 or simply visit our website www.yourhome901.com
This article is for informational purposes only. It should not be considered Financial or Legal Advice.