When investing in real estate property for positive cash flow, the key strategy is to buy that property which will create a surplus cash flow before tax. The real estate market is full of several segments, and identifying the best investment option will help you achieve this goal. A lot of people invest in residential property for positive cash flow because it is an ideal market segment for this.
Factors to consider when investing in real estate for postive cash flow
1. High yielding suburbs
When you buy a residential property in a high yielding suburb, the returns will be much greater as compared to middle and low-income residential districts. The total monthly rent collected will be sufficient to cover your loan and interest repayment, and also leave you with some cash to operate with after meeting all your expenses.
2. Multiple income properties
Investing in multiple income properties will present you with many cash flow sources. An example of this is a building that contains a granny flat. They are commonly referred to as secondary dwellings and can be a good source of cash.
3. Targeting student accommodation
This is another smart investment. Buying or putting up property for student accommodation will give you a steady source of income all year round. The good thing about this is that learning institutions do not often change locations. Thus you are assured of a steady source of income for a long time.
4.Focus on big cities and towns
The level of income for town and city dwellers is usually higher than for those who work in the countryside. Life in urban areas is more expensive, which makes the amount of compensation commensurate with the standards of living. If you want to invest in residential real estate for positive cash flow, a big city or town would be an ideal area.
The cash flow formula when investing in residential real estate for positive cash flow
A wonderful thumb rule for calculating cash flow by real estate investors with the goal of acquiring properties that will give them surplus flow of cash is given below:
(Gross annual rent/buying price) X 100 = Cash-flow zone percentage
If the zone is 8% and above, the investment is worth checking out because it will give good returns.
A positive cash flow is the backbone of any sound investment especially when one is just starting out. It will make your operations smooth and create an opportunity for further investment.