Interested investors should always start with a budget in mind before locating the right real estate market. Getting this down, investors can now look for the right property that can give them positive cash flow. Cash flow is essentially the inflow and outflow of cash of an individual or entity.
Whether it is the first investment or a series of properties, the way to make money with real estate investments is by having a positive cash flow. In simpler terms, this means earning more with rental income than the cost of maintaining the properties. Knowing this simple principle is one thing, but when faced in a real estate market with a lot of property choices, it can be quite tricky. In this article we outline everything a real estate property investor needs to know when it comes to finding the right property that can sustain a positive cash flow.
Locate the right real estate market
The real estate market is bigger than one might imagine. Studying the different markets can help identify which one would be most beneficial. Are you looking for a commercial or residential real estate property? If commercial, is industrial better than office or retail? Urban or rural? In a central business district or a smaller city? Location is incredibly crucial to any real estate investment so narrowing choices down helps especially when one is to conduct a deeper dive through a real estate market analysis.
Choose the kind of investment property
Bad investment properties can exist even in good real estate markets. This is why due diligence is important and doing substantial research before diving into a property is a must. Try to source information from property listings online, newspapers and websites to narrow down property choices.
After narrowing down the properties, an investment property analysis is the next crucial step. Checking out a property rental calculator can also help prospecting owners and real estate property investors. Identify how much one will receive from the property via rental income versus how much it would cost to own and manage them.
Important real estate investments however call for a much more sophisticated approach. Getting the services of a property advisory firm who can conduct highest-and-best use studies, site selection, valuation and appraisal, and other research to aid decision making is important.
Identify the financing method
Cash flow is very important for any prospecting real estate investor. One’s financing method can impact the cash flow one is to receive through monthly rental income. Properties can be either financed with cash or through a mortgage. To ensure that the investment property nets a positive cash flow, the financing of the property must first and foremost be affordable for the owner. Having this in mind lessens the risk of the property owner from not being able to pay the property mortgage in unforeseen circumstances.
Building the right rental strategy
There are different rental strategies one can employ for their real estate properties — whether short-term or long-term, traditional or through Airbnb. Trying out property rental calculators can help inform one of which strategy would work best for them. But ultimately, identifying one’s goals with the investment can better inform one of the rental strategies that would meet these goals best.
Minimize expenses and maximize profit
Keeping expenses to a minimum is a simple rule of thumb in helping one actualize better rental income. Being mindful of expenses and being smart about what to spend with the property can go a long way. One can still do routine maintenance or have the property furnished without going overboard with expenses.
Once expenses are minimized, the focus can be moved to trying to make that rental income grow. Some of the ways to increase the rental price are through adding a few basic appliances that tenants might need, paying for the utilities in exchange for a convenience fee, or offering an additional service that they might need. It can take a bit of creativity in trying to make the most out of the property to maximize one’s profit.
As seen from this guide, real estate investment involves a process. Getting into property investments can be quite daunting for anyone starting out. Luckily, there are real estate agencies that offer consultancy and advisory services in helping potential real estate investors with the property that they are looking for. Santos Knight Frank is a renowned real estate agency offering a slate of real estate services from brokerage, consultancy, research, facilities management, and more. Learn more by visiting the official website of Santos Knight Frank at https://santosknightfrank.com/.