Basics of Real Estate Investments

Investing in real estate can be two-fold. One you can purchase property and move in to that place. Or you can buy it and then sell it immediately.

One of the surest ways to invest is to buy a wholesale property and make sure that it is of the right location so that its value will be ideal for you to make a profit. You can also find a property with a good cash flow to ensure that you will profit from the said property. Positive cash flow is defined as the amount remaining after all expenses related to the real estate property has been deducted. These expenses may comprise of items like taxes, mortgage payment, and operating costs.

Positive cash flow is dependent on three different aspects such as the amount of the mortgage payment, operating expenses of the property, and the rent being charged. For you to get substantial profits from investing in real estate, you should analyze the said aspects. One of the easy ways you can gain a positive cash flow is to get a cheap down payment on a property, and a low interest, long-term mortgage. Usually if you get a low mortgage payment you will gain higher cash flow. For example if you purchase a $125,000, 4-story apartment and have it rented for $600 a month, you will get $2400 a month.

If the mortgage payment is less than $625, with operating expenses at $300, you would gain positive cash flow amounting to $1,475. But if the mortgage rises to $925 monthly your positive cash flow drops to $1,175 monthly. Thus you should get low payments as much as possible and keep the operating costs at a minimum.

Yet another method to gain positive cash flow is by availing of an interest-only loan, mainly because this is for the short term, normally from 5 to 10 years, and you would only have to pay for the interest. Once the loan period lapses you have to sell the property or even refinance the property. The problem is that this loan usually has high payment terms. By getting positive cash flow from this investment property you can then utilize it in getting more investment properties.

Keep in mind that if you want to generate income through real estate investments, you need to have a positive cash flow by keeping your operating expenses, rental, and mortgage payments low.Article Source -

The Author runs a weekly column about Real Estate in Texas.

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