Cash Flow is King for Real Estate Investors
Q: What’s the best thing about collecting rent every month?
A: Collecting rent every month!
Cash flow is the life force of any business—and in the real estate investment business, your rental properties provide a nice inflow of cash every month. Unlike a retail business owner, you don’t have to wait for a customer to walk in your door and buy something. And instead of the service business owner’s fight for new clients, your tenants come to you needing a home to live in. And you get to open your mailbox or bank statement and see the money coming in.
The challenge is to find new ways to keep rental property expenses down—which is the best way to improve cash flow. Keep in mind, that even small profits add up—and profit is absolutely necessary. Losing money by paying too much for a property, taking on big mortgages or paying out too much in expenses—even for the short term—can cripple your rental property business.
Cash flow can help you grow your business. Having cash on hand means you can take advantage of new opportunities—like transitioning from smaller properties to larger properties. Or purchasing a ready-to-go building instead of a fixer-upper.
When you buy properties at the right price, and the rents pay the mortgage, taxes, insurance and other expenses, you will have positive cash flow. Conversely, if a property is not making a profit, consider getting rid of it to return to positive cash flow. And remember, the promise of potential profit and increasing value does not equal cash flow.