Flipping properties is an excellent way to obtain faster cash than the longer term plan of buying and holding rental properties – however, rental properties can provide passive income and create a longer term plan for consistent cashflow. Creating a monthly paycheck for yourself with rental properties can be an excellent way to retire early!
When beginning any real estate investment adventure – one must always begin with the end in mind. What are your target numbers? In other words, what is the objective return on investment or cashflow you wish to create? When considering the creation of a monthly net amount for yourself through the buy and hold approach, the highest possible monthly net per unit is the obvious goal. To begin with, one must consider the purchase price of the real estate, along with the deduction from the gross monthly rent rate of expenses such as property owner’s insurance, ongoing and emergency maintenance, property management, and taxes to name some things.
We literally take pencil to paper when meeting with clients to understand their financial goals – the client’s desired monthly net number is what we begin with every time. Obviously every person’s financial scenario is different – some investors are cash buyers, others may utilize a myriad of securities as collateral – also, some investors are comfortable with the idea of owning single family homes, others prefer apartment complexes, or even commercial real estate such as parking lots or warehouses.
Once there’s an understanding of the desired monthly net income – we can begin by evaluating and searching the current real estate market for the best properties to create the highest revenue “per rental unit”. In some markets and for some investors, a “rental unit” could be defined as a single family home – for other investors, an apartment within a large apartment complex would be what’s considered to be a unit for them. Again, there are a myriad of scenarios but every single one is geared toward buying low and finding properties that rent quickly and create monthly income. Return on your investment!
Flipping real estate is a great way to build cash, however, to buy and hold real estate and create monthly income for yourself is another revenue stream entirely . The next topic is the issue of getting into the game of being a landlord – for a lot of folks this is where their real estate investing experience goes south. “I had no idea how many details there would be” is something we’ve heard from clients before. Ongoing and simultaneous details related to property management may not be for everyone, outsourcing property management is obviously something we are familiar with!
Aside from the headaches of managing their own properties – the second most often cited reason for investor burnout of failure is paying too much for property. And as we all know (hopefully only secondhand!) when real estate is purchased for too high of a price, the end result provides no cash flow – and ultimately, failure of projected returns or even worse, no returns at all.
The Fine Print – the articles and blog that we provide are not intended to be specific investment, financial or legal advice. Please feel free to contact us directly with any individual questions – we are happy to share our knowledge and expertise.