Real Estate is About Cash Flow
Mar 19th, 2009 by kyle
While going through some blog posts and news articles today, I realized that even after such a large real estate fall-out there are still people thinking of real estate as a get rich quick, speculation style of investment. Nothing could be further from the truth. Cash flow is king!
Since the value of properties has come down very significantly is some markets, and since real estate has historically always gone up in value over the long term, these people think they can time the market and catch it on a bounce with the expectation that property values are going to come right back up and that they will make tons of money from appreciation. This may be the case…but it may not. Foreclosures are still happening at a blistering pace and housing prices continues to fall in some markets. Even if I thought this was the bottom, I wouldn’t buy real estate on this speculative reasoning.
The most important benefit of such a large decline in the market is that it creates opportunities to cash flow properties in markets that do not traditionally cash flow. Some parts of Florida for instance did not have enough rent to cover expenses. Since some areas have decline as much as 50%, they now do cash flow. In situations like this, buy properties that you can cash flow and then it doesn’t matter if the values fall further or take several years to appreciate, you still make money on your investment because it cash flows month after month.
There are many ways to cash flow real estate, where it be rental, lease options, assignments, etc. Do you homework and make sure the numbers are in alignment with the market and that you understand all the expenses so that you won’t be surprised by sudden, large increase that could wipeout your cash flow.
Cash Flow is King!
[...] Original post by KGE Real Estate [...]
[...] Original post by KGE Real Estate [...]
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real estate property values…
So, today is Saturday and I was searching around for real estate property values on google and you came number 3 in the UK, Just thought you would like to know….
jackie O…
So am I an missing something? or this same-old, same-old?…
Number 3 in the UK. Not exactly my target market, but I’ll take it.
Hi Jackie,
Thanks for chiming in. This may be the same-old, same-old, but consider the fact that most of the market’s problems were because the investors were not following these rules. And not just the inexperienced investors. How about some of the biggest. In fact, read the story about the John Hancock Tower in Boston (http://tinyurl.com/dzukkp). Cash flow comes in many forms. For someone like yourself, who is working with foreclosures, the same holds true. If you are buying heavily discounted properties or taking them over “subject-to”, I’m sure you are not financing at 100% and then hoping they appreciate. More than likely you are flipping them for a quick profit or turning them into income properties through rental or lease-own-arrangements. These all constitute cash flow.
[...] little over a week ago I wrote a post called Real Estate is About Cash Flow. Today I received a comment on that post from Jackie that said “So am I an missing something? [...]
[...] Only during this due diligence phase will we make a visit to the park. The looks of the park are very much a secondary consideration after the financials. Whether the park is a 1 star or a 5 star, the important thing is that it has good cash flow. Remember, Cash Flow is King. [...]
rent real estate…
Thank you for your help! Nice post with some well thought out points….
[...] old adage of “buy low, sell high” comes up a lot these days. Just remember that Cash Flow is King. Also, how do you know if you are buying [...]