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Real Estate Investing for Cashflow

Investment in real properties requires certain knowledge and experience. For your property to become profitable it should not be a rocket science. You just have to know some underlying principles before actually investing your life savings. The best thing about real estate is that there are different ways to keep your cash flow with a positive sign.

Below are basic points that will have an impact to your cash flow and eventually your real estate investment. Items found on the cash flow-in are circumstances wherein you expect some cash flowing in to your portfolio. On the cash flow-out column are obviously items that will result to cash out transaction.

Cash flow-in (+)	Cash flow-out (-)
Monthly rent - your tenant’s monthly rent payment is your major cash flow-in transaction. It is important that occupants pay the right amount at the right time. You can establish a preset due date or impose penalty charges for late payments.	Loan payments – if the money you used for acquiring the property is through a loan, then you have to set aside sufficient cash to avoid penalties and other charges for late payments. This will not be something to worry if you bought the property with your own money.
Annual rent increase – if there should be rent appreciation, it should be stated on the contract agreement. You may also explicitly discuss this matter during the negotiation or before actual contract signing. The increase may not be a very high amount but it will definitely help you out in one way or another.	Insurance – it will give you and your investment a sense of security over time. But if you did not apply for any property insurance, then your cash flow-out will be lessen.
Other revenue – it may be a good idea if you can sustain some other income-generating equipment within the property such as a laundry facility, vending machines, etc. This can be a big help to your lessee and at the same time providing you with extra cash.	Operating expense – this includes but not limited to water system, garbage management, security systems, and other expenses you regularly incur in managing your property.
	Property taxes – you may hate it but who does not? It also includes approximate annual increase of property taxes.
	Miscellaneous expense – try to allocate some cash on unexpected expenses.

These are just some of the things you need to know that may affect your cash flow management. The next thing you should do is compute for the sum of all your cash flow-in and cash flow-out transactions. If the sum of all cash flow-ins is significantly higher than the sum of all cash flow-outs then it is a good investment.

Cash is king not profit. Even if your real estate has the highest rate of return in your entire investment portfolio, if cash management is not effectively maintained it will eat up your profit over time. so before jumping into real estate investments, do your assignments first – read good materials, ask opinions of highly experienced people, and check your cash flow.

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