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Producing Positive Cash Flow With Investment Property

by Guest on Jul 2, 2012 Real Estate 1296 Views

Investment property refers to any type of real estate that is purchased for the purpose of generating positive cash flow. There are several types of properties and each generates income differently. For example, rental houses generate cash flow monthly, while flipping houses produces income when the property is sold.

Investors need to determine which investment property type is suited for their investing goals. Some investors prefer to buy properties for a specific niche, such as house flipping or rental houses, while others diversify and buy different types of properties and real estate notes.

Offering homes for rent is a good option for investors who want to generate monthly income. Rental properties can be offered on a long- or short-term basis. Some investors prefer offering properties as vacation rentals, while others prefer renting on a long-term basis using a 1- or 2-year lease.

To derive consistent income from rental properties requires investors to attract quality tenants. Investors must be prepared to maintain rental properties and address repair issues quickly. Rent prices must be in-line with market conditions; otherwise rental homes will stay vacant and create negative cash flow.

When offering vacation rentals, investors must be prepared to clean the home after each rental and engage in marketing strategies to keep the property rented on a consistent basis. Investors can often generate higher profits from short-term rentals when investment properties are located in popular vacation destinations. It is not uncommon to charge up to four times more for vacation rentals than long-term rentals.

House flipping can be a good choice for investors who prefer to generate quick cash. This strategy used to be very popular during the housing boon, but has nearly fallen to the wayside. The real estate market is oversaturated with distressed properties which make it difficult for investors to generate profits.

Prior to the housing market collapse real estate investors purchased distressed properties, such as foreclosure, bank owned, and short sale houses, at deeply discounted prices. They would rehab the house, sell it within a month or two, and pocket decent profits. It was not uncommon to earn $20,000 or more per property.

Today, many of the properties that investors purchased with the intent of flipping are either used as rental homes or sold using lease purchase option agreements or seller carry back mortgages. While there is still opportunity to generate profits through flipping houses, this isn't the best investment practice at this time. Investors who choose this route must be prepared to hold properties for long periods of time if unable to sell for profit.

Everyone knows the housing market is chaotic. Banks are holding seized properties in hope of selling at higher prices once the market stabilizes. This has created a housing inventory shortage in certain markets such as California and Florida and reduced the number of distressed properties available for investment purposes.

To succeed in real estate investing today requires becoming diligent in the quest for profitable properties. Investors who carefully assess purchases and make informed decisions have potential to reap financial benefits once the market rebounds. In the meantime, investors will need to become creative with property investments.

Finding appropriate investment property requires a lot of skill and good luck. However, real estate has a long history of being a good investment choice. Those who conduct adequate research and develop good relationships with real estate professionals can earn profits in a down-turned market.

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