Understanding potential cash flow is important because it shows the actual amount of cash you have on hand monthly to:
Depending on the buyer’s overall income and cash flow situation sometimes a short-term negative cash flow will make great sense.
If someone has a high taxable income or a strong cash position and having short-term negative cash is not a problem, our Rental Opportunity Analysis Report will help you find the best Long-Term Opportunities. Sometimes the best deals are the properties that have been managed poorly. Once they are managed properly for a year or two, the returns may far exceed those at the time of purchase.
Yes, your cash flow can be negative. If your cash flow is negative, this means your property's rent (Revenue) is not enough to cover the monthly operating costs.
Often, when you first buy a property, your cash flow will be negative. Generally speaking, rents increase over time, so you can expect your cash flow to improve a bit each year. Most expenses like your mortgage, taxes and property management tend to be static or to grow slower than the rent increase rate. You can also increase your down payment to make the cash flow better.
Yes! For example, if you run multiple cash flow scenarios on a duplex in a particular area unless the interest rates change, you will quickly discover what the breakeven GRM is for that type of property.
Once you know what the break-even GRM is you will be able to rapidly analyze properties to see which ones meet the GRM requirements.