How To Choose A Good Real Estate Investment Property With A Good Monthly Cash Flow By Joel Teo

How To Choose A Good Real Estate Investment Property With A Good
Monthly Cash Flow
By Joel Teo

In real estate investment there are basically two ways in which you can make money from your properties:
Capital appreciation and monthly rental. In
this article we will assume that you are a serious real estate
investor and are purchasing this property to rent out and use mortgaging to control 100% of the property with a 30% cash down
payment. Note this article does not deal with the no money down
methods of property investment which will be covered in a
separate article. This article aims to show you how to identify
a good real estate investment that can provide you with a good
monthly revenue stream and cash flow.

Firstly, ascertain how much cash you have in hand initially.
This amount will determine how much financing you can get and
the maximum amount of real estate you can control with your
initial sum. Taking our example above, if we have $30,000 in
hand, we can use this to control a property worth $100,000.

Secondly, once you do a rough estimation of your initial down
payment sum, spend some time going to all the mortgage brokers,
finance companies and banks in your area to see if they are
willing to loan you money. You would probably need some credit
reports and other documentations so as to convince them of your
credit worthiness.

Some things you would want to learn from your
financers include, the interest rate and whether its fixed or
floating, the monthly instalment size, whether they have
special short term mortgages in case you should identify a good
property to flip and re-sell. The financing element of a real
estate investment deal is very critical and spending some time
shopping around for the best bang for your buck would be a
prudent move.

Thirdly, now spend some time peering intently at the classified
advertisements. You want to ascertain the properties with the
best rental yields as if you want your real estate investment
to outperform the national rental yield, you would want
therefore to look at properties in areas that are high in
demand and look for bargain real estate investment deals.
Another good way to figure this out is to ask someone who is
knowledgeable in property.

Ask him for places with good locations for the purposes of rental.

A quick tip to note,
places near the sea and on a mountain always fetch better
prices than any other properties. Thus even commercial
properties with a sea view command a slight premium over
properties that do not have a sea view.

Fourthly, now after identifying on paper the bargain properties
within your budget, start making appointments with real estate
agents to look at properties on your list. If you make it clear
that you are looking into property investment and that you might
be a frequent customer, then there is a chance that these real
estate agents would welcome you and inform you of other real
estate bargains that you might be not aware off.

Fifthly, always make it a point to be early for the appointment
and spend some time observing the surroundings of the real
estate in question. Things to take note off include, a bad
neighbourhood, no human traffic if you are looking at a
commercial property, inaccessibility, no car porch or parking
facilities or something that your intuition tells you is not
right with the property. This is even more so for bargain
properties and auction properties as there might be something
very inherently wrong with the property. Spend sometime talking
to the neighbours and ask them about the neighbourhood and then
ask them if they know of anything wrong with their neighbours
property.

If you are purchasing a run down property, you would want to
bring along a contractor and building engineer or architect to
inspect the property with you so that you can estimate how much
you might have to spend to spruce up the property and later rent
out or sell. Once you have ascertained the real estate
investment is good for your purchase, start asking about rental
yields of property in the area and what price the agent will be
able to rent out your property.

Finally, once you have the property price, the mortgage
instalment payment, the rental yields, and operating expenses,
spend some time generating a spreadsheet to estimate whether
your purchase is viable from a monthly cash flow perspective.
You want to find the property with the best cash flow for your
real estate investment. Once you find one property like that,
spend your energy finding other similar properties and you will
start seeing your monthly income rise.

Note that generally you are more likely to encounter surprises
as opposed to surprise income, so factor this into your
calculations. Remember to keep some money in your bank account
to take into account things like changing of tenants where a
month may go by without any rental coming in and you must be
able to pay the monthly bank instalments. Also take note of
where in the rental cycle you are purchasing the property, a
property that may be in positive cash flow now, may not be so
in the next few years.

In conclusion, this article has highlighted ways to ensure that
you have a good grasp of all the different ways to choose a real
estate investment property that will yield you a positive cash
flow. Note that always remember that Murphy’s Law may strike at
any time so keep some extra cash in your bank when preparing to
purchase a real estate investment property to hedge against
such uncertainties.

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About the Author: Joel Teo is the owner of several websites and
takes a keen interest in real estate investment. For more real
estate investment articles and resources go to
http://www.realestateinvestment101.info/Investment_Articles.html

Source: http://www.isnare.com