How Real Estate Can Put Cash In Your Pocket Every Month.

Everything old is new again – Back in the days before housing prices zoomed through the roof like a rocket, the way to make money on rentals was to create a positive monthly cash flow, and to count future price appreciation as gravy for a later day when you wanted to sell. Right now is the first time in years that 4 important factors have aligned so that you can once again both make money every month and build your wealth the old fashioned way –

1. Low purchase prices – Many homes can be purchased for less than it cost to build them, and sell for 70% less than their market high.
2. Crazy low interest rates that you can lock in for 30 years – Today’s rates mean your monthly expenses for principal and interest payments are easily 30% less than a few years ago. Combine the low interest rate with a low purchase price and your monthly nut can easily be 50% less than in years gone by.
3. Stable rent prices – Although rents have fallen, they haven’t fallen by nearly as much as the purchase price of the homes. This is in part due to the increased number of renters.
4. A larger pool of renters / increased customer base – New mortgage guidelines which make it harder to buy a home + the large number of folks that have lost their homes and need to rent = more renters

Another benefit to a positive cash flow with a one year lease is that it eliminates the need to stress over resale prices every month. When you are putting cash in your pocket every month, a change in resale prices is less of a concern. Many of the landlords that got knocked out of the rental business were completely invested in double digit price inflation. They did not care about the good old fashioned benefits of positive cash flow because they thought they would make it back when they “flipped” it. When prices went in the wrong direction, and they were sitting on a negative cash flow, all their potential profit was gone.

I’m buying rentals and I think it is something you should also consider. Contact me and I’ll be glad to discuss if it makes sense for you to try and get both a monthly return on investment (ROI) combined with future asset appreciation.

Click here to view the Arizona Republic Article published May 2011.

Jerry Raviol
West USA Realty
http://www.houseaz.com
602-695-5478