Real estate investments should grow in value over time and offer positive cash flow. If your property does not provide cashflow, you will have to inject money into the property continually.
If it does not increase in value, you miss out on a great way to build wealth through real estate – capital appreciation. Keep in mind that while prices are rising, that’s the time to get your finances in order.
Rental growth is a powerful way to balloon your cash flow from a rental property. Here is why it works: Your mortgage is a fixed rate, and the rent is going up over time.
If you purchased the property with a modest cashflow at the beginning, you have the potential to double your cash flow quickly.For example, if the monthly rent is $1,000 and the cash flow is $200, a 20% increase in rent would double the property’s cash flow.
Some of the zip codes analyzed had over 100% appreciation in a short amount of time. This increase in home value would vastly outpace the cashflow received from a property in that period.
Relying solely on appreciation and not cash flow can change a solid real estate investment strategy into speculation. It is essential to focus on a mix of growth and cash flow in an investment property.