Achieving Positive Cash Flow from Your Real Estate Investments

Even if you're counting on rising property values to eventually make a profit on an investment property, it's far more desirable to have a positive cash flow each month. If you're losing money on a property every month, it may not take long until your future profits will have been lost. Owning investment property is much more enjoyable if you're making money along the way.

Here are a couple of ideas for keeping your investment property cash flow in the black:

If you don't already own your own home, your first goal should be to live in your first "investment" property. Interest rates and down payments are considerably lower for a primary residence, and you won't have to deal with finding and managing tenants or absorbing the cost of an occasional vacancy.

Once you begin looking for your first "official" investment property, you'll want to concentrate your search for less expensive homes, because they're generally easier to rent for a profit than higher cost houses. You can also purchase two or three smaller homes for about the same cost as one larger one, thus giving you an even greater cash flow.

One of the easiest ways to achieve a positive cash flow is by obtaining a loan with a very low interest rate for the first several years. One example is known as a "payment option" loan, although these types of loans may not be available in all states.

These loans allow you to set up an optional minimum payment, which can result in low monthly payments, often for the first five years. During that period, your minimum payment will increase by a small amount every year, although it's usually no more than a factor of 1.075. During the minimum payment period, your interest will still continue to accrue at whatever rate you've agreed on (such as 4.5%), but the interest that your payments don't cover will be deferred. At the end of the first five years, that deferred interest is then added on to the loan, and the loan becomes a standard variable rate loan. Normally, that's not a problem, however, because the property's value probably will have increased enough to cover the deferred interest.

Another way to minimize monthly interest payments is through an interest-only loan. The period of most such loans is usually 5-10 years, during which time, you'll be paying only the interest on the loan. To make this type of loan work most effectively, it's best to sell or refinance the property by the end of loan period.

There are many other ways to realize a positive cash flow on your investment properties, depending upon the financing options available in your area of the country. But regardless of where you live, it's always desirable to have your investment properties pay for themselves, and can move you a long way toward your goal of financial success as a real estate investor.

(c) Copyright 2004, Jeanette J. Fisher and Robert S. Kramarz. All rights reserved.

Jeanette Fisher, Design Psychology Professor, is the author of "Doghouse to Dollhouse for Dollars: Using Design Psychology to Increase Real Estate Profits," the only book to reveal interior design secrets on how to make top dollar investing in real estate. For real estate and interior design psychology books, articles, tips, and newsletters: http://www.doghousetodollhousefordollars.com.

Robert S. Kramarz is a loan officer for a major loan brokerage. He has over 20 years experience in finance and business management and comes from a family a long background in real estate investing and banking. He specializes in providing financing for purchase of investment real estate. He can be reached by email at MrFunding@22cv.com. Further information is available at the website http://www.sweetloan.info.

More than 40 states signed onto a proposed $25-billion deal with major mortgage servicers over faulty foreclosure practices. New York, Nevada and Delaware joined California in holding out for better terms.

More than 40 states signed onto a proposed $25-billion settlement with major mortgage servicers over faulty foreclosure procedures, but California, New York and other key states were still not among them.

California has until Monday to share in a multi-state deal with banks to obtain mortgage relief and reforms. Atty. Gen. Kamala Harris, who walked away from talks last year, says the door remains open.

With a Monday deadline at hand, California officials have resumed direct talks with the Obama administration about joining a multibillion-dollar, multi-state mortgage settlement with the nation's largest banks, a source said Sunday.

The talk show host pays $12 million for the 4,088-square-foot house with four bedrooms and four bathrooms. The ocean-view home sits on 1.26 bluff-top acres with beach access.

In one of the more talked-about transactions in town, actors Brad Pitt and Angelina Jolie have sold their Malibu beach house to daytime host and comedian Ellen De Generes for $12 million.

The four-bedroom, five-bathroom house built in 1920 for industrialist James Wigmore lists for $2,875,000.

A decorative cast stone entrance opens to this restored Spanish Colonial Revival-style house in Pasadena's South Orange Grove area. Built in 1920 for industrialist James Wigmore, the house retains such original details as coffered wood ceilings and arched doorways.

They don't believe they can sell their property for what it's worth, so they're spending money on making their homes more comfortable.

Do you fit any of these descriptions?

A biennial research report by the National Assn. of Realtors indicates that a handful of real estate agents and brokers and their clients either don't know the law or don't care to follow it.

When it comes to lawsuits, real estate agents and brokers tangle mostly among themselves.

The president aims to help about 3.5 million people with good credit who are unable to refinance at historically low rates because their homes are worth less than their mortgages.

 

The White House hopes to help millions of homeowners lower their monthly mortgage bill with a $5 billion to $10 billion plan to set up a streamlined refinancing program for people who are current on their payments.

The Standard & Poor's/Case-Shiller index of 20 large U.S. cities fell 1.3% in November from October as foreclosures continue to drag down the housing market.

Three straight months of home-price declines in the biggest U.S. cities showed that foreclosures remain a significant drag on a housing market that is entering its fifth year of deterioration.

L.A. Clipper Chris Paul may be quick down the court, but he moves pretty fast when it comes to buying multimillion-dollar real estate too.