Cash Flow
Buying investment property is a business and, like any successful business, it should make money. So, the question is: "How to make money with real estate?" Well, before you buy, you should do an investment property analysis to determine if the property will make money.
Fortunately, there’s an easy way to do that by using my INVESTMENT PROPERTY WORKSHEET®. Your success will ultimately depend on your analysis. So be sure to use realistic numbers and be conservative with your estimates.
A good rental property can make money in four different ways. (cash flow before tax, principal reduction, income tax savings and appreciation). Each of these four financial benefits is calculated by using the INVESTMENT PROPERTY WORKSHEET®.
Let’s start with cash flow. That’s the money you have leftover after you pay all expenses and loan payments. A dollar of cash flow is twice as good as a dollar from your job!
That’s because cash flow dollars can be sheltered from income tax (as we’ll see later) plus the cash flow dollar is exempt from social security or self-employment tax. Most people would have to work hard enough to earn $2 from their job to equal $1 of tax-sheltered cash flow.
Let’s join one of my seminars so I can show you how to use the Investment Property Worksheet to calculate cash flow. You’ll learn about important items such as gross operating income, vacancy rates, operating expenses, net operating income, debt service and so forth. The seminar deals with a woman named Janet who is thinking of buying a small apartment building. As you listen don’t worry too much about the numbers – - – just follow along to get the concepts. Once you master these concepts, you can apply them to any investment property in any town.
® Copyright Tom Lundstedt Seminars. ALL RIGHTS RESERVED. No part of this program (except as noted) may be reproduced or used in any form, including electronic, without advance written permission.
This material is designed to provide information about the subject matter covered. The accuracy of the information is not guaranteed. This material is sold or offered with the understanding that neither the author nor the publisher is not engaged in rendering legal, accounting or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought.
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