How do you Analyze Cash Flow in Real Estate

How to analyze cash flow in real estate

How to Analyze Cash Flow in Real Estate

Recently I was asked this question by a hopeful real estate investor. They asked, How do you analyze cash flow in real estate?

How to Analyze a Cash Flowing Property

Analyzing cash flow in real estate is quite simple. If you simply look at the purchase price of what the asset's going to cost and subtract your expenses, including debt service, taxes, insurance, maintenance items that might come up, subtract the one from the other, and what you have left is the cash flow.

What Parts of the Country to Look at

Depending on where it is, what it is, the type of neighborhood it is, we might look at, is this an area that's appreciating in value? There are certain parts of the country where we're seeing people flocking into those areas, like Florida, for example, one of the fastest growing states in the country because of its favorable tax laws and people wanting to retire where it's warm. Well, because of this, a lot of people moving to Florida and we're seeing rapid appreciation.

When Analyzing a Cash Flow Property

When we're analyzing cash flow in real estate, it's as much as the purchase price, because that equates to expenses, as much as it is the income. What can we get for rent for that property? But we also have to have to look at where is it and what is the future value going to be?

Purchasing real estate is not about luck. It's simply about looking at the trends and buying in the path of increase. If you'd like to learn more, click the link below.