Having a positive cash flow investment is becoming increasingly important these days. Investors are aiming for co-living as a means to get into the positive cash flow properties' market. To understand this kind of investment, you need to know that the cash flow strategy is focused on generating a high monthly income.
This income should surpass your monthly holding costs and create enough cash flow for your pre-tax. But, of course, some experts see this concept in the negative light. They think the income returns do not even reach the cost of holding, and the investor pays more on taxes.
However, people in favor of this form of investment believe that having positive cash flow strategies and properties under it can create enough income for the investor.
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Income And Expenses In Positive Cash Flow Investment
In the positive cash flow investment section, your income will look something like this:
- Income from rent
- Advance rent income
- Income from late rent
- And income from insurance payment from loss of rent
Moreover, it would be beneficial to note that your income will not include the rent that is due but is still not paid. It will also not include rent from family members because the money is coming from within the family, exchanging student and board payments. In addition, the bond money also does not fall under your income.
Your expenses will include but are not limited to:
- Maintenance and repairs of your properties
- Property management fees
- Property taxes and charges
- Amount spent on finding tenants after lease
Moreover, these are just the tiny expenditures that you cannot ignore. A bigger expenditure is your monthly mortgage repayments. You cannot only compare the mortgage repayments with your rental income by neglecting these extra expenditures.
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Advantages Of Having A Positive Cash Flow Strategy
- First, if your portfolio has several positive cash flow investments, you are more likely to attract lenders.
- Second, if your positive cash flow property appreciates its value, it will always be in demand among other investors. So you will not be under any pressure to be in loss.
- Third, the income you generate from your positive cash flow properties can aid in recovering the extra money you spent on properties with high growth potential. So you will be using money to make more money in the future.
- Fourth, any first-time investor would likely buy into the positive cash flow strategy as it provides monthly returns.
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Disadvantages Of Positive Cash Flow Strategy
In the long term, the capital of the property may decline, given its regional area. Therefore, it can be risky to invest in one.
Moreover, the more income you generate from your positive cash flow strategy, the more taxable your income becomes. So, in the long run, you may not have as much wealth as you imagined.
Conclusion
Either way, the positives will wear out the negatives if you can bring in co-living as a concept to your properties. This way, you will generate triple the amount of rent and maybe more every week.
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