Max Cash Flow Now

Max Cash Flow Now: Following up on yesterday’s blog on new way to increase rental property income; I was contacted by a real estate investor that purchased one of these Government Direct Foreclosures to inquire how he could create even more cash flow than what he was getting now, at market rents.

He purchased the property, a 1248 sq. ft 3 bedrooms 2 bath bi-level in Aurora CO, for $129,500 with only $3,885 down, on the Government Direct Foreclosure program, the house only needed another $5,000 in fix up.  Closing costs were worked into a 4.5 fixed rate loan with a 4.75% APR.  Cash out of pocket was $8,885 after rehab.  His PITI was only $873 and he was renting the property out for $1,250 per month.  That results in monthly cash flow of $377 per month, or $4,524 annually.  Hence, an annualized cash on cash return of 61% for the first year.  You don’t get that in your 401K very often!

But what if he added our model to it?  With the increased rents our model generates, the same property would rent for $2,128 monthly.  Deducting the PITI and in our model he’ll pay a portion of the utilities, you have $1,005 cash flow or a $12,060 per year, a 74% cash on cash return the first year, and a 90% overall cash on cash return.  Wow!

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