Max Cash Flow Now

Max Cash Flow Now: How does your rental properties cap rate compare to other income producing properties.

Since our method guarantees such a vast difference in cash flow from what is normally received from a single family and multi-family investment property we wanted to illustrate what investors in apartment houses do when they asses a deal.  They evaluate the profit potential of the property as opposed to what comparable properties recently sold for, to establish value.  Basically, how that investment is going to pay them back, similar to annual interest rate paid on an investment in a CD or Bond.  So the ratio between the sum invested and the net profit the asset produces is the cap rate.

By applying a certain criteria, someone investing in larger money producer, such as apartment buildings can determine a worthwhile investment and the same criteria can be used when looking at our system applied to your single family and smaller multi-family rentals.  A good deal for an investor in apartments is a cap rate of 10% or better.

annual net cash flow / total dollars invested in the property = Cap Rate

For illustration, if a single family residence (SFR) were acquired for $85,000 and it required $15,000 in remodel costs so the total investment would be $100,000.  Market rents for the neighborhood suggested that you could rent the property for $1,250 a month gross or $15,000 annually.  Deduct your total annual operating costs; principle, interest, taxes, insurance, property management/maintenance costs, (lets use $1,050 a month) to arrive at your net positive income.  So annualized operating costs would then be $12,600 annually, which leaves $2,400 in net annual cash flow.

$2,400 / $100,000 = 2.4% cap rate

It’s not unusual for a usual rental to cash flow $200 a month net. Naturally, the property owner is relying on the property’s ultimate market appreciation, and tax advantages, to evaluate their overall investment also.

Now apply our system, and rent the home at double market rates of $2,500.  Our suggested method does necessitate some additional operating expenses, so the monthly effective operating costs would now be $1,250 a month, thus providing $1,250 a month in net cash flow or $15,000 annually.

$15,000 / $100,000 = 15% cap rate

Now that’s much better and the envy of every apartment owner out there and you did it with a SFR.  It’s not completely passive income, it does call for some extra time, but not as much as one might think.  We teach ways to reduce management time considerably.

To learn how to increase your “Cap Rate,” download our free Ebook, Max Cash Flow Now, from the side bar.

Blog Intro 01-04-10

Max Cash Flow Now: Transitional housing is the key to increased rental property cash flow, especially with the right tenants.  A small three bedroom two bath unit can generate $1,900 a month gross income.  A four bedroom can gross $2,600 a month.  It adds up quickly for the property owner and offers an advantage not often afforded to individuals looking for alternatives.

Also, known as alternative housing, this form of housing is in great demand due to the nature of our current economy.  Foreclosures continue to increase, as reported by the Denver Post yesterday, subsequently, forcing more individuals to seek affordable housing options.  The cost of renting a small apartment may still be out of reach for some, as landlords typically demand first and last months rent up front.

That is where transitional housing fills in, by renting inexpensive furnished rooms by the week or the month in a SFR, duplex or small apartment complex fully furnished and equipped.  Private rooms normally rent for $100 a week and up, and some single tenants will agree to a semi-private room for $85 a week, with a $100 damage deposit.  These tenants do not sign leases, and agree to “house rules” minimizing the management time after you are up and running. Many zoning districts allow for this type of occupancy.

There is one tenant population that has a great demand for this type of housing and there are government and non-profit agencies who refer tenant applicants to you for no charge.  This is not section 8 housing.  Download (see sidebar) and read our free eBook, it covers all the details of our unique method of increasing rental property cash flow.  Why not cash in on a lucrative opportunity and at the same time supply a much needed resource?

Why not?  Read our free eBook.   You or someone you know has nothing to loose and much to gain.

Blog Intro 12-22-09

Max Cash Flow Now: Discover how to give back and increase rental cash flow this holiday season.  Increasing rental property income is what we have been writing about since the start of this blog.  It is what initially attracted us, and each of our students, who have implemented our system. However, there is an equally important aspect to the system we teach that makes a tremendous impact on the property owner and the tenant population they serve.

It all came about when another real estate investor, told us that he was making incredible profits on a couple of properties he owned.   He was presently looking for more houses to continue growing his strategy (and his bottom line).  He went on to describe that he was renting out individual furnished bedrooms for $400 a month.  Some of the larger bedrooms he let as shared, two to a room. While the idea of a shared room may be a put- off to some, other tenants came into his houses wanting to save money and knew they could upgrade to a private later if they wanted to as one became available.  By offering shared rooms, $700 a month split between two people increased the landlord’s cash flow considerably.  This real estate investor’s gross monthly rent on one little 3 by 2 was $1900, and another duplex was totaling $3,600 a month!

Because the tenant population is derived from particular sources and they agree to a set of house rules and don’t sign leases the idea was even more intriguing and attractive.  Here was a way we could add a fix-n-hold strategy to our existing fix-n-flip one.  This approach would allow us to profit on future higher real estate values, and at the same time pocket $1,000 or more on each rental while we wait.  Equally attractive was letting rooms to a tenant population, which could otherwise be homeless.  We could truly have a positive impact on someone’s life and make a profit at the same time.  Sounds like a win- win all the way around.

Are there really people who would consider such a living arrangement?  YES, and who are grateful and appreciative of the opportunity to have this option over a shelter.  Men who easily pass our screening criteria and who have skills, jobs, but don’t have the funds for a furnished or unfurnished apartment.  Most apartments either way require one month’s rent up front and a damage deposit equal to a month’s rent. ?

What we offer is called transitional or alternative housing. Read what one of our students has to say about this system.

It’s a wonderful feeling to be able to incorporate this work into my successful real estate business and earn great positive cash flow along with the personal satisfaction of knowing I have an opportunity in making a difference in someone’s life.”

Matt Gerace – Freedom Choice Properties

Discover more about transitional housing by downloading the free eBook, see sidebar.