In places like Phoenix, Las Vegas, and Miami we have seen real estate drop like a rock. Some people see doom and gloom but I see opportunity. We need to be careful investing in these places because it’s hard to speculate a bottom in the market. A lot of places in the American market are still falling but if we invest properly, should we really care?

When investing in real estate one should always look to invest in places that are set for growth. On the other hand, if there is an excellent cashflow position on these property deals could this offset the falling property value if we are willing to hold on through a collapse? Just like the stock market some people choose to hold their investments through falling markets to make later gains. Cashflow is king when investing in rental properties. For those of you that do not know what a cashflow property is, it is a property where the rental income is enough to cover all expenses including mortgage payments and still make a profit. These properties are out there and they are becomming more abundant due to a combination of falling prices and people leaving their homes and being forced to rent. A good way to sift through properties to see whether they are worth a deeper look is to use the formula that became famous from “REIN CANADA”; you take rental income multiply it by 12 months and add a zero to the end of the outcome.

For example lets say we have a duplex that has a rental income of 1400$ dollars per month.
1400$ x 12months=14800 then add a zero to the end = 148000$
The most we are willing to pay for this property is a 148000$ dollars.

Even with rentors just paying your expenses the return you get from having your mortgage paid down for you is excellent! There is a ton of money to be made in the American market right now, you just have to be willing to go out and get it. I know a lot of people are not regular property investors but there is nothing that says you can’t hire a property management company to handle your rental properties and just leave them on auto pilot. Even if you don’t want to go that far there are great joint venture companies that can do everything for you and just hand you a check from the cashflow properties rental income. The best investors in the world just do the exact opposite that everyone else is doing. Do your due diligence, calculate properties with positive cashflow and buy buy buy! Once you have enough of these properties you might be able to retire off the passive income. Then again who knows when the American market will hit bottom, when things hit bottom the only way to go is up!

Kelly Parks

www.wealthforinvestors.com