You must be weighing about cost and potential of income if you are thinking about investing in rental income.
If you are thinking about the amount of cash flow that would make sense in the market then you have got a great question in your mind. And the answer would probably surprise you.
Cash flow: cash flow is the reason due to which real estate investors attain rental property. So most probably, you must be thinking about the amount of cash flow that is needed so that it could make sense in the market.
The answer could get tricky to answer sometimes but there are some ways to answer it.
How Much Cash Flow do you Need for a Rental to Make Sense in Michigan?
Most of the investors want to start out of the gate with a cash-flowing property that is highly profitable but that is not always the case. Robert Kiyosaki is the first real estate millionaire whose cash flow was $25 positive each month but today Robert Kiyosaki is very rich and successful.
So, one needs to make his expectations realistic because this is the first thing that anyone should do. Think about different ways that could be profitable at the end of the month such as will you have exactly the same amount or will you get a profitable amount rather than focusing on a single large cash flow because at the end of the month you will have less money left over.
All of these are variable options and this is what makes it interesting.
Variable Options that Can Affect Your Rental Property’s Cash Flow
1. Cash Flow Negative
Cash flow becomes negative when your expenses are more than your cash flow.
But if for a short period of time expenses are more than cash flow or it is not that bad if the expenses to income are fairly close, some investors really want to avoid this situation when cash flow is negative. Negative cash flow for a short period of time is okay but one must not want cash flow to be negative for a long period of time such as for a year especially when someone is borrowing money to pay for an investment.
2. Cash Flow Equivalent
Cash flow becomes equivalent when your expenses are equal to your income monthly.
Your goal should be cash flow equivalent if your cash flow is negative. If you achieve equivalence in a short period of time then it means that you are on your way to profitability. In case you have maintained equivalence then you must be hoping for a profitable payoff on the table on the sale price when you choose to sell.
3. Cash Flow Positive
Cash flow becomes positive when your expenses are less than the income you earn each month on your properties.
In the words of Kiyosaki, he would get willing to buy investments that were even for $80 cash flow positive monthly. And he would be willing to get as many of those as he could get his hands on. It is not hard to reach this level, fortunately.
So, how much cash flow do you need for a rental to make sense in Michigan?
It is less than what you think because Kiyosaki started with just a $25 cash flow positive per month. Also, there are some scenarios in which negative cash flow investment makes sense.