Not only house hacking will save you from mortgage slavery. It is much easier to "take out" all credit obligations if you immediately invest in a profitable object. For this, it is only necessary to calculate its cash flow.
❝Cash flow (Cash flow) is a cash flow that determines the net profit that remains with the owner of the property after it is rented out.❞
In the real estate market, this very concept plays a key role if you plan to purchase square meters for the purpose of making money. To determine your personal cash flow, you should consider several indicators:
- Rental income is your main source of income from a real estate investment. It is worth making a lot of effort to maintain the object in an attractive way, because the more impressive the offer, the greater the reward;
- capital costs - significant repair work, the purchase of high-quality equipment and furniture cost quite a lot, but every hryvnia paid today will pay off thanks to the increased rental price tomorrow;
- operating costs – all incidental costs associated with real estate ownership. It is worth adding here taxes, payment of utility services, insurance and other incidental costs that inevitably arise during operation;
- debt coverage - we mean the interest on the loan, if you bought a home with a mortgage or installment plan.
Why is it so important to pay attention to cash flow? This one indicator will help you calculate several others at once. Yes, it all starts with an investment assessment. Yield object indicates how profitable its acquisition will be and how quickly you will return your investment. That is, how profitable a particular apartment or house is. Stable and high cash flow guarantees financial stability and helps to plan the future, define new goals, allocate the existing and future budget.
Example of use:
- You know, you've been in real estate for a long time. Tell me how you generally evaluate objects and understand which ones are worth buying? There are so many good things on the market that I don't know how to choose just one.
— For me, the key indicator is cash flow.
- What is it?
— This is such a cash flow, your net profit. That is, all income and expenses are taken into account. If you have a positive cash flow, it means that the rental income exceeds the costs of maintenance, mortgage and others, so the object is really profitable and deserves attention.
To learn the material better, try it yourself buy a small apartment for rent. Our specialists will select a worthy option, which is guaranteed to have a considerable positive cash flow.
