How to Create a Real Estate Cash Flow

Most of us step into the real estate market in the hope of making huge profits. The real estate market gives returns for your money like no other market. However, you should know the rules of the game to be in a win-win situation. Property investments entail several other tasks, like maintenance and renovation, which can deplete your bank accounts. In order to sustain high maintenance costs, it is imperative to create a real estate cash flow that can take care of the additional costs, and yet leave you with substantial profits.

By: Kris Koonar

One of the best methods of creating a real estate cash flow is to invest in real estate and resell the properties in back-to-back closings. Many investors these days flip their properties in this fashion to maintain the cash flow. However, flipping properties may not be very easy if you are new to the real estate game. You need to be constantly on your toes to ensure that the cash flow comes in as planned. You have the option of flipping properties for a cash payment of the total amount, or a partial amount and a promissory note. A promissory note guarantees you a monthly income for a long time.
For flipping properties, you need considerable amount of cash. If you are considering a mortgage loan, it becomes necessary that you recover the amount from the sale of your property to settle that loan. Investors can opt for the Wraparound transaction. It allows investors to create a new loan without disturbing the first mortgage. The new buyer pays you, and you in turn repay your earlier loan. The difference between the two payments is the cash flow you have managed to earn for yourself.
It may not be very easy for new investors to get liquid cash to circulate in the real estate market. However, you can invest in a joint venture by finding a partner who has a good credit limit and provable income. As partners, you also have the option of forming an LLC, or a Limited Liability Company, of which both have a fifty-fifty percent partnership. The next step is to find good real estate in middle class neighborhoods that are usually at least ten percent cheaper than other properties.
After finalizing a particular property, execute a resolution through the LLC that the investor partner is planning to buy a property in his name for the benefit of the LLC. The resolution should subsequently be followed by the purchase of the property. As agreed upon earlier, your partner investor will use his own down payment and credit to pay for the property. After the purchase, your partner investor needs to advertise it for sale, specifying credit not required. When considering offers from prospective buyers, focus on those that will pay at least ten percent more than the appraised value of the property. Ideally, choose a buyer who is willing to put down ten percent or more as a down payment. The investor gets the funds to recover his initial investment, while you enjoy part of the cash flow earned from the deal.
Seller financing is also a good option if you are looking for convenient payment options. Seller financing eliminates the hassles associated with credit check and delayed funds when obtaining home loan from the financial market.

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