What I am looking for personally, on a single family, at least $200 bottom line net positive cashflow. In other words, if my mortgage, taxes, insurance, utilities and maintenance is $1,100 a month, I needed the rental property to rent for at least $1,300 per month.
Now there are exceptions and I'll give you an example. I have a few properties, the only rentals I want now are where I can pull cash out, where I will be net cash neutral. In other words, I don't have anything into the rental property. If I had nothing into the rental property, or if I've pulled cash out (refinance), I don't mind if the rental property brings me in only $100 per month. Because I've already taken my profits out.
An example. I purchased a rental property in Souderton, Pennsylvania this past year. I was able to refinance and pull out about $25,000 cash out of the rental property. This is non-taxable, a great benefits of real estate investing. The non-taxable income of $25,000 and put $10,000 or $15,000 into another rental property. And now you've got your down money again for the next rental property. To find and fund another rental property deal. Then maybe that deal generates another $100 or $200 or $300 per month cash flow.
You're increasing your wealth through real estate investing. You're taking your profits, rolling them and putting it into another investment property. That's what I personally look for in a rental property.
If I have cash sunk into a property or an accidental rental and I have had a couple of those, which I'm selling in this real estate market now. Because I want to take the cash out. I have $20,00 in the one and I have $25,000 in another. These rental properties don't generate cashflow. I want that money out of these properties so I could put it into something that's even more profitable for me. That's one of the objectives I have personally for my rental property philosophy. When you have a great real estate market like this, it's a great time to sell below average rental properties and get your cash out of them and move on to the next real estate investment property.
If you're new to real estate investing, try to do that as often as possible. Try to get in there, where you're into a rental property for next to nothing. Then you're just building cashflow. Have a separate account. Your extra cash flow goes into a separate account. Try not to use that for income unless you have to. Otherwise put the cash flow into the separate account, save it for renovations or repairs or your next investment property. That's my advice on how to pick up a rental property.
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