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DC Fawcett say Achieving a consistent cashflow is the ultimate goal for the real estate investors’ad it is fair on their part to expect it as an investment.
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DC Fawcett Strategies To Avoid Negative Cash Flows – Investment Mistakes & Money basics
Achieving a consistent cash flow is the ultimate goal for the real estate investors ad it is fair on their part to expect it as an investment will be pointless without it, and they end up losing whatever they have. • Though negative cash flow is not always bad, you need to plan well to salvage the property by that means. DC Fawcett discusses some of the strategies to avoid negative cash flows in real estate investing.
Strategies to avoid negative cash flows in real estate investing • Negative cash flow is basically the excess of expenses over the property revenue. However, it does not always mean that negative cash flow is the red flag for the investors as many smart investors have ridden it out till the property value had appreciated. • Purchasing the property with negative cash flow has been popular. Even the billionaires utilize the negative cash flow in order to avoid paying tax unnecessarily. However, you cannot blindly go for the negative cash flow. Here are the strategies to avoid negative cash flow in real estate investing
Make a full-proof plan for your business • Planning is very important for any business to succeed. However, when it comes to real estate, you need to plan your finances such that you don’t get into the problem of negative cash flow and at the same time, you can minimize your tax. • Apart from the good investment plan, you need to be flexible as well so you adapt and change according to the needs of the investment .
Keep all your options open • If traditional model of renting is not enough to work put your negative cash flow; you need to work on other alternatives to overcome it. • Bed and Breakfast • If you have a big property, you can convert it from the run of a mill single family home to cozy desirable bed and breakfast. This is one f the options which you can go for.
Rent-to-own • In this strategy, you allow the tenants to rent your house to other tenants which are helpful when they are struggling for mortgage approval. Rent to own generally takes 1 to 5 years in the short run. Tenants pay the amount according to the market rates. • Short-term rental • If your property is located near a hospital, business district or university, your short-term rental offers can turn the negative cash flow into positive ones and provide the service that you need the most in your area.
Have cash reserves ready • A cash reserve comes handy when you are handling long-term investments. If you don’t have sufficient reserves, that will automatically lead to negative cash flow. This is the mistake that most of the investors make. • Utilize positive cash flow in the best way • When you have a goodpositive cash flow, utilize them in the best possible way such that you never go out of pocket. Most of the investors utilize them in on new items or on the vacation. Very few of them keep them for the future. You need to be among the few to store the positive cash.
How to calculate net operating income • Net operating income calculation is simple once you get the break-up amount of individual components. The components are • Potential Rental income – Is the sum of all rents under the terms of each lease with an assumption that your property has been rented out and it is occupied. If it isn’t fully occupied, then a market-based rent is taken to consideration on lease rates and the terms of comparable properties.
How to calculate net operating income • Vacancy and credit losses – It is the income lost from the tenants who have either vacated the property or have defaulted by non-payment of rent or lease. For the purpose to calculate NOI, the vacancy factor is calculated on the basis of current lease expirations as well as the market is driven figures with the help of comparable property vacancies. • Effective rental income – The outcome of this is the result of potential rental income minus vacancy and credit losses. This is the income that the owner can expect to collect which is reasonable.
How to calculate net operating income • Other income – This is the income the owner gets other than the rental income. They can get the income through billboard/signage, parking, laundry, vending etc. • Gross operating income – it is the result of effective rental income plus other income that is generated from the property.
How to calculate net operating income • Operating expenses – It includes all the expenses like property taxes, insurance, management fees, repairs and maintenance, utilities, and other expenses. • Net operating income – It is the result of deducting operating expenses from gross operating income.
Conclusion DC Fawcett is the creator of Virtual Real Estate Investing Club. There are many ways to avoid or overcome negative cash flows which when mentioned will bore the readers.
Also Refer my sites: • http://vreic.com/ • http://virtualwholesalinginvesting.com/ • http://virtualcashflowinvesting.com/ • http://virtualrehabbing.com/ • http://dcfawcett.reviews/ • http://dcfawcettrealestate.com/
