Today, many people are turning to real estate as investment for its ability to generate consistent, month-to-month income. This income, called cash flow, is practically unique to real estate, and makes real estate an incredibly powerful investment vehicle.
Real estate, when purchased properly, pays on a monthly basis in the form of rent. Cash flow, then, is simply the income received from rent after expenses. When a property is purchased for cash flow, it generates returns in both good and bad markets regardless of whether or not the property is appreciating.
In addition to consistent returns, cash flow also makes real estate an attractive investment option because it makes the investment relatively predictable. For cash flow to work, rental income must outweigh expenses. Investors have a number of calculations they can use to assess the potential a property has. This is impossible with other investment options, such as stocks and mutual funds, which are largely “weight and see” investments.
Historically, rental rates have been predictable as well. Rental rates have traditionally increased faster than inflation. More recently, an increasing demand for rental properties has driven rent prices up. In fact, Capital Economics, a research firm, predicted rents could rise as much as 4 percent in 2014.
Of course, real estate offers numerous other benefits. Appreciation can increase investors’ returns; however, it is best thought of as a “bonus”. Real estate also provides tax breaks, the ability to leverage your money, and much more.
For investors, real estate offers numerous avenues for generating wealth, so it’s no wonder more and more people are turning to real estate. When purchased for cash flow, there are fantastic real estate investments out there for all kinds of investors—from the first time, mom-and-pop investors to the seasoned veteran!