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Show Me The CASH FLOW!!!

cash flow mindset real estate as a business real estate market Jun 07, 2021

There used to be a time where it seemed like you could buy a rental property with 20% (or less) down just about anywhere and it would cash flow. Toronto cash flowed, Miami cash flowed, Vancouver cash flowed and Phoenix cash flowed...

In 2021 most major markets across US & Canada are seeing tremendous appreciation but finding a cash flow positive property (with 20% down or less) is becomingly exponentially more difficult.

Low interest rates, low inventory & lots of demand have driven prices to record levels. Frothy markets have brought out all the "experts", "investors" & "flippers" speculating that prices will keep going up. Many buy properties knowing that they'll be losing hundreds, if not thousands of dollars per month as the rents tenants pay cannot keep up.

They don't care about "negative" cash flow of a couple hundred/thousand dollars per month because the property will appreciate much more than that....

This is gambling  & when you consider the trends that we're facing it's getting pretty reckless in my opinion.

  • Housing affordability levels are now at historic lows.
  • Various government subsidies for housing are now set to expire and foreclosures are imminent.
  • Interest rates have nowhere to go but up eroding buying power.

Just one of those factors pulling in the wrong direction makes the case that housing prices are far overdue for a correction (or cooling) in many markets... all 3 concurrently... well I'll let you draw your own conclusions there.

Real estate is a fantastic investment & store of wealth but only if you can afford to hold onto it over the long term.

When (not if) the markets turn and prices freeze (or fall) those holding negative cash flow properties will eventually bleed out financially and have to sell.

That's when the professional investors will once again emerge in a BIG WAY to buy real estate assets at prices that make sense... cash flow sense.

Experienced real estate investors know that there are very few and specific reasons to knowingly buy a negative cash flow property (example - value add renovation, release at market rent and forced appreciation).

As I touched on above there are several major trends that are emerging to make the focus on buying positive cash flow properties even more critical in the coming months.

There's plenty of opportunity out there - just make sure you're asking to see the cash flow!!!

 

Talk to you soon,

Marcin

 

 

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