Do you have an investment property? Maybe you had a little extra money at one point and a friend recommended you buy a house and rent it out. Well, you need to fire that friend; not really, but read on…

An investment property is just that, an investment, so why buy a rental property that’s going to net you negative cash flow every month? “Well, the monthly rent is helping pay the mortgage and in 30 years I’ll own the house free and clear. Then when I retire I’ll be able to sell it and make a large profit.”

Why not find a multi-unit property, or apartment building, or a house in a college town that six college students are going to rent and get positive monthly cash flow, a free house, and (this is where it gets good) the ability to buy as many of these properties as you want?

You see, each time you take on more debt, a little calculation known as your Debt-to-Income Ratio, a vital ingredient in determining whether you qualify for a mortgage, goes up. Once that ratio gets to be around 55% or so you’ll have a hard time getting a mortgage if you want to go full-doc (Full documentation = lower interest rate). If you have a positive monthly cash-flow, your Deb-to-Income ratio keeps going down – this is a good thing.

Is it easy? No. You have to find a property in a down market, or a fixer-upper, or buy foreclosures. As a general rule, though, the more units the property has, the more likely it will yield positive cash flow.

OK, so you’re not exactly keen on the idea of searching far and wide for a place that’s going to yield positive cash-flow. You just want to put your money into an investment that is relatively stable until you retire. If you’re one of these people, no problem, I’ve got a plan for you too. We’ll cover that tomorrow and show you how it’s possible to make $5 million on your investment property.

Thanks for Reading.
John Crenshaw

Popularity: 2% [?]