{"id":7680,"date":"2018-02-07T02:12:58","date_gmt":"2018-02-07T02:12:58","guid":{"rendered":"https:\/\/www.canadianrealestatemagazine.ca\/more-analysis-more-cash-flow\/"},"modified":"2023-10-24T03:57:41","modified_gmt":"2023-10-24T03:57:41","slug":"more-analysis-more-cash-flow","status":"publish","type":"post","link":"https:\/\/www.canadianrealestatemagazine.ca\/strategy\/more-analysis-more-cash-flow\/","title":{"rendered":"More analysis, more cash flow"},"content":{"rendered":"

The decision to become a real estate investor generally hinges upon three questions: How can I make positive cash flow every month? What is the right investment strategy for me? Where do I start?<\/p>\n

Before coming together to form Mothers of Real Estate, Monika Jazyk, Gillian Irving and I were investors grappling with these questions while also building careers, juggling the demands of motherhood and dealing with various financial adversities in our personal lives. We soon learned that looking for a single answer to these questions can be risky.<\/p>\n

A successful investor must be able to analyze a property thoroughly, and that goes beyond crunching the numbers related to a single strategy. Your property can be whatever you want it to be \u2013 a rent-to-own, a student rental, a more traditional buy-rent-hold \u2013 so why limit your initial analysis and possibly miss out on the best possible cash flow?<\/p>\n

To illustrate, Monika, Gillian and I examined a two-storey, single-family detached home<\/a> with three bedrooms and two baths purchased for $350,000 to show how you can make extra cash in three different ways.<\/p>\n

Rent-to-own<\/strong>
\nBy all accounts, this is a safe strategy for investors with a low tolerance for tenant issues. You\u2019re creating an opportunity for a family to become homeowners while making predictable, consistent cash flow.<\/p>\n

As MORE\u2019s rent-to-own expert, I concluded that with a standard 36-month RTO term, you can expect monthly cash flow of $595 from this property. In addition, with RTOs, you won\u2019t deal with landlord headaches such as lost rental income, repairs or property management.<\/p>\n

RTO customers, also known as tenant-buyers, are typically recovering from financial setbacks and will require time to become mortgage-ready. They are focused specifically on homeownership<\/a> and have saved upwards of $15,000 for a down payment. With a $350,000 RTO property, you\u2019ll use the tenant-buyer\u2019s savings to offset your 20% down payment and closing costs. Plus, you benefit from the bank\u2019s financing.<\/p>\n

Buy-rent-hold<\/strong>
\nMonika, our rental specialist, says that to make this single-family detached property cash flow against a monthly mortgage payment of $1,300, you would need a monthly rent of $1,600. It would be advantageous to create legal suites and convert the property into a duplex, thereby increasing your rent potential to generate $302 in monthly cash flow. (Setting aside 20% toward fluctuations and 8% toward a credible property management service offers peace of mind.) A pro tip to deal with pesky tenants is to include vandalism insurance when purchasing home insurance.<\/p>\n

For more profitable buy-rent-hold investments, it\u2019s critical to think outside the box. This means buying in areas where demand for rentals is growing but no one is looking, and where the likelihood of finding undervalued properties is much higher. The main consideration here is that you are building long-term relationships with these properties and purchasing for a minimum term of five years.<\/p>\n

Student rentals<\/strong>
\nWhen most people think of investing in student rentals, they cringe \u2013 but not Gillian, who says that when done right, this strategy can create a sizeable monthly cash flow that can go toward building a considerable estate for your kids\u2019 future.<\/p>\n

When investing in a $350,000 property as a student rental, aim to create as many bedrooms you can comfortably fit. A three-bedroom, single-family detached property has the potential to house six students, paving the way for six separate rental incomes. At a reasonable rent of $500 per student per month, your monthly income would total $3,000. After expenses, your student rental will cash-flow $540 monthly.<\/p>\n

Gillian suggests three must-haves to ensure a dependable income stream:<\/p>\n