February 18, 2018

Positive Cash Flow or Appreciation

What’s more important to you when buying an investment property – appreciation or positive cash flow?

Positive Cash Flow

Single-family homes in the most desirable neighborhoods may appreciate quickly, but because their carrying costs are high, in past years they have rarely generated the sort of income needed for positive cash flow. Times have changed though.

Our current market conditions have made this a perfect storm for investors looking for positive cash flow single family homes!  There are a lot of good people having to make tough decisions to short sale or foreclose on their homes that they refinanced or bought at the height of the market in 2006-2007 – they still have good jobs and possibly money in the bank… but their credit has taken a hit because of a short sale or foreclosure.  They still need somewhere to live and will make great rental tenants… and possibly be candidates for a lease-option or rent-to-own.   

With prices being at record lows (some property prices in areas of Phoenix are 70% lower today than those in 2005-2006!) and more and more people needing rental properties.

Chandler Positive Cash Flow Investment

Multifamily units that bring in the bucks each month are likely to be in a little bit rougher parts of town and aren’t likely to show as great appreciation.  Typically you’ll be competing with apartment complexes who can offer big incentives for tenants.

If appreciation is your goal, then only look at homes that have appreciated well in the past, those that shot up quite a bit in 2003-2005.  You’re most likely going to be looking in master planned communities where homes were built after 2000, 1,800-2,200 square feet, single level, 4 bedroom homes with no pool – those homes that will fit the average family.  

If you want guaranteed positive cash flow, you need to be looking properties with favorable balance sheets and with established, reputable tenants. Make sure that you see the income and expense statements for these properties for at least the previous two years if the owner will provide them.  If not, make sure that you get a rental market analysis on the properties so you know what the current rents are for the areas.  Look to see if there have been any property improvements, and what you can expect in terms of maintenance and repair costs, association fees and other expenses.

Once you locate a good income-producing property, consider your offer carefully – again consider what’s more important to you when buying an investment property – appreciation or positive cash flow?  We all want a great deal, however we’re currently experiencing a lot of investor activity and multiple bidders on properties.  Make sure you’re ready to make a competitive offer based on the recent sold comparable sales and market data of list price vs. sales price. 

We do quite a bit of work with buy and hold investors who are looking for Chandler positive cash flow investments as well as Gilbert positive cash flow investments… and we can do the same for you!

Contact us today for a free market analysis and the areas of town where rental rates are high and quality tenants are looking for properties.

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