By: Gregg Cohen CEO JWB Real Estate Capital
Today we’re going to talk about how you can earn positive monthly cash flow without being a “landlord.” The #1 reason why investors do not invest in rental properties more often is not because of the numbers. Many people would agree that holding on to rental properties is a sound financial strategy. It’s because they are afraid of being a landlord. Nobody wants to get those late-night phone calls. Nobody wants to constantly chase rent. Most people don’t realize that you don’t have to deal with those hassles in order to earn positive monthly cash flow from rental properties. The 3 keys below will help you find a better way.
So, how do we know what is the right market in which to invest? There are a few things you will want to consider. First, you must find a market where there are low prices and high rents. Low prices and high rents equal a cash flow opportunity for you as an investor. There are real estate markets out that that have below-average pricing but also have above-average rents. That spread right there is your cash flow opportunity. The next thing you should look for a market that has strong socio-economic anchors. Specifically, that means there are a lot of jobs – and more jobs coming to the market – and there is a foundation of Fortune 500 companies that have headquarters in that market. These anchors will bring people to the city who are going to rent your homes. Lastly, your market must have a lot of people living there. You should have at least a million people living in that market. You don’t want to be in a small market with a small number of businesses and a small number of people because if the major employer leaves, it can really put a dent in your cash flow plan.
Now we’ve located the right market for positive cash flow. However, that doesn’t mean that every neighborhood in that market is going to be the right place for you to build your portfolio. We have to make decisions based on numbers, not emotions. That means that you’re going to be investing in places that might not be the most visually appealing neighborhoods. Think about what brought us to investing in rental properties in the first place. You are here for positive monthly cash flow and this is not your primary residence. You will want to target neighborhoods that range from below-middle income to middle income. These are the neighborhoods that will produce the returns that help you accomplish positive monthly cash flow.
There’s a simple rule that I want you to follow when building your passive income rental property portfolio. Here it is: the company who sells you the property must be the company who is responsible for collecting the rent from your residents. When you go down this route, you remove the opportunity for finger-pointing and excuses if your expected returns are not being achieved. The same person who is making the promises to you on the front end during the initial purchase must be the person who is responsible for delivering on the backend. Not enough investors take this rule to heart and it ends up costing them dearly. You also want to be associating yourself with a management team who is obsessed with reducing maintenance and vacancy costs. You want to work with someone who stays up late at night thinking about ways to keep your residents in your homes longer because that is the path to success when it comes to positive monthly cash flow. Lastly, you want to be working with someone who you enjoy talking to. So many people go into buying rental properties thinking of their property manager as a commodity. That’s not the way you want to think about it. Your team should be much more than that. They should be a trusted resource for you – one that you enjoy getting on the phone with – because they are going to be controlling a big part of your financial portfolio for many years and many decades to come. So, simply ask yourself: is this someone that I look forward to speaking with on a regular basis? Here are JWB, we help clients earn positive monthly cash flow without the hassles of being a landlord. We invest in Jacksonville, FL, which hits all of the key metrics described above that are crucial for a successful rental property portfolio. If you have any questions or if you would like to speak with a member of our team, please fill out the form or give our office a call at (904) 677-6777.