2. Have a positive cash flow.
Positive cash flow results when the rent you receive exceeds the total you pay for the mortgage, taxes, insurance, maintenance, and other costs. That's not at all as hard as it sounds. First, decide whether you need a positive cash flow before or after taxes. A pre-tax positive cash flow translates into current income, a goal of many retired investors and others with current expenses. Properties yielding a pre-tax positive cash flow are harder, but certainly not impossible, to find. Be aware that not all properties will yield rental income which is high enough to cover your expenses. Make sure you know how much rent to expect by researching rents for similar units nearby, the property's current rental fee, and that of the last increase. A positive after-tax cash flow can come from a negative pre-tax cash flow. Generally, the depreciation deduction makes up the difference. If you meet the eligibility test, you'll be able to use the depreciation to shelter some of your taxable income and reduce your tax bill. Second, you'll want to ensure your tenants make timely rent payments and take care of the property. Of course, a positive cash flow is impossible without income. A thorough credit, employment and landlord check of any potential tenants is a must and will help you track down the best renters.
For More Valuable Real Estate Information visit:
Pat Ogle and The AnnapolisHomes4You Team
Champion Realty, Inc
Past Performance is No Guarantee of the Future!
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