This is the twelfth (and final) post in the series Buying Real Estate for Cash Flow.
The prior eleven posts cover why cash flowing real estate is often difficult to obtain for the average investor. The way to generate cash flow through real estate is to “not be average,” as Robert Kiyosaki says. That’s right, you’ll need to build skills few others possess, find deals few others see, and manage assets more effectively than nearby competition.
Highlights from the Series
Cash flow is often NOT there and the true numbers prove it!
Most real estate sold does NOT produce meaningful cash flow to the new owners within the first few years of ownership. There are many real expenses for the investor that are often unexpected.
Pro formas are a fiction
The seller’s and broker’s “pro forma” is really a “liar’s statement.” This is because you will NOT get the returns projected there. Usually the projected expenses are much lower than in real life. The real income will be less because the pro forma usually projects (almost) 100% occupancy, which is extremely unrealistic.
How true professional investors do it
Professional real estate investors often acquire properties through alternative channels (not the MLS). In commercial real estate, cash flow is also a challenge to create and one way the pros create it (for themselves) is to be selling insiders.
Problems, students, and Section 8 tenants could be your best bet for cash flow
Sometimes, working with problems and atypical (maybe “undesirable”) tenants (such as college students or Section 8 low-income tenants) could lead to better cash flow than the general tenant market.
Property manager incentives
Unfortunately, your property manager has more incentive to manage your property for their own benefit rather than yours.
Brokers often aren’t on the side of the buyer
Of course real estate brokers keep the best deals for themselves and their friends. Brokers represent the seller not the buyer. That’s why when you see a property priced for perfection with no room for improvement, that is the broker doing a good job for the seller and you probably shouldn’t buy it.
Final Thoughts
Plenty of people make money in real estate. The prior posts cover who some of those people are and what situations and deals could cause you to NOT be one of them. Build your investment skills through education and experience before parting with significant investment capital.
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Mort Zuckerman Discusses the Economic Recovery Roadmap
Sam Zell Speaks at Milken Conference about Commercial Real Estate
Buying Real Estate for Cash Flow: Summary
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