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Page 1: Tips for investing in positive cash flow properties

Tips for Investing in Positive Cash Flow Properties

Here's a big hint of what this means to you. Your financing options have moved from Wall Street to Main Street. Take your local banker out to lunch and nurture that relationship. You're going to need it because while you're building your commercial real estate investment portfolio in a down market, you'll need to borrow money to grow your wealth. If you buy for cash flow and you focus on the fundamentals, the exit will take care of itself, your deal will be financible, and you'll get your original investment back more quickly-something everyone's concerned about these days.

A quick look at the math will demonstrate that purchasing for cash flow works. Let's start with the purchase price. You decide to purchase a property for $1,000,000. You deposit $250,000 as your down payment and earn a 10% cash on cash return on your investment. This investment will pay you $25,000 in the first year and as the rent increases, so will your cash on cash return. Plus, while you're holding the property, your $750,000 loan is amortizing or being reduced by your rental income. This means that you're recovering your down payment while you pay down the debt.

At the end of the 10 years, you sell the building for $1,000,000. That may not seem like a great deal to some, but if you've already recovered your $250,000 in cash flow and paid down your mortgage by $100,000, you're walking away from the closing with a check for $350,000 plus the $250,000 you already got back. My simple math may be wrong, but you more than doubled your money.

If you focus on the fundamentals first, buy for cash flow. Empires are built on durable, long-term cash flows. Once you have that in place, go out and play.

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