Heroic Investing
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Anatomy of a Good Income Property

HeroicInvesting.comWe talk about income property a lot on this blog, not just because we like the sound of it but because we truly believe it is your best hope to create financial independence in your lifetime. The question then becomes, what is a good income property? Well, there’s a long answer and a short answer. If you want the long answer, and they will be more than happy to provide it for you, call our professional investment counselors at 714-820-4200 and ask them how to go about finding one.

But sometimes a short answer works just fine, so here it is.

The Mortgage
A big part of evaluating the desirability of an income property is whether or not you can get the right kind of mortgage. What used to be commonplace – 30 year term with 5 percent down – is harder to find these days and, believe us, the numbers do make a difference. Specifically, you want a long-term, fixed-rate loan tied to a piece of income producing property. Without that in place, we don’t count it as a GOOD income property.

Cash Flow
Some real estate investors will tell you that property appreciation will make up for negative cash flow, and maybe it will, but why even get into that situation if you don’t have to? The Property Tracker software used by our property referral network, Platinum Properties Investor Network, allows you to input raw data. The software crunches the numbers and spits out a report informing you at a glance whether or not the property is worth pursuing. Negative cash flow isn’t always a bad thing but why settle for it when there are so many positive cash flow situations to be found?

Cash on Cash
One metric we really like is Cash on Cash Return, which tosses out the leverage calculation and tells you the down and dirty about how much return on investment you’re going to get from the cash you put into the deal. Though usually lower than the Total Return on Investment, Cash on Cash gives you a good snapshot of what the property’s numbers are trying to tell you.

Is this everything you need to know about choosing a good income property? Heck no! But at least now you’re in the conversation.

The Heroic Investing Team







Flickr / FredoAlvarez