I have spoken before about the 4 Benefits of real estate investing. And in many parts of the country the first benefit, Cash Flow Before Taxes, is very hard to obtain. But here in the Greater Kansas City area it’s pretty tough not to do…at least if you come in with some capital.
I’ve posted the formula for determining cash flow before taxes before here. If the term in new to you I would really encourage you to go back and study it.
The key to remember is that just because your rent will cover your PITI (Principal, Interest, Taxes and Insurance) that doesn’t mean your new rental property is cash flowing. Heck no. What about property management expenses, if any? How about utility costs when there is a vacancy? (Are you gonna let those water pipes freeze in January when the house is empty?)
Other costs to consider;
- Vacancy rates.
- Maintenance fund for general repairs.
- Lawn care fund even if tenant is mowing.
- Sinking fund for that roof that looks like it’s almost done, or the furnace, or the water heater, or the foundation, etc.
- Administrative costs like LLC expenses, travel and tax preparation.
That’s not an all encompassing list. But unless you want your personal account to continue to kick in for your rental property until you sell it 5-7 years from now you will probably want your rental property to pay for itself, right?
BBQ Capital | Kansas City Real Estate Investing 
Pingback: Cash Flow Hunting: It’s Officially A Trend « Kansas City Real Estate Investing
Pingback: Fundamentals Of Kansas City Real Estate Investing « Kansas City Real Estate Investing
Pingback: Cash Flow Before Taxes « Kansas City Real Estate & Investing
With thanks! This is definitely an good online site!
Hey there, awesome site you’ve going here.