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Grand Estates relies on 2 real estate investment decisions, the strategies of whether to invest for cash flow or appreciation.
As an investor, we understand that both strategies are valid and can be combined when evaluating a trade. Therefore, it is important for real estate cash flow rate and the purchase a property appreciation rate.
Real Estate Cash Flow Strategy Overview
A cash flow returns strategy offers consistent cash, typically in the form of rent, to real estate investors. Over time, the property may also benefit from appreciation. With equity accumulation, an investor could refinance, sell, and use returns from investing for cash flow and appreciation to invest in new properties.
But it is not always as simple as this. In many cases, you choose one or the other. You could have high investing for cash flow and appreciation when you buy property in a low-cost neighborhood and improve it with some sweat equity. On the other hand, in more developed areas like San Francisco and Washington, D.C., you might find it difficult to find cash flow investments, and therefore have to rely on the appreciation.
Reasons our Investors Opt for Investing for Cash Flow
1. If you’re cash-flow positive, rent covers your expenses, e.g., mortgage payment, monthly maintenance fee, insurance, and property taxes, and provides you with extra cash every month.
2. Conventional loans are readily available for cash flow investors. Cash flow is not only used by investors to evaluate deals. Lenders use it too, as mortgage payments will make up a large part of the property’s costs and will definitely affect your cash flow. Lenders use the debt service ratio (DSCR) to determine if, after mortgage payments, a property will be cash-flow positive. To calculate your DSCR, you need to know your net operating income (NOI).
3. Investors who desire financial freedom, passive income, and early retirement will opt for a cash flow strategy because steady cash flow helps you reach your financial goals faster.
4. Rental property appreciation cash returns flow offers more versatility. Instead of a conventional long term rental strategy, you could place your listing on short term or long term rental websites like Airbnb. You could also make monthly income through systems like house hacking rental property appreciation. Grand Estates only invest in multifamily for scaling our portfolios.
5. Our cash flow grows over time as we pay down our mortgage and build wealth equity.