Real Estate Investing: Why Cash Flow is King

The value of real estate in India rise nationwide as well as worldwide and many properties listed for sale are being fought over by investors and home buyers, it seems that, once again, investment in real estate property buyers are paying outrageous prices for commercial property in Delhi NCR. Anyone recall this phenomenon in 2004 to 2014?

An “outrageous price” is one that is way too high considering the cash flows the rental property can generate. These negative cash flow properties are rarely profitable investments, compared with other investment property ingreater noida options a buyer could have chosen.

Experienced real estate investors only buy properties that are cash-flow positive — based on conservative estimates — and skip those pesky negative cash flow deals. Note that those negative cash flow properties are typically the fancy prize properties in town; you know, the location, location, location properties.

Penciling out a deal

The main reason investors keep paying these high prices is because 95% of them acquire real estate companies in Delhi NCR without doing any financial analysis to determine whether the real estate property will actually produce decent investment returns. Instead, they hope that a property will go up in value; they’ll sell it and make a bundle. Unfortunately, that scenario rarely happens.

Additional perks

Only about half of the properties in a general marketplace would generate positive cash flows and a decent, actual return such as 5.55%. In actuality, real estate investing in India is much more complicated than just penciling out your cash-on-cash return, but that analysis is a good start.

And with that nice positive cash flow, you also will get some extra return yield as a result of the amortization of your mortgage. Plus you probably will get some tax benefits and possibly some appreciation in value too.

Cash flow is king, and if you buy positive cash flow properties, you will feel like royalty each month as your bank account balance builds up and you earn wealth over the years!