Pushing the envelope on Rents to increase your CASH FLOW

Many investors come to me and they are all about CASH FLOW!

Cash flow is great, but it is not the be all and end all of real estate.

REAL ESTATE IS ABOUT LEVERAGED APPRECIATION

If you buy a great property in a great location at retail price you will win over time.

You don't always win with cash flow.

Often you see a property with $6300 a month in rent and a $600k price tag.  Buyer beware. If the property was so great why are they selling it?  How are they going to get better returns elsewhere?

What happens in these situations is that the current owner was chasing cash flow so they got the tenants who would pay the highest rents.  Maybe it was renting by the room, or to huge extended families, maybe to people with low credit, or things that show on a police report.  These fringe tenants are willing to pay over market rents since there are few people who are willing to rent to them.

On the other side of the coin.  Let's say you bought a property and want to maximize cash flow.  

RESIST THE URGE TO MAXIMIZE RENTS IN EXCHANGE FOR THE TENANTS YOU WANT.  The more difficult the tenants the more issues you have.  DON'T FALL FOR THE SIREN SONG OF SUPER HIGH RENTS!!!

The best way to make money and to create cash flow is to buy undervalued properties and to get the right tenants in there who PAY THEIR RENTS.

Just because you have a lease for $1800/month it doesn't mean that you will get the rent.  it is much better to get $1500/month every month, then to worry all month long if you will get the $1800.

Once again, that is often why someone is selling $6300/month in rent for $600k