In our opinion discounted properties with positive cash flow represent the best property investment opportunities with the least risk and highest return potential all else being equal.
Positive cash-flow properties are the ones that have already a tenant paying rent when they are acquired, and the rental income received is more than enough to cover operating expenses, including property taxes and mortgage payments. So the investor has a positive cash flow while building up equity.
Here are what we consider as best features of these investments vis a vis alternative property investments.
• They are considerably less risky than investments in properties that are vacant and produce no income upon acquisition; in such a case the investor takes significant risk as he/she does not know when a tenant will be found and when found what the exact income of the property will be
• They are also less risky and more profitable than properties that produce rental income upon acquisition but does not fully cover the operating expenses plus mortgage payments and the investor will need constantly pump additional money in the property in order to cover the cash flow deficit
• Properties that are truly discounted below their market value at the time of purchase offer instant equity and capital gain upon resale and represent unquestionably better investments than acquiring undiscounted properties of similar quality at the same location and market
• Properties that are cash-flow positive allow the investor to build up equity by repaying the loan amount, while earning income at the same time.
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