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When it Comes to Your Rental Portfolio, How Much Cash Flow...

As a landlord, if the rent you charge is significantly higher than your expenses, that difference can not only help you build wealth but can also serve as a potential cash cushion, there to soften the blow when you have too many vacancies or when the unexpected happens and you need reserves. Even so, the conversation is mixed on how much cash flow is necessary to provide that “cushion” and how much is needed to help the investor grow his/her portfolio. The other extreme is that I have a property that cash flows $1,600 a month (never underestimate the power of improving a property for highest and best use). Investing Goals & Tax Implications Investors who are already high income earners may be looking for tax write-offs and losses to offset earned income. Maybe before you invest in your next property you should ask your accountant about how much cash flow you can add without significantly increasing your taxes. My point is that getting more cash flow isn’t the goal for all real estate investors. After all, the more the property is worth, the more cash flow you need. Another strategy is classic arbitrage: tapping into your equity in the property and investing that money somewhere else, making a higher return than your interest rate. Certainly, cash flow helped build and sustain my real estate portfolio. Besides increasing cash flow, what other strategies are you using to build and preserve wealth?