Making Money in DFW Real Estate

People invest in DFW real estate as a way to make money, but a lot of them enter the business without first knowing anything about it. In order to make the most the investment, people must first learn about the four factors of investment return. Knowing about these elements can lead to success when investing in real estate.

Positive Cash Flow

Before making an investment in any real estate, especially foreclosures in Dallas, a person must first make a feasibility study that uses conservative estimates of rents and expenses. It is considered good investment if the rents are more than the expenses. This is also known as positive cash flow.

Make sure that the property you invest on has positive cash flow. This will provide you a way to make money in DFW real estate. Properties with negative cash flow will eat up one’s bank account in order to cover the insufficiency. Make a mistake and you may find that, you yourself, may be selling to one of those We Buy Houses companies.

Investing Based on Potential Value Appreciation

Most people invest in real estate and expect the value of the property to increase in the future. While, in the past, this is true, the last six years saw unpredictable real estate prices. Real estate has been rewarding for long term property owners. Appreciation of the property’s value will not help your short-term financial goals, and it is best to invest on positive cash flow properties instead.

Mortgage Principal Pay Down to Earn in Real Estate

People don’t realize that an amortizing mortgage can earn them some money. Payments made on a mortgage each month are for the accrued interest as well as the outstanding amount of the mortgage principal.

The principal is considered pure investment return and it can help increase the returns. But investors must keep in mind that that paying down the principal will not help with their cash flow. Banking on mortgage principal pay down alone will not leave you with money for emergency repairs to the property.

It’s Income Tax Benefits

Investing in real estate can bring income tax benefits. Owning a property will result to paying fewer taxes compared to when one doesn’t own the property. The bad news is that some investors don’t know how to use this to their advantage.

A person will get little tax benefit from owning a property if one pays little in taxes and self-employed; or one who earns more than $150,000. It is best to consult with an accountant to determine whether you will earn from income tax benefits from earning properties.

All four factors can help a real estate investor earn in the long run. Out of the four, cash flow is the only one that can impact your finances at the present. Cash is good because it can accumulate and earn interest in your bank account.