We say it all the time when it comes to real estate investing: cash flow isn’t everything.  Sometimes, a negative cash flow investment property becomes a great long-term asset.  For Envision Advisors agent Leah Keeling, her Colorado Springs townhouse is projected to cash flow a negative $6500 the first year she rents it out. So, why are we excited about this deal?

Leah has known for a while that she wanted to start investing in real estate, and she took her time deciding on the best strategy for her situation in life.  When she came across a new build townhouse in the city for only $305K, she knew she had to act on it. Her plan is to use the Nomad approach to investing. This means she’ll live in the property for at least a year before converting it to a long term rental. 

Thanks to favorable FHA loan terms for primary residences, Leah was able to put down just 3.5%. This put her out of pocket costs at just $18K.  In fact, these low numbers are the reason she’s looking at a negative cash flow for this investment property. If this were a pure investment property, then she’d be putting down 25% and paying around $85K out of pocket.  Instead, she has an extra $67K she can save or use to invest in other properties.  Because Leah is a great saver, she’s comfortable taking on the risk of negative cash flow. You’ll need to understand your spending habits to determine if this strategy works for you.

Real estate investing is all about perspective: what do you want out of the investment, what are your long-term plans, and how can this property help you achieve them?  In Leah’s case, she gets to live in a brand-new home until she’s ready to rent it out and move onto her next property.  Plus, she owns an appreciating asset in Colorado Springs and is starting off strong on her investment journey.

In This Episode We Covered:

• The Nomad investing strategy and why buying a future investment property can be a great move for families looking to get into real estate investing.  
• Why cash flow isn’t everything. Leah is confident in this investment because she understands the four ways to make money in real estate.  
• The importance of acknowledging where you are in life when deciding how to invest.  While house hacking, rent by room, or the BRRRR strategy can be lucrative, they require time and a willingness to share your space.  For someone like Leah, with a teenage daughter and dog, they weren’t the best strategies.

Links from the Episode

Rental Property Spreadsheet

Envision Advisors

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