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209 Fast Spare Time ays to Build Zero Cash - Tyler T.H.

Tyler T.H. 209 Fast Spare Time ays to Build Zero Cash - John Wiley & Sons, 2004. - 290 p.
ISBN 0-471-46499-6
Download (direct link): sparetimewaystobuildzero2004.pdf
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We値l look at each of these numbers in terms of an income property you might buy. You値l see how you can use the numbers to figure the income you値l earn from one of your own properties. That way the numbers will have importance to you用ersonally.
205
206
Chapter 10
Positive Cash Flow
Positive Cash Flow (PCF) is just what the words say, that is:
Your monthly cash income after paying all costs of your income
property, including your monthly loan payments for all mortgages you have on the building.
There痴 no magic about PCF遥ou either have a monthly positive cash flow or you do not.
Figure 10.1 and Figure. 5.2 (see page 103 in Chapter 5) show Income and Expense statements for two types of income properties.
Figure 10.1 shows an Income and Expense Statement for a large income property溶amely an 8-Unit Multi-Family Building. This property has an $816 per month PCF, rounded to the nearest dollar.
Figure 5.2 shows a Single-Family rental unit having a monthly PCF of $320.00. Such a PCF number is common for Single-Family rental units.
Note that your PCF with each property includes your having paid for all these expenses BEFORE your PCF is figured:
First mortgage遥our long-term loan on the property.
Second mortgage遥our short-term (3 to 5 years) down payment loan for your zero-cash deal.
Real estate, water, sewage, and all other property taxes.
Maintenance of the property羊epairs, cleaning, updating, expansion, painting, carpet replacement, or other.
Any management fees to collect rents, find new tenants, or other fees.
Heating, air conditioning, other climate control.
Vacancy allowance蓉sually 5 percent of your annual rental income傭ut actually often much less or zero!
Electric, gas, and other utilities for the building not paid by your tenants or an agency if they池e on a rent payment program from the city, state, or national government.
All other operational expenses of your building.
Count Your Way to Real Estate Wealth
207
Date: April 20, 2---
Property Name: 8-Unit Multi-Family Garden Apartment
Address: 2312 Pacific Avenue
Annual Rental Income with 5% Vacancy Factor: $59,000
Miscellaneous Annual (Laundry) Income: $440
Total Annual Income Before Expenses: $59,440
Annual Expenses:
Real estate taxes $ 6,200
Trash removal 480
Water charge 600
Electricity 840
Ads and telephone 420
Insurance on property 1,200
Maintenance & cleaning 1,800
Salaries for building employees 4,000
Accounting & legal 2,500
Other expenses 2,000
Total Annual Expenses $20,040
Annual Mortgage Costs:
First mortgage of $190,000 for
25 years @ 8.00% $17,598
Second mortgage of $45,000 for
5 Years @ 12% 12,012
Total Mortgage Costs $29,610
Annual Positive Cash Flow $ 9,790
Figure 10.1 Income and Expense Statement
208
Chapter 10
Thus, your PCF is true Money-in-Fist (MIF)洋oney you can spend for improving your property, deposit into a savings account, buy another income property, use to take a vacation, or another wish. You can use your PCF for any purpose you choose.
Remember預lways葉he Hicks rule of getting rich from zero-down income property, namely:
You must ALWAYS have a monthly PCF from every income property. Never buy an income property unless you can see it giving you a monthly PCF from the first day you buy it! Violate this rule and you値l regret it when you must pay from personal funds to keep the building in operation.
Monthly Debt Service
In every normal real estate project, you will make one or more monthly debt payments. To determine if you have a positive cash flow you must know the amount you値l pay each month on every loan you have on the building. Such loans might be:
First mortgage15-, 20-, 25-, or 30-year loan.
Second mortgage3- or 5-year loan for your down payment.
First Mortgage Payment Strategies for You
When applying for your long-term (15, 20, 25 years) First Mortgage, keep these three key facts about your monthly payments in mind at all times:
1. Apply for and get a fixed rate long-term First Mortgage. Why? Because with an adjustable-rate mortgage, your loan payments representing Principal and Interest (P&I) can increase if the measure on which the rate is based changes. You do not want to be faced with rising First Mortgage payments. REMEMBER: Never accept an adjustable-rate First Mortgage. Demand and get a fixed-rate First Mortgage for every investment property you buy.
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