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More analysis, more cash flow

by CRE on 07 Feb 2018
The decision to become a real estate investor generally hinges upon three questions: How can I make positive cash flow every month? What is the right investment strategy for me? Where do I start?

Before coming together to form Mothers of Real Estate, Monika Jazyk, Gillian Irving and I were investors grappling with these questions while also building careers, juggling the demands of motherhood and dealing with various financial adversities in our personal lives. We soon learned that looking for a single answer to these questions can be risky.

A successful investor must be able to analyze a property thoroughly, and that goes beyond crunching the numbers related to a single strategy. Your property can be whatever you want it to be – a rent-to-own, a student rental, a more traditional buy-rent-hold – so why limit your initial analysis and possibly miss out on the best possible cash flow?

To illustrate, Monika, Gillian and I examined a two-storey, single-family detached home with three bedrooms and two baths purchased for $350,000 to show how you can make extra cash in three different ways.

By all accounts, this is a safe strategy for investors with a low tolerance for tenant issues. You’re creating an opportunity for a family to become homeowners while making predictable, consistent cash flow.

As MORE’s rent-to-own expert, I concluded that with a standard 36-month RTO term, you can expect monthly cash flow of $595 from this property. In addition, with RTOs, you won’t deal with landlord headaches such as lost rental income, repairs or property management.

RTO customers, also known as tenant-buyers, are typically recovering from financial setbacks and will require time to become mortgage-ready. They are focused specifically on homeownership and have saved upwards of $15,000 for a down payment. With a $350,000 RTO property, you’ll use the tenant-buyer’s savings to offset your 20% down payment and closing costs. Plus, you benefit from the bank’s financing.

Monika, our rental specialist, says that to make this single-family detached property cash flow against a monthly mortgage payment of $1,300, you would need a monthly rent of $1,600. It would be advantageous to create legal suites and convert the property into a duplex, thereby increasing your rent potential to generate $302 in monthly cash flow. (Setting aside 20% toward fluctuations and 8% toward a credible property management service offers peace of mind.) A pro tip to deal with pesky tenants is to include vandalism insurance when purchasing home insurance.

For more profitable buy-rent-hold investments, it’s critical to think outside the box. This means buying in areas where demand for rentals is growing but no one is looking, and where the likelihood of finding undervalued properties is much higher. The main consideration here is that you are building long-term relationships with these properties and purchasing for a minimum term of five years.

Student rentals
When most people think of investing in student rentals, they cringe – but not Gillian, who says that when done right, this strategy can create a sizeable monthly cash flow that can go toward building a considerable estate for your kids’ future.

When investing in a $350,000 property as a student rental, aim to create as many bedrooms you can comfortably fit. A three-bedroom, single-family detached property has the potential to house six students, paving the way for six separate rental incomes. At a reasonable rent of $500 per student per month, your monthly income would total $3,000. After expenses, your student rental will cash-flow $540 monthly.

Gillian suggests three must-haves to ensure a dependable income stream:
  • Hire a reliable property manager who specializes in student rentals.
  • Build a bulletproof lease and have it signed by at least two guarantors.
  • Ensure the lease includes a clause holding each student ‘jointly and severally responsible’ for damage, as well as a cleaning clause and a utilities cap. Nothing holds a student more accountable than the thought of having their beer money spent on repairing damages, cleaning or utilities.
Looking at these three strategies, we see three distinct outcomes. For this particular property, if you automatically opted for a buy-hold-rent strategy, you would end up missing out on more than $3,500 a year in cash flow that could have been generated by RTO and more than $2,800 that could have come from a student rental.

Of course, these are just suggestions. You have to choose the approach that is right for you and your family, the one that helps you achieve your personal and financial goals. But that choice should be based on a thorough and comprehensive analysis that takes into account the risks and rewards of multiple strategies.

Mothers of Real Estate was founded by Monika Jazyk, Gillian Irving and Rachel Oliver as a community for anyone who wants to create sustainable, above-average cash flow. To learn about MORE and the group’s intensive seven-week e-course, visit

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