Every investor makes the decision to invest in rental properties for one reason, to make money. Sadly, many investors find themselves in the position of not making enough money to survive financially.
Thankfully, there are a variety of reasons why investors don’t make money when they own rental properties. In this article we will provide you with a few reasons why real estate investors don’t make money so you can get your rental property on the right track.
1. Cash flow
The big misconception that a lot of people have is that if your property is not cash flowing, you are not making any money. And if you’re not making any cash flow, you’re losing money. However, you have to understand, cash flow is only one piece of a five-part puzzle.
Next, you have equity capture. That’s when you buy the property for less than what it’s worth. Therefore, when you actually close on it, you’re capturing equity at that point.
Related: What Is Cash Flow Anyway?
You also have depreciation. If you have a job and you’re able to depreciate the property, you were able to get tax advantages for depreciating that asset.
4. Debt paydown
There’s the debt paydown, as well. You have a tenant in that property. That tenant is paying down your debt to zero. If it’s a 30-year mortgage, eventually you will owe nothing on that property, and the tenant will have paid that down.
Source – Bigger Pockets
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