When considering an investment home purchase, it is of utmost importance to look at the potential cash flow via a proforma or analysis tool. Many investment property sellers offer a cash flow analysis tool with their investment properties. The degree of these vary widely but overall they seem to pretty accurate. It is prudent to make sure when using these tools that you can compare apples to apples. Often the tools can be skewed to benefit the seller.
I recently had a good laugh at one of these tools though. My laughs turned to concern after realizing many investors probably relied on it for their decision making process. This particular analysis tool was being used by another investment property sales company had a video attached to it. The video was instructing that “true cash flow” factors PITI and management fee. That’s it. There you have it, “true cash flow”.
Investor Nation offers a “True Cash Flow Analyzer” (we’ve used that name for 18 months) which gives investors a break down proforma of a potential investment home purchase. In this model Investor Nation factors in various items which are certain to affect the cash flow on a property one purchases.
- Principle
- Interest
- Taxes
- Insurance
- Property Managment
- Bridge lending costs
- Vacancy
- Maintenance
- And “other” which can include short term utilities, etc
. Which begs the new question; is the cash flow true, true?
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