What type of real estate investment income is right for you?

When getting started in the real estate investing game, new comers are generally focused on two things. How much money will they make, and what will they be buying with all that money. Although those are good things to keep in mind, there's a critical consideration they should not hastily over look: the two different types of incomes that can be generated by investment properties.

Income Type 1: Ongoing Cash Flow

On going cash flow is usually generated from monthly rental income. When a property is rented, the investor receives the rental income and uses some of that income to pay the taxes, repairs and property management fees that a property incurs. The rest of the money collected after paying all the fees associated with a particular property is profit for the investor.

Income Type 2: Capital Gains

Capital gains income comes from selling the property at a higher price than it was bought for, usually associated with a rehab or property flip. The investor has (usually) already spent money to buy the property and fix it up so the money received from the sale of the property is used to pay off debt and expenses incurred during the rehab. The rest is profit for the investor.

Things to consider

While investors are thinking about all that potential profit from the cash flow income or capital gains income, they should also be thinking about this: Each one has a distinct impact on the budget. Ongoing cash flow from rentals can tie up your capital for the long-term but creates a dependable stream of regular, predictable money that becomes increasingly profitable as the mortgage is paid off, plus you can recoup most or all of your initial investment at resale if you bough at a good price. Capital gains income is slightly more liquid (in that you intend to sell the property and get the money back at some point soon) and results in big "spiky" windfalls, one downfall is if a property you intend to flip sits on the market for a long period of time you may not make any money and in turn might even loose money.

One provides steady and dependable but relatively small monthly payments. The other provides big buckets of money but less steadily and with greater deal of risk.

 Which type of income is right for you?

Each one has its advantages and disadvantages. There are a million real estate investing gurus out there who can suggest an answer but only you know what is best for your budget. No matter which investment strategy you decide to go with we at iDeal Realty & Management can help you make the most of you investment. Give us a call to discuss you options and your investment goals and we can put together a plan that will help you achieve them. 

iDeal Realty & Management

9051 W Kelton Lane, Suite 10

Peoria, Arizona 85382

(623) 201-3544

www.idealrealtyaz.com