I also provided some candid advice for the real estate investor. In this column, let s talk some more about the good and the bad. First, you make money through net cash flow, principal or equity, appreciation, and tax advantages. Your net cash flow is the difference between what you charge for rent and the monthly mortgage payment, including principal, interest, taxes and insurance. Equity is the amount of the original purchase price that you are actually paying off each month.
Appreciation is by far the best part of real estate investing.
Time is your friend. The better the location, given a good economy, the higher the appreciation. Sounds pretty good so far. First, if you buy a house using creative financing or if you buy a repossessed home, you are in for some fun time. Get ready for the cleaning, painting, replacing carpeting, removing trash, mowing, raking, repairing plumbing, installing fixtures, replacing furnaces or air conditioners, and whatever else is needed to get the property sold or rented.