First of all, this "roady" sign is great! I think I saw a few Real Estate investors holding this sign on Bee Ridge Rd. a few days ago. Funny but scary! This article is dedicated to finding deals that take this sign out of the investors hands and put that million in their pockets.

With over-inflated pricing in the Sarasota/Manatee market, there's a scarcity of investments that will result in a positive cash flow. I have a number of clients looking for these types of investments and it seems 99% of real estate agents feel, "you're not going to find anything that will result in a positive cash flow situation". I beg to differ (I tend to challenge anyone making comments of; it doesn't exist, its not out there, it can't be done, and all the rest of the blanket statements made from real estate people just not doing there homework).. First of all, let's start from scratch.. What is the rules we want to follow to make a positive cash flow investment? Well, number one, we need tenants to pay rent. Number two, we need to find a stressed seller who's willing to charge my buyer an over-inflated price for the investment (Tons of these currently on the market). Number three, we need a property that will result in appreciation at some point, when the market turns around. Last ingredient, we need to make sure we lock in financing at a reasonable rate that will keep monthly out-of-pocket costs down. I spent all day Tuesday and Wednesday looking for these opportunities and I found a handful of investments, with tenants in place that will make money for you on a monthly basis. Here's a layout of my thinking & the math that goes along with calculating a good rental property. Also, I want to add, I was only looking multi-family properties (duplexes, triplex, quad-plex).. I'm sure there's a number of seasonal renting condos and stressed sellers who would dump their single-family homes, that could be bought resulting in positive cash with tenants in place.

I think the most important variable in looking for these deals are finding something that will appreciate over time and build maximum equity for your portfolio. It is my opinion that when this market turns around waterfront property will the first genre of real estate to grab appreciation. Waterfront property is scarce, it can't be duplicated, and demand is the highest for this type of property. 7 out of 10 investors I work with ask, "how far is this property from the beach"? We all know when season rolls around every year, midnight pass becomes jam-packed with cars trying to find a parking spot on Siesta Key. The sun shines here and people love the beach. This will never change. So, the real estate does benefit from that demand. I always start my search as close to the water as I can get & work my way towards the listings with owners in the most stressful situations. Bottom line: Waterfront property is what people want and it will appreciate first when our market turns around.

Next, we need to calculate the cost of owning this type of waterfront property and how can we keep them rented. Beachfront real estate appeals to the seasonal renter/vacationer, so we have to reap the benefits of that demand. They are willing to pay extremely high weekly rates to be able to walk to the beach. (I don't blame them.. Finding parking is really stressful and convenience is invaluable) So, we know where we want to look, so what did I find out there?

I found a new construction 2-story duplex on Bradenton Beach asking $800,000, turkey furnished. It boasts a heated pool (always drives rents up and vacationer love having this amenity for the kids) Recent property tax hikes have pounded beachfront real estate, so this is very sensitive and we have to pay attention to this value. Also, homeowners insurance is crazy for anything close to the water, so we have to be very specific with this expense as well. Next question, how much rent will this duplex garner? On average, in-season, this unit gets $2900/week, and out of season it gets around $1800/week. Its also important to find a great property manager (cutting into your revenue but this is a service you have to have). Property managers market your rental to find tenants, they clean up after tenants leave, they collect deposits and rent, they fix minor complications with the electrical, plumbing, etc. on site, among many other services that leave you stress-free living away from your investment. The most important piece though would have to be the marketing they do to keep your place rented and cash coming to you. This particular property I found, is already booked for 8 months of the remaining 9 left in the year, earning $75,000 in gross revenue. Let's take out our expenses and find the net on our investment: Here's a breakdown of this investment:

$800,000 asking price (I think the seller is a little flexible here, especially in our soft market)

Hypothetically we buythis beach duplex for $750,000.

20% cash down for financing: $150,000 (Leaving $600,000 financed)

Annual Mortgage Payment on Interest Rate @ 7% (& Rates are getting more favorable): $42,000

Property taxes (1.7% of purchase price)- $13,000 in property taxes annually

Insurance- $8,000 annually

So, annually (2009 bookings are already filling up for this duplex, but if 2007 repeats itself in 2008) the cash revenue from this unit will be $104,000.

$104,000 in Gross Revenue: Less expenses:

$13,000 Property Taxes

$8,000 Homeowners Insurance

$20,800 in Property Management Fees

$42,000 in Mortgage Interest Payments

$5,000 Misc./Emergency Repair Fees

= $15,200/Year in Positive Cash Flow & you own a 3,000ft2 Duplex with Gulf & Bay Views on Bradenton/Holmes Beach (which is more popular of a vacation destination than Siesta Key. Many baby boomers see Siesta Key as being a bit too "rowdy" for their lifestyle). If a 30-year old inland single family home goes from being valued at $250,00 to $310,000 over whatever period of time that takes, this $800,000 duplex should be valued @ $1,000,0000. Sarasota/Bradenton Waterfront property is where the appreciation grows first.

The bottom line is, this is a positive cash flow and would result in a 10-11% return on your $150,000 down payment.. Keep in mind this is based on a $750,000 purchase. I think we may be able to get a better price than that .*) (that's as close to a computer wink as I can get.. Almost looks like a tear, but this is nothing to cry about!)

I found a few more properties more inland that result in positive cash flow as well with a more consistent annual tenancy to collect rents from, lower property taxes, and more favorable insurance. But, these deals are out there and real estate agents swear they aren't.. If your to purchase real estate and make money from your buy, come to me and I'll show you a return an all-star trader couldn't earn you in the stock market (with more favorable tax benefits as well).

Happy investing!

Justin