INVEST

Cash flow refers to the amount of money that an investor can pocket at the end of each month after payment of all operating expenses, including loan payments. Cash flow can be positive or negative. If you spend less money than you earn, you will have a positive cash flow. If the cash outflows are more than the cash inflows, you will have negative cash flow.

ARV, or after-repair value, is the estimated value of a property after completed renovations, not in its current condition. House flippers commonly use ARV as a way to gauge the worth of a fixer-upper property, including how much it can be bought, and then resold for after repairs.

Equity refers to the difference between the present market value of a property and the amount the owner owes on the property’s mortgage. The value of equity builds up gradually over time as the mortgage balance reduces and the property’s market value appreciates.

Capitalization rate or cap rate is the ratio of the net operating income produced by an investment property to its capital cost or current market value. This is one of a few real estate investing terms that refers to the rate of return expected from an investment property. Beginners should make sure to study each one and understand the major differences between them.

Buy, Rehab, Rent, Refinance, Repeat. The BRRRR method is a strategy where investors buy and rehab a distressed property, rent it out, do a cash-out refinance, and repeat the process by buying another rental property with the profits. By renovating a property, you’ll build immediate equity that you can then use to buy another property, as well as gain a rental unit that you can rely on for passive income for years to come.