These real estate investors built cash-flowing portfolios. Here are the rules they swear by.

Jeff White and Suleyka Bolaños say renting individual rooms has helped them maximize rental income and cash flow. Jeff White and Suleyka Bolaños Investors use rules like the 1% rule to screen for cash-flowing rentals. Some boost cash flow by adding units: "The more doors on the land, the more money it produces." Others see mid-term rentals as the 'sweet spot' between long- and short-term leases. Producing cash flow from rental property sounds simple: collect more in rent than you spend on the property. In practice, getting the numbers to work can be much harder. Investors have to find a property at the right price, finance it, account for ongoing expenses, and keep it occupied. Business Insider has spoken with real estate investors across the country about the rules they use to find — and maintain — cash-flowing rentals. Here are four that they swear by. Use the 1% rule as a quick screen Ted Garber has specific cash-flow and return goals for each property he buys. "Each rental needs to shed cash flow immediately and, on average, pay back our initial investment within three to six years," the Florida-based investor said. One tool he uses to quickly evaluate a potential deal is the "1% rule," which suggests that a property's monthly rent should equal at least 1% of its purchase price. For example, a $120,000 property would ideally rent for at least $1,200 a month. Garber prefers an even wider margin. On a $120,000 condo, for example, he'd rather collect closer to $1,500 a month to create a cushion for expenses. Brannon Potts uses the same rule differently because he builds his rentals rather than buying existing properties. He starts with expected rent, then works backward to determine how much he can afford to spend on construction. "I know my rents, and I can reverse engineer it using the 1% rule," he said. "If I know rents are going to be $2,100, can I build it for $210,000 or less?" He applies the same logic to multifamily properties. If a triplex can rent for $1,750 per unit, for example, total monthly rent would be $5,250, giving him a target build cost of roughly $525,000. Make the land produce more income Potts owns both single-family and multifamily rentals in Fort Worth, Texas, and has developed another rule of thumb: "The more doors on the land, the more money it produces." That could mean buying a multifamily property instead of a single-family home or finding other ways to generate revenue from the same parcel. On one project, Potts hoped to build a fourplex, but local regulations limited him to a triplex. He still had unused space on the property, so he added four storage units for his tenants. "I ended up building those four storage units for less than $20,000 total, and I rent those out at $55 per 10-by-10 storage unit," he said. That generates an additional $220 a month from the same property. His broader advice: "Be creative." Consider renting by the room Another way investors increase a property's income is by renting individual bedrooms rather than the entire home to a single household. Peter Keane-Rivera, who owns single-family properties in the greater Seattle area, summarizes his strategy this way: "Buy the biggest house you can and fill up all the rooms with paying tenants." He has converted or added bedrooms to increase the amount of rent his properties can generate and said he aims for at least $1,000 a month in positive cash flow. Renting by the room can also spread vacancy risk across several tenants, he said: "You diversify your cash flow by having four tenants under one roof instead of one." Jeff White and Suleyka Bolaños, a couple who invest in Denver, have used a similar strategy. "More bedrooms equals more cash flow," White said. When evaluating a property, they look for opportunities to add bedrooms without major structural work. Turning a five-bedroom home into a seven-bedroom, for example, could add $1,600 to $2,000 a month in gross rent, White said. The trade-off is more management. Multiple unrelated tenants under one roof can create compatibility issues, so White and Bolaños sometimes begin with shorter leases before offering longer renewals. Look beyond traditional long-term leases Some investors have also found a middle ground between traditional long-term rentals and nightly vacation rentals. Mid-term rentals are generally furnished properties leased for more than 30 days but less than a year. They can appeal to traveling professionals, people relocating, or tenants who need temporary housing. The strategy can generate more income than a traditional yearlong lease while avoiding some of the turnover and management required by short-term rentals. Colorado-based property investor Zeona McIntyre described mid-term rentals as the "sweet spot" between the two strategies: potentially higher revenue than a long-term rental without the constant bookings associated with an Airbnb-style property. The broader lesson is that cash flow doesn't depend on one formula. Investors can improve the numbers by buying at the right price, increasing the amount of income a property produces, or choosing a rental strategy that better fits their market. Read the original article on Business Insider

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