How to Keep Your Real Estate Cash Flow in the Green
11 Jan 2022
5 min read
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You first started dabbling in real estate but have now become more serious about it. You’ve had some successes but also some failures; maybe you didn’t quite see the appeal of investing in real estate. After all, it’s hard work. But somewhere along the way, you crossed the threshold from getting your feet wet to taking a dive headfirst into the choppy waters. You now know things and it shows in how you approach your latest real estate project, how you delegate your work, and what your ultimate goals are.
And for many people out there, their ultimate goal is to experience real estate cash flow – that is, the money that is left over from rental income on your property after all of your business expenses. After rental income, mortgage payments, insurance, taxes, and HOA (or condo) fees have been paid off, you’re hoping you’re in the green, meaning that left over number is positive. If that number is, in fact, negative, then you’re in the red and may need to reevaluate either the property itself or how you’re maintaining it.
There are a few ways to ensure your rental property isn’t hemorrhaging and that you are, in fact, making a profit.
Refinance your debt
One of the fastest ways to increase your cash flow is by restructuring your loans. Your property can build equity in two: (1) passively through a rising real estate market value and (2) through equity you actively add from property improvements. By renovating and remodeling as the years go by and tenants move out, you’re adding value to your own property. This can afford you to potentially refinance your loan so that you can pull out some cash from the property and use it for continued repairs and improvements.
Cut your costs
It’s never fun to be honest about where you can be cutting corners with costs, but if your numbers are in the red, it might be worth exploring ways to begin tightening your belt. If you are leasing an office, for example, could you do the same work from home? Though the corners cut may seem small at first, they all add up to quickly save you money.
It’s important to know the law and the market, and while rent increases may seem less than ideal for your tenants, it’s common practice– and in this day and age, accepted – especially for desirable properties. If your property is in a hot market with thriving industries, your rents should reflect the community tenants are choosing to live in.
Upsell your units
Monthly income can expand beyond rent and into services offered. Think of adding perks like providing internet and cable, parking spaces, or a washer and dryer lease.
Allowing tenants to bring home furry friends is an easy opportunity for extra income. Monthly pet fees often start at $25 per pet, but always research your area’s average cost to make sure you are not overcharging or undercharging your tenants.
There’s often no one-size-fits-all approach to owning rental properties, and it’s important to keep in mind that numbers can always swing between being in the red or being in the black, sometimes due to unforeseen or external forces out of your control. The important thing to remember is that as the landlord, you should do your part to stay abreast of your state and city laws and know when to invest money in your property versus when to hold off.
If you’re ready to discuss a rental property investment, contact us today.