- September 15, 2020
- Posted by: Editor
- Category: Uncategorized
Several factors exist that play a part in the success of a real estate investor. However, the most crucial of the factors, which every investor should always keep an eye on, is real estate cash flow. As a real estate investor, you want to ensure that your rental properties generate enough income to cover rental expenses and still make a profit. It’s through real estate cash flow that property investors can build their portfolio and attain financial freedom.
However, you should always aim to get as much positive cash flow as possible. Therefore, it’s important to understand how to maximize real estate cash flow. In this article, we share some of the top strategies for cash flow real estate investing.
Strategies for Real Estate Cash Flow Maximization
- Research Before Venturing.
The first step to maximizing real estate cash flow is to ensuring your investment property has a positive cash flow right from the onset. To find cash flow income properties, you have to do a thorough market analysis and investment property analysis.
- Finding the Optimal Rental Strategy.
One rental strategy may yield better cash flow than the other, depending on the location of an investment property. For example, properties that are located near airports, beaches, or theme parks will typically yield more real estate cash flow if they are rented out on Airbnb than when rented out on a long-term basis. Generally, Airbnb properties will generate more rental income and more cash flow if there is a high demand for short-term rentals in an area.
- Setting the Right Rental Price.
Setting the highest possible price is not always the best strategy for real estate cash flow. If you overprice your rental, it could sit vacant for months until you are forced to drop the price. If it’s occupied, it could force tenants to move out. On the other hand, if you price your rental too low, you could lose out on money that could have boosted your real estate cash flow.
Setting the right price for your rental involves considering what other comparable rentals in the neighbourhood are charging and adjust the price according to the amenities. This price will ensure that the property rents as quickly as possible without leaving money on the table.
Remember, setting rent prices is not a one-time event. You should constantly review your rate and adjust it based on rental comps if you want to maximize real estate cash flow.
- Finding the Right Tenant.
Finding the right tenant is another crucial strategy that maximizes real estate cash flow. Not only will you have no rental income when tenants destroy property, default on their rent payments or don’t pay on time but it could also cost you a lot of money to legally evict such tenants.
To find then best tenant for your rentals, you need to profile every prospective tenant thoroughly before selecting the final candidate. This may involve running a credit check, running a background and interviewing them. Taking your time to find good tenants will always pay off in the long run.
- Look for Ways to Get Extra Income from Your Rental Property
Apart from monthly rental payments, real estate investors can earn additional revenues from their property by offering extra services at a fee. The fee can be included in the rent or you may have tenants pay separately.
Examples of such services in which landlords can create an additional stream of income and increase real estate cash flow:
- Laundry machines
- Vending machines
- Cleaning services
- Storage space
- A gaming room
- Make Your Tenants Responsible for Utilities
Another effective way of making your cash flow investment more cash flow positive is to monitor and cut operating expenses where possible. One of the best ways to cut rental expenses is to assign the responsibility of paying utility bills (water, electricity, gas, etc.) to tenants. Be sure to include a clause on this in the tenancy agreement.
If you let utility bills be your responsibility, they can eat a big chunk into your rental income. After all, tenants are typically less conservative when they aren’t paying for utilities based on usage.
- Property Management
If you have a small rental property portfolio, you could easily save thousands of naira on management costs by managing it yourself. However, you need to equip yourself with the right property management skills and put the right systems in place. Rather than hiring a property manager to manage everything on your behalf, you can do some of the tasks and outsource other aspects. This option is more viable when your time is not restricted by a job and you live close to your rental property.
Having an understanding about the importance of investing in cash flow real estate is not enough any real estate investor should also know how to maximize their cash flow. However, if you follow these strategies, you can easily boost your cash flow, grow your portfolio, and become financially buoyant. It’s essential for these properties to be kept in mind.