How to Improve the Cash Flow of Your Investment
Owning rental properties is a great way to gain financial freedom. The more properties you acquire, the more wealth you accumulate. When purchasing a rental property, it is important that you choose one that has a positive cash flow. There are options for increasing cash flow after the fact as well. Increasing cash flow can help you increase your profits. If you have a mortgage, you can use the increased cash flow to pay it off more quickly.
Raise the Rent
The simplest way to make more money in your real estate investment is to increase the rent. 37 states prohibit rent control. In fact, only five states and Washington D.C. have rent control regulations. So, if you do not invest in California, Maryland, New Jersey, New York, or Oregon, you can raise your rent.
However, you want to be strategic about this. You do not want your rent to be so high that no one will rent from you. Check out the properties in your area that are similar to your rental property and see how much they are renting for. If you find that you have room to increase rents, do not do this during special occasions like Christmas or your tenant’s birthday. You want to be considerate, especially if they are good tenants and you want them to stay.
Avoid whole numbers, like $2,000 and $2,500, when pricing your rental property. Instead, you want to set the price at $1,999 and $2,485. This gives the illusion to prospective tenants that they are getting more value for their money.
Upgrade Your Rental Property
Adding value to your property justifies increasing the rent. You can replace the flooring in between vacancies. If you are going to upgrade appliances, do it while your tenant is there. Making the rental more comfortable may encourage them to resign the lease despite the rent increase. You can get an idea of popular upgrades in the area by looking at the properties that are comparable to yours. Almost anyone can book a viewing with a real estate agent.
Some of the improvements cost very little money. You can replace and paint the cabinet doors a neutral color. Changing out the hinges and drawer tracks so they soft close can also give the property a classier feel. If you do decide to repaint your rental, buy it in bulk so you can do touchups as needed. You can improve the curb appeal of your rental by pressure washing the outside.
Reduce Operating Expenses
Upgrades not only add value to your property, but they can also be a good way to decrease expenses. Installing insulation and double-glazed windows can reduce the amount spent on heating. Investing in a new HVAC system will save you money in energy costs as it runs more efficiently. If you have a lawn on the property or landscaping that requires a lot of water, rather than pay for lawn care, your tenants can use it for parking or storage.
Nowadays, if you want to reduce the amount of water consumed, you can buy low-flow showerheads and toilets. You can also put LED lighting in the common areas. Water meters can inform you of leaks. If you notice unexplainable spikes, you may have to check for water leaks. Have a preventative maintenance strategy so you can address issues when they are still small. Doing so will save you money in the long run. Shop around for quotes on insurance, cable, and internet to save money.
Minimizing vacancies can help you save a lot of money as just one month of vacancy can cause you to lose 8.4% of the money you usually make in a year. One way to avoid vacancies is to be thorough in your screening of tenants. Ask them for a 60-day heads up before they move out. Build a rapport with your tenants to develop a good relationship. They may decide to stay longer if they are happy with you as a landlord.
If you are in a situation where a tenant needs to move out, you can avoid having a vacancy by hustling. Contact your tenant and come up with a viewing schedule that is convenient for them. Then, send them polite reminders the day before the viewing just in case. Weekly hosting one or two open houses and being available for last-minute showings will help you. At the end of the day, you want as many qualified people to see the property as possible because it is a numbers game. Post your listing on all the free websites.
When making your ad on Craigslist, put up as many photos as possible and highlight the perks of your rental property. You also need to highlight the location and inform them of the bars, restaurants, and green areas so people have an idea of how fun the neighborhood is. You can do so by including a map. Social media is another good place to market your property. You can ask friends to tell others about your property. During this time, you need to be really responsive. This indicates to prospective tenants that if they need to reach you, you will respond quickly.
The Wrap Up
Increasing the cash flow of your property does not have to be difficult. You can raise the rent. Upgrading the rental can also help. Some of these improvements do not have to be expensive. You can reduce operating expenses to increase cash flow as well. Improving the energy efficiency of your property can help reduce operating costs. It is also important to do all you can to minimize vacancies. Just these few things can help you make more profits.