Maximize Cash Flow on Investment Property
Subprime Crisis No Barrier to Affordable Housing (Photo credit: woodleywonderworks)
If you own investment property, you know that positive cash flow is very important. Ideally, when you initially purchase the property, you enjoy positive cash flow at the outset. However, in some coastal markets you may end up with a property that breaks even or is slightly negative at first and so you need to work harder to get there.
Here is a list of ideas to improve investment property cash flow:
1) Raise the rent
Landlords are gaining in many markets as the economy covers and housing supply is constrained and you should be no different
Keep the increases modest (i.e., 2-3 percent annually) and it will be harder for tenants to want to move
If you have a vacancy, be sure to price up as close as you can to market when re-leasing
2) Refinance
If you haven't already done so, refinancing is an easy way to improve monthly cash flow
Some investment property is eligble for government programs (i.e., HARP) where loan to value ratio would not otherwise allow for a refinancing
If you purchased recently you may have to wait to build more equity since investment property can be purchased with 25% down but refinancing requires 30% equity
4) Review liability insurance
Periodically check the market for insurance to see if you can get a lower rate on liability insurance
While you are at it, make sure your coverage is adequate
5) Evaluate property manager
Check your property management company against the market - are they competitive in their fee structure?
Are you happy with their performance?
Get a few quotes and talk to some other companies
Make sure repairs, leaks and other issues are addressed immediately
A few dollars spent today on preventive maintenance will save you bigger dollars down the road
Get a few quotes before doing the work - as the economy recovers, contractors are getting busier now and are able to raise their prices
7) Other service providers
Periodically check the market for other service providers, such as landscape maintenance
8) Review property taxes
If the value of your property has declined since you purchased it, you may be able to appeal the the value and thereby reduce your taxes
Many jurisdictions have done this automatically in recent years but you should verify
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