Owning an investment property can be a profitable and fulfilling endeavor. According to a 2020 MSCI review, the global real estate investment market was worth $10.5 trillion, proving the market is awash with cash.
As CNBC found, real estate is still the preferred investment vehicle for most of today’s millionaires. Here’s a quick look at how you can wring out more money from your investment property.
Increasing Cash Flow on Your Property
Although real estate investment has been with us for ages, the market keeps changing, so you have to keep innovating. For instance, you might have a profitable building that suddenly starts making losses due to shifting demand.
Here are a few strategies you should employ for the cash flow properties:
1. Make a Large Down Payment
Investment properties require a lot of money to acquire. If you pay through mortgage or loans, that translates to high monthly premiums. Making a sizable down payment of at least 15-30% of the purchase price will reduce the amount borrowed and lower your interest rates and monthly repayments.
It will mean more money in your pocket at the end of the month. Additionally, a larger down payment will cut down on the loan repayment duration, ensuring you enjoy a loan-free investment much sooner.
2. Investment Property Refinance
Refinancing can help increase cash flow from your investment by changing the terms of your investment property. You can pay larger monthly installments to decrease your interest rate, ensuring you pay your loans faster.
Look for opportunities to refinance your property by regularly monitoring mortgage interest rates. You can identify when rates plummet, which is handy for renegotiating your interest rates and lowering your monthly mortgage repayments.
Lower rates will make the loan manageable, thus increasing your cash flow.
3. Upgrade the Property
Making upgrades to your property increases your property’s market value and improves goodwill with your tenants. One way to achieve that is by installing green appliances to help cut down on utility costs.
Some of the upgrading projects you can conduct include outdoor structures maintenance and changing hardwood for laminate floors. That maintains the same aesthetics but at a lower maintenance cost.
Improving the property allows you to raise the rent in the short term and make a bigger profit should you choose to sell it. Whatever you choose, it will mean an increase in your cash flow.
4. Allow Pets
Allowing pets can enlarge your tenant reach. That’s because pet owners tend to move less often as many properties do not allow pets. Therefore, permitting pets guarantees an increase in lease renewals, ensuring constant cash flow.
Many tenants with pets are willing to pay an extra fee not to give up their pets. Consider charging pet deposits or pet rent in addition to the rent. You will make extra money, and in case of damages from pets, the money will cover the costs.
5. Lower Operating Costs
It is essential to keep a tab on operating costs as they can eat into your cash flow if left unchecked. You can reduce these costs by setting up individual meters for each tenant, so they cater to their own bills.
If you pay your property’s utility costs, consider installing solar panels to cut down electricity costs. Similarly, introduce coin-operated washers and dryers in your rental units.
You can also choose to switch service providers who have better rates than your current one. Conduct preventive maintenance to minimize repair costs. You could also consider running the show yourself to save on the property management fees and increase cash flow.
6. Have an Additional Revenue Stream
Depending on the location of your property, zoning laws could allow you to have a mixed-use property. Consider adding or mixing commercial and residential rentals in your property if this is the case. This way, you will get money from residential and commercial tenants.
Using your property for advertising can be another income source. Lease some sides of the building or fence for advertising space.
Monetizing your spare room or land by renting it out to interested tenants for use at an extra cost, such as a flower garden, is another way to increase cash flow.
7. Increase rent
Raising your rent will ensure positive cash flow and help keep up with your expenses. A good guideline would be a 3-5% yearly increase on rent, depending on the market. A steeper increase could mean higher tenant turnover.
To minimize resistance, communicate the reasons necessitating the increase. Enlighten them on the neighboring market lease rates, rising expenses, or any improvements you have done or plan to do. Alert them via written notices of rent increment at least three months before the changes to allow them to prepare.
8. Add more Units
With the skyrocketing real estate prices, this is an opportune time to look into adding accessory dwelling units to your property. If you own a property with a big unused yard, you can add a backyard home or install an attached additional unit to the existing property to rent out.
Alternatively, you can convert a basement or garage by insulating the walls and giving the area a cosmetic facelift by adding household appliances. Just like that, you get an additional unit to rent out.
9. Parking and Storage Space Provision
If your investment property is in an area with scarce parking spaces, consider offering this extra service. You can give your tenants the first opportunity, then rent out the remaining slots to neighboring tenants.
Convert an empty lot or unused basement in your commercial property into a paid parking spot to earn more money from your investment.
The self-storage industry is a $40 billion business, showing how lucrative these investment ventures can be. If you have a vacant floor, you can convert it into a rentable storage space for tenants or other interested parties.
Final Word – Increasing an Investment Property’s Cash Flow
Investing in property doesn’t have to be a stressful venture, as you can earn more from it than you imagined if you get creative. Firstly, you can increase cash flow by making a large initial deposit, which reduces the loan cost, monthly repayments, and loan duration.
Renegotiating your loan terms to reduce interest and monthly premiums is another smart way to increase cash flow. Further, allowing pets, offering storage and parking spaces, and installing additional units are surefire ways to increase cash flow.
Lastly, lowering overhead costs, raising rent, and giving your property a facelift are guaranteed to increase cash flow.
