First things first, what is an investment property?
To put it simply, an investment property is a real estate property that is not occupied by the owner and has been bought specifically for the purpose of earning an income or gaining a return on the investment, through rental or resale of the property.
What real estate investors ultimately yearn for is for their investment property to generate profit and for it to have positive cash flow. The cash flow is the money that enters or leaves your pocket every month. It can be positive or negative. You have a positive cash flow if more cash or more profit comes in and if you spend less than you earn. On the other hand, you have a negative cash flow if more money goes out or if you spend more money than you earn.
Positive cash flow is important because the money that comes in later becomes payment for bills and expenses, especially for things that can help improve your property. Money that comes from positive cash flow can be used to reinvest in the same investment property or into another investment. When money or profit comes in, that would mean that your investment is going smoothly.
Here are five ways to increase positive cash flow from your investment property.
1. Cut down on your expenses
What better way to maximize your cash flow than to reduce or lessen your expenses. How do you do this? Try to spend less as much as possible on your rental investment property unless you have to pay for improvements or repairs in order to earn extra profit from it. Research well for best financing options with a lower rate and longer amortization periods because it will increase the positive cash flow. With proper research and planning, you can save money from your expenses.
2. Make improvements and renovations to your property
You have to spend money when you make improvements or do renovations to your property, but do you know that doing this may boost the value of your investment property?
Making improvements or renovations to your property add value to it and you, therefore, can increase rent prices.
When you do necessary repairs and make improvements to your property do it to increase the value because it will rake in some money in the long run.
3. Raise your rent
Why should you raise the rent of your investment property?
Most real estate investors raise their rent annually, especially if the investment property has undergone renovation, or if repairs and improvements were made. Rent can also increase when regular expenses have gone up. Real estate investors have the option and the right to increase rent if the tenants are paying below market value. Do your research and know your market value to make sure you're renting at a fair price. If you’re charging below market value, you can maximize your cash flow by increasing rent.
4. Find other income-generating sources
There are other sources of income or other means by which you can increase your cash flow from your investment property, at little or no cost at all. You can provide additional services or new amenities that are high in demand for renters or tenants. Why not rent out parking spots to renters or tenants, rent out an unused property for garages or storage for cars, or turn an extra space to a work studio and have it rented out? Surely, these are in demand among renters.
Allowing pets in your rental property, providing cable and internet service, leasing laundry facilities or washer and dryer, and offering cleaning services are also great sources of income. When you offer or provide additional services, tenants will most likely want to stay in the property and be willing to pay the rent, even if you have to raise the rent. You, as a real estate investor, will be able to increase your cash flow and will be ahead of your competitors.
5. Fix and flip!
Another way to boost cash flow aside from renting out your investment property is by fixing the property and flipping it. What does this mean? What is fixing and flipping?
Basically, fixing and flipping means to buy a property, fix or revamp it, then sell it for a price. It is when a real estate investor purchases properties and then quickly resells them for a profit. Flipping houses is a good source of stable cash flow for paying expenses. It may cost more, but the money goes back to you a number fold when you sell it.
Remember: You should buy a property for a lower price, then sell high.
The bottom line is:
Most real estate investors say that cash flow is the lifeblood of real estate investing. Cash flow is really important when investing in properties. It is essential for your properties to provide you with an income and for cash to come in rather than leave your pocket. The good news is, there are many different ways to increase the cash flow out of your investment property. You can reduce your expenses, make improvements or renovations to your property, raise the rent, find other sources for income, or flip your property. Keep these in mind when you need tips on how to boost positive cash flow from your property.