6 Strategies to Increase Your Real Estate Cash Flow
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In real estate investing, cash flow corresponds to the amount you have saved each month by subtracting all expenses from your income. In concrete terms, these various expenses include monthly payments, taxes, insurance costs, management fees and all other charges related to your property. Income is primarily made up of rent and rebilled fees. Depending on the case, cash flow can be negative, zero or positive.
When you aim to generate wealth from your real estate investments beyond the assets you have accumulated, you should aim for positive cash flow. A positive cash flow will allow you to accumulate liquidity to continue investing. Making money from your real estate properties goes beyond acquisitions, but it requires a strategic vision to enable you to optimize your investments. To achieve this, you can use several techniques.
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1. Buying at a low price
Asset price is an important variable in determining the profitability of your project. The lower the price, the less you’ll pay in credit. Therefore, it is important to negotiate the price of your property as soon as you buy it. Always keep in mind that you make money at the time of purchase but not when you resell your property. Many investors tell themselves that the assets they have acquired in 10 years will be worth this or that amount, and they don’t even think about negotiating its price.
However, one cannot be sure what will happen in the property market in 10 years. Negotiation must take place before signing at the time of purchase. To determine the true price of an asset, find the market value, and negotiate below that price. At least you will get your property at market value. Note that sellers usually expect a negotiation, and that they leave a margin by declaring a higher price. A $1,000 savings over the advertised price can also have an impact on the cash flow of your real estate project.
2. Negotiating loan terms
Monthly payments are among the highest expenses. By negotiating the terms of your real estate loan, you can get better loan terms, and you can also reduce repayment expenses. Certain elements, such as the loan rate, loan insurance rate, application fee and early repayment penalty, may be negotiated with your banker. If lending rates fall, it is also possible to refinance your loan. This technique allows you to get a lower rate than your current rate and lower your monthly payment.
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3. Raising Rent
You can increase your income by increasing the rent. However, this increase should be justified to avoid rental vacancies. It is important to stay within market prices. There are several strategies that you can use to increase the rent of your property. The first strategy is to improve the comfort of your property through small-scale renovation work, such as the decoration of certain rooms or the installation of appliances, such as an intercom or security system.
There is also the option of investing in furniture and moving into a furnished rental property, taking into account the applicable tax regimes depending on the area you are in. A furnished property is generally more expensive than an unfurnished property. In the same way, seasonal rentals such as Airbnb are generally more profitable than traditional rentals. For better profitability, it is possible to mix these different strategies.
4. Creating Other Sources of Income
Apart from renting out your property, you can also do other activities to increase your income. For example, you can build a laundry facility, bicycle storage area or wine cellar on your property. These various facilities provide additional comfort to the tenants of your property, and at the same time, they allow you to generate more income.
5. Reducing Costs
This technology allows you to reduce your expenses. To do this, it is necessary to identify and reduce the highest expense items. You can process rental charges that are not billed back to the tenant. This can be heating, electricity or the Internet. It’s also important to compare prices when you’re selecting a craftsman for repairs, as the expenses caused by the work affect the amount of your cash flow. If you have a condominium, you should also be aware of condominium fees, which can add up.
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6. Avoiding Turnover
Rental vacancy has a direct impact on the cash flow of your property, as it reduces your income significantly. Also, every time a tenant leaves the property you’re renting, you’ll have to plan for some repair and renovation costs, which will put a strain on your cash flow. Therefore, the idea is to maintain a consistent level of income by retaining quality tenants who occupy your property.
To do this, you must rely on high quality service to better position yourself in the market. This is manifested in the use of quality and durable materials to ensure the comfort of the tenants or to maintain a good relationship with those tenants. Always keep in mind that when tenants feel special and appropriately welcome, they are more likely to stay in the property.
6 Strategies to Increase Your Real Estate Cash Flow
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