Maximizing Your Cash Flow on Income Properties

Maximizing cash flow with these tips

If you have been in the property investing or property flipping business for very long, you know the importance of a steady income stream. Whether you are using that income to finance new purchases, or to pay down debt so you can qualify for another loan, if that cash flow dries up, you are going to find yourself on the sidelines while good deals slip through your fingers. Here are some tips to keep that flow moving.

Manage Expenses

The big-ticket items like property management fees are straightforward. What can sneak up on you are the smaller bills like utilities, lawn care, and HOA fees. Some of those costs may be eliminated altogether—or passed along to the tenant—where others can at least be reduced by looking for more competitive pricing.

Another factor is with the property’s larger appliances. Here, many property owners make the mistake of looking for the cheapest options they can find. But if you are constantly having to pay for repairs, consider investing in newer, better quality models that won’t need so much upkeep. In the long run, you will come out ahead.

Look for the Best Tenants

Better tenants take better care of properties. Properties in better neighborhoods that are in great shape will attract a higher-caliber tenant. Once you have good tenants in place, try to keep them there. Nothing stops cash flow faster than a vacancy. Avoid trying to get more rent out of them than what the neighborhood and property condition dictates. Look at the long-term goals as well as the month-to-month numbers.

Additionally, when you are completing the rehab work on an investment property, consider your target tenant. If you are near good schools, you are likely to attract young families who want at least three bedrooms, two full bathrooms—including a bathtub—and laundry hookups. If you are more likely to attract a college crowd, their needs will not be the same. By creating an end product that attracts those most likely to be looking for housing, you will have more tenants to choose from. This will increase the likelihood that your property stays occupied with good tenants.

Have your Deductions in Order

As the owner of a rental property (or portfolio of properties), you have a legal obligation to keep careful records of your income and expenses. Come tax time, you can deduct many expenses incurred throughout the year. Potential deductions include property maintenance, supplies, repair work, mortgage interest, and property taxes. If you have not already done so, get yourself up to speed on what you need to be tracking, and what you can deduct at the end of the year.

Make Better Use of your Cash Flow

Once you have maximized your portfolio’s efficiency, keep the money working for you. Look into different options, including:

  • Paying off debt
  • Paying down principal on any mortgages you hold
  • Holding the extra funds in an account to put toward your next purchase

By tracking expenses, finding good tenants, streamlining the outgoing money, and making better use of the incoming cash flow, you will put yourself in a great financial position. Whether your goal is to pay down debt or to finance your next income property, if you follow these tips, you will be ready.

Eric

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