Similarly, as water can stream in two ways, income can as well. As a cash flow investor, the last thing you need is negative income that goes down the drain.
Let's break it down. Negative cash flow can be avoided or at least minimised if not totally avoided. Understanding the common reasons and what to do to address it is key.
Below are common reasons why an investor experience negative cash flow:
Late rental payments
Higher Vacancy rate than expected
Emergency Maintenance repairs that out of budget
Financing with an LTV higher than 75% results in a bigger mortgage payment that leaves too little of a cash flow cushion in case income is low or expenses are high
So to avoid that, here are some of the best ways to increase your cash flow shared by property experts;
1. Strategise and Plan ahead
A long-term plan and a strategy to reach your cash flow goals is key. Do not let yourself purchase any property that would cost you more expenses than income.
If you think you’ll have a hard time getting a tenant for a rental property - talk to a property management company, or get a deal with a rental guarantee for at least a year to get a good footing and benchmark before you fully manage yourself. There will always be lean days and all you can do is to be a bit conservative in your projections.
2. Location = Cashflow
With Positive Income Properties, we are always after location growth and potential. Some property markets are good for appreciation, others for positive cash flow. You may also find that within the same market, there are areas loaded with ‘cash cow’ rentals, while just a few blocks away you can barely break even because the prices are so high.
3. Outgoings VS Incoming
Your goal with a cash flow property is to maximize the money you have leftover at the end of the day. Of course, you want to give your tenants a nice place to live in exchange for fair market rent, but never spend more money than you have to.
In fact, with many of the best cash flow properties, renovating or upgrading is not the ONLY solution. It will not guarantee an increase in rents, simply due to the nature of the neighborhood or the tenants.
4. Work with the Experts
When you’re investing in property in another region or far-off location, having a local team whose interests and compensation is directly aligned with yours is crucial.
Discuss with your property consultant what you are after, be clear that your goal is more cash flow.
At Positive Income Properties, we have all these and many more points covered so we can deliver a great property experience.
Call or email us to start your journey to a new property that will deliver income, growth, and tax benefits.