Increasing Your Cash Flow Return
Increasing cash flow means either increasing income or decreasing expenses, or both!
If you own an income-producing investment property, cash flow and appreciation are top-of-mind. What if you want to increase your monthly cash flow? Increasing cash flow either means increasing income or decreasing expenses (or both!). Here are just a few ways to take a magnifying glass to your investment property bank register:
Yes, you can certainly raise the rent if the market will bear it, but below are some other things to look at.
BANK SERVICE FEES – If you are allowing the tenant to pay rent with a credit card, do you know that can take around 3-4% of your income each month? Consider charging that fee back to your tenant as you are legally allowed to do so or require a different payment option that isn’t charging you fees.
EXTRA PARKING OR STORAGE – If your tenant has more vehicles than allotted spaces but you have additional space to rent (such as extra space in a garage), that is a way to have more of your space making money for you. Additionally, tenants are usually looking for additional storage. If you have the space to rent, look at that option!
PETS – If your tenants have pets, are you charging pet rent? In general, animals cause damage and that future damage should be covered by both a pet security deposit and monthly pet rent. Rules for this may depend on each area, so be sure to be up on the laws before requiring this. Vacation rentals should charge pet rent too!
EXTRA GUESTS – If you have a short-term rental and guests want to bring in extra guests, do you charge for that? Might be worth considering!
LAUNDRY – Every load of laundry a tenant does costs money – wear and tear on the machine, water, and power – even wear and tear on the sewer pipes! The utilities may be billed back to the tenant, but it might be worth looking into a coin-operated washer and dryer to bolster your income. Of course, tenants will also pay more in rent for that convenience, so that is another way to look at offering laundry facilities.
UTILITIES FOR LONG-TERM RENTALS – Many landlords don’t like the hassle of billing their tenants for utilities, but this can represent hundreds of dollars per month! Although many property owners will pay for water, sewer, and garbage, they may not turn over utilities such as power and gas to their tenants. What about extra garbage pickup and water use overages?
LATE FEES FOR LONG-TERM RENTALS – This is another category that requires scrutiny and an understanding of your laws, but many landlords don’t even bother with late fees. Charging late fees as allowed by your lease and by law is a great way of letting your tenant know that you are serious about due dates.
Now that you have taken a look at income, what can you do to bring expenses down? It will depend on what expenses you have, but here are a few things to look at:
INSURANCE – Are you overpaying for insurance? Sit down with your insurance rep and review your needs. Although the replacement value of your property will likely have gone up, but do you need all the coverage you do or do you need your deductible so low? Review!
PROPERTY MANAGEMENT – Review your property management agreement. Are you receiving all that you are paying for? Keep in mind that most property managers work pretty hard for what they get, but it is worth a look.
LANDSCAPING – Are you paying for landscaping every single month? Does it make sense to do it that way? There are often months that do not require much of any landscaping, so analyze what you are getting and paying for.
TECHNOLOGY – A lot has changed in technology in the last several years. From internet to how people consume TV, whether you have a short-term or long-term rental, this is worth taking a look at. For example, if you have a short-term rental and are paying for cable or dish service, see if you can set up a streaming service that provides basic service unless your guests have streaming accounts they can log into and automatically be logged out of at the end of their stay.
Want to learn more? Join us for Prosperity Strategy in Palm Springs – Rancho Mirage this November!
If you want to level-up your investing knowledge, we are doing a 3-day intensive Prosperity Strategy workshop in November in Palm Springs. Whether you are starting your investing journey or are ready to shift your strategy into high gear, this event will expand your knowledge and understanding. I hope to see you there.
By Denise Lones CSP, M.I.R.M., CDEI - The founding partner of The Lones Group, Denise Lones, brings nearly three decades of experience in the real estate industry. With agent/broker coaching, expertise in branding, lead generation, strategic marketing, business analysis, new home project planning, product development, Denise is nationally recognized as the source for all things real estate. With a passion for improvement, Denise has helped thousands of real estate agents, brokers, and managers build their business to unprecedented levels of success, while helping them maintain balance and quality of life.