Increasing cash flow

Most real estate investors who go bankrupt all seem to follow the same pattern. Either they don’t manage their cash flow or they do not manage their properties and tenants. In this article we will cover the challenge of managing and increasing the cash flow.

How to calculate cash flow?

Cash flow is fairly easy to calculate once you understand all the parts of your rental business. You need to track all your income and expenses. If you have a book keeper get him to send you monthly statements and get him to explain all the transactions. Yearly is not enough.

You calculate your cash flow by taking all income – all expenses. What’s left is your cash flow. As in any business cash flow is key. If you don’t have a positive cash flow you risk running into trouble.

How to increase cash flow?

Now that we’ve defined what cash flow is, the obvious answer to this is too increase income and/or decrease expenses.

How to decrease expenses?

Every situation is different so you should have a good look at your own cash flow statement, but here are a few suggestions:

Refinance your loan.
Review your insurance. Call around to other insurance agents and meet with your insurance agent and get your rate lowered.
Contractors. If you have a contractor you’ve used for a long time try and use that to lower his rate. If he does lots of work for you it’s in his interest to keep that business.
Advertising. Are you paying too much to advertise your rentals? In our other article screening for tenants we also offer some advice on where to advertise.
Reduce your debt.

How to increase income?

Now for the good stuff. There are several things you can do to increase your income.

Increase rental rates

The easiest one is to ensure you have the right rental rate. In our article How to determine the optimal market rental rate we offer some advice on setting the right rental rate. If your market allows for it increase the rent on an annual basis. Increasing your rental rate just a little can have a tremendous result long term.

Example:
A $20 increase on 50 units = $1000 increase a month! And $12.000 extra per year!

Add late charges and other charges

Check with the applicable laws of where your rentals are located and if it’s possible add late charges. Not only will this increase your income, but it will also decrease the late payments and headaches associated with that.

Sell your empty parking spots

If you have empty parking spots, or even just a driveway, that’s not being used by your tenants why not sell that to other people.
WhirlPark.ca offers you the option to sell your parking spots online.

It’s free to sign up and WhirlPark.ca will handle the payment processing leaving almost no work on your side! You only pay a small fee once you actually sell your parking. Once you've sold some of your parking the money will be transferred to you.

This is not legal advice. Always ensure that you follow applicable Tenancy and Bylaw Regulations.

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