When you want to maximize your rental property cash flow? You have to do 1 of 2 things:
- Increase what you earn in rent
- Decrease what you spend
There is no magic to this real estate formula; when you increase your revenue and decrease your expenses, you’ll create more passive income for yourself.
This blog shows you some of the most reliable ways to increase your rental property cash flow and get the most profit out of your investment property. Here are a few of our favorite ways to help investors get more money into the bank account and build long term wealth.
Reduce Vacancy and Turnover
High tenant turnover is always going to be a drain on your potential cash flow. A vacant property isn’t earning any money for you, and when you’re turning the property over between tenants, you’re making extra expenditures on maintenance, cleaning, and marketing.
With high turnover rates, you’re increasing risk due to security issues that come with a vacant property. You’re also increasing the work and time required to find new tenants, which can put a damper on your rental property cash flow.
Reduce your tenant turnover and increase your cash flow by choosing good, long term tenants who are consistent, reliable, and communicative. High quality tenants will frequently lead to better rental income.
Decrease Unnecessary Expenses
Keeping costs down is part of every plan for positive cash flow. There are usually some good ways for real estate investors to increase cash flow by lowering your rental property expenses. Review your insurance and tax rates. Make sure there isn’t any room for improvement there, and that you’re being taxed according to an accurate property value.
Review contracts you may have with pest control companies, landscaping vendors, and other professionals who provide a service. If it’s been a while since you shopped around, you might be able to find deals and lower your operating expenses. Consider whether any monthly expenses like utilities can be passed on to tenants.
Evaluate Your Mortgage
You can always free up some cash by refinancing your mortgage, especially if interest rates are decreasing. With a lower monthly payment, you’ll have more cash flow coming in every time the rent is paid. And, your tenants are still going to help you pay down that debt.
Refinancing your rental properties will extend the repayment term, and will simultaneously lower the payments and leave more money in your pocket. Look for a lower interest rate and better loan terms.
Appeal Your Property Assessment Value
In BC, Canada, property taxes are one of the biggest expenses for rental property owners. Since property taxes are calculated as a percentage of your assessed property value, if you think your assessed value is above the actual value in your local real estate market, you can file an appeal with BC Assessment. An average of 94 percent of all appeals in BC get solved through mediated resolutions, which is less time consuming than going to hearing.
Raise Your Rent
Raising rent is an easy way for rental property investors to increase cash flow. With higher rent, you’re simply earning extra cash from your income property every month.
As long as your rental increase is supported by market prices in your area, you don’t have to worry about losing tenants. It’s expensive to move, and tenants will measure the cost of finding a new home against your rental increase and likely see that it’s better to stay in place.
At a minimum, you should increase your monthly rent to keep up with the inflation rate.
Rent by the Room
If your property address is located in an area popular with students and younger renters, renting your property out by the room is an easy way for rental property owners to increase cash flow. Also known as “house hacking,” this strategic approach involves purchasing one property with a suitable layout, dividing it into additional units, and leasing each space separately, often bundling amenities. This strategy helps you maximize rental income, mitigate tenant risk, and capitalize on the market value of your property.
Focus on Preventative Maintenance
Emergency maintenance and repairs are very expensive and take many investors by surprise. You can avoid those costs by being proactive with the repairs your rental home needs. Ignoring those small repairs that don’t seem worth your time and money will only lead to larger repairs that are more complex and a lot more expensive.
Commonly deferred maintenance items include plumbing, rain gutters and roofs, drainage issues, and appliances. Make preventative maintenance a part of your plan for earning more and spending less.
Hire a Great Property Manager
While property management services will cost you some of your rental income, working with a great property management team can help you free up your time, minimize tenant vacancies, and help you bring in more rent in the long run.
Property managers handle everything from screening potential tenants to maintenance and tenant disputes, helping you win back your time and turn your rental into a passive investment. Most property managers charge a flat fee to find your first tenant, plus a monthly fee that’s around 10 percent of the monthly rent.
These are 8 good ways to increase maximize cash flow from your real estate investments. If you have any questions about how to earn more on your Kelowna rental property, we’d love to help. Contact our real estate investing experts at Vantage West Property Management. Our full service approach to property management can turn your real estate assets into passive income generators.