{"id":167500,"date":"2024-02-19T09:27:10","date_gmt":"2024-02-19T16:27:10","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=167500"},"modified":"2024-03-01T03:17:06","modified_gmt":"2024-03-01T10:17:06","slug":"ways-to-generate-cash-flow-with-high-interest-rates","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/ways-to-generate-cash-flow-with-high-interest-rates","title":{"rendered":"11 Tips To Generate Cash Flow When Interest Rates Are High"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC8106955888\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">Rental properties have been one of the largest real estate industry sectors to be hit by the increase in interest rates. Investor purchases of single-family homes tumbled 29% in 2023, according to the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.wsj.com\/real-estate\/for-property-investors-the-price-of-homes-is-still-not-right-e6ab67c8\" target=\"_blank\" rel=\"noopener\"><em><span data-preserver-spaces=\"true\">Wall Street Journal<\/span><\/em><\/a><span data-preserver-spaces=\"true\">, citing data from Parcl Labs, a real estate data and analytics firm.&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.realtor.com\/news\/trends\/a-look-back-at-2023-the-year-the-housing-market-froze-over\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Realtor.com<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;concurred that last year saw the largest annual drop in investor buying activity in at least 20 years.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, for those who can&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/cash-transactions-now-making-up-a-third-of-sales\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">buy with cash<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;or hold their nerve (and pay the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-is-a-mortgage\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">mortgage<\/span><\/a><span data-preserver-spaces=\"true\">) during the current cycle, now is an ideal time to strike a deal with sellers stranded by high rates. When rates eventually fall, investors will flood back to the market and prices will increase, allowing intrepid investors to refinance, looking like financial geniuses.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">So if you&#8217;re planning to venture into the current terrifying interest rate tornado, here are a few tips to help weather the storm.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">1. Consider Switching to Short- or Medium-Term Rentals<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Although some cities have&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/crackdown-on-short-term-rentals-get-tougher\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">strict short-term rental (STR) laws<\/span><\/a><span data-preserver-spaces=\"true\">, you&#8217;re likely to have far more leeway with a&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/how-to-invest-in-medium-term-rentals\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">medium-term rental<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;(renting for a month or more). Your chances of maximizing your income increase if you snag a high-paying corporate client. Relocating executives, insurance companies, business executives, or athletes on short-term contracts or temporary assignments are some of the more lucrative clients.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Single-family homes or upscale condos have a distinct advantage over hotels in this department, allowing room for families in a self-contained, relaxed environment. Investor-owners will have to incur the initial expense of furnishing the home, but a high-paying client should replenish that expense within a few months.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you do intend to rent to short-term visitors, buying a home in a year-round tourist destination or frequently visited area with lax STR rules will ensure a consistently high yield.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">2. Add Additional Room in Attics and Basements<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Extra rooms equal extra income. While some cities do not allow basement rentals or occupancy, others do.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Research your city&#8217;s rules for adding a kitchen and what permits you need. Often, gas lines are not allowed, but air fryers and portable induction cooktops are. You will also have to weigh the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/increase-home-value\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">renovation<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;cost versus the extra income you can generate.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">3. Charge for Parking Spaces<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Charging for garages or dedicated outdoor parking is becoming more prevalent, especially in large rental developments. Additionally, providing EV charging is increasingly in demand.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are strict&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/afdc.energy.gov\/laws\/12954\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">government guidelines<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;regarding this. Charging your tenant extra to use a charger is a gray area if it is not directly billed to their unit. It&#8217;s an often contentious topic of discussion. This means a rock-solid&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-to-include-in-a-lease-agreement\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">lease agreement<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;stipulating the rules regarding EV charging and the additional costs involved is essential.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">4. Consider Splitting Utilities<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you plan to own a multiunit rental for a long time and are responsible for the utilities, consider splitting them. Costs to do so differ massively by home. Running separate water lines can be extremely expensive, and you&#8217;ll likely need to make more money back on rent to justify the investment.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, cost-effective mini-split HVAC systems are relatively affordable to install, providing you have sufficient electrical wiring. Expect to pay between&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.forbes.com\/home-improvement\/hvac\/mini-split-installation-cost\/#:~:text=A%20mini-split%20system%20typically,individual%20rooms%20or%20small%20spaces\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">$1,000 and $4,200<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;for one outdoor and one indoor unit.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">5. Self-Manage Your Properties<\/span><\/h2>\n\n\n\n<p><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/property-management-vs-self-management\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Self-managing<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;your investment properties can be a gift or curse, depending on many factors, such as how many units you have, where they are located, what condition they are in, and the caliber of tenants you have living in them.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">However, assuming you have one to four units (or more, depending on your available time and number of paid helpers) in good condition, in a good neighborhood, with upstanding tenants, self-managing could be a reasonably easy way to save spending 8% to 10% of your rental income on hiring a third-party management company.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">6. Rent by the Room\/Workforce Housing<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">With the rising cost of rents, room-by-room renting has become more popular. Similarly, workforce housing has become popular in major cities where essential and city employees such as emergency services workers, teachers, or government employees can no longer afford to live.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">For an investor, a big draw for workforce housing concerns zoning. Essentially, you can have a single-family dwelling acting as a multiunit dwelling. To ensure maximum comfort for your tenants, fitting each room with its own bathroom means an upfront investment, but higher rents in the long term.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As with all rental properties, meticulous&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/how-to-screen-tenants\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">tenant screening<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;is essential. Also, regular cleanings and robust security (such as cameras and biometric entrance systems) help prevent unwanted guests from entering the premises.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">7. Consider Cost-Effective Improvements<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Nothing turns off renters more than a down-on-its-heels home with a scrubby garden, moldy siding, and hanging gutters. First impressions count, so adding curb appeal with new (artificial) grass, trimmed vegetation, a newly painted exterior, vibrant planters, and a fresh hardscape go a long way toward making renters want to dig deeper in their pockets to secure a place in your property.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Kitchen upgrades don&#8217;t need to be gut jobs. They can include simply refinishing cabinets, adding hardware, upgrading appliances, and installing new counters. In addition, the bathroom should be presented as repainted and spotless, with a newly glazed tub. Upgrading a vanity and lighting are also relatively fast and easy tasks.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you&#8217;ve got carpets in your rental, it&#8217;s time to get with the vinyl plank program. This type of flooring looks good, is easy to maintain, and creates a seamless, uniform look around the home.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Consider adding these amenities to simplify your tenant&#8217;s life, allowing you to charge extra for the privilege while claiming a&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/rental-property-tax-deductions\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">tax deduction<\/span><\/a><span data-preserver-spaces=\"true\">:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">A dishwasher<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Storage space<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Central AC<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Outdoor living areas (a simple patio, balcony, or deck goes a long way in the hot summer months)<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">A fenced-in yard for pets<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">In-unit washer and dryer<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Basement pay-to-use washer and dryer<\/span><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">8. Ratio Utility Building Systems (RUBS)<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">RUBS allows a landlord to regulate utility bills amongst tenants in a multiunit building based on certain criteria. It keeps a landlord&#8217;s utility expenses down in un-submetered buildings.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">9. Add Solar Panels to Your Property, and Charge a Flat Fee to Use Charging Facilities<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Did you know that&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.cnet.com\/home\/energy-and-utilities\/heres-how-many-solar-panels-youll-need-to-charge-your-ev\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">eight to 12 solar panels<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;connected to your property&#8217;s Level 2 charger can fully charge most EVs? As a landlord, you can recoup your costs for the installation and turn a tidy profit by adding a charging fee for your tenants to use.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">10. Invest in Less-Expensive Areas<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you traditionally like to invest where you live and you live in a pricey neighborhood, it might be worth considering investing elsewhere.&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/investing-in-real-estate-out-of-state\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Out-of-state investing<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;has become essential for people living in expensive cities like New York or LA. Buying out of state through a&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-is-a-heloc\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">HELOC<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;or by liquidating savings could allow you to purchase a property for cash and refinance once the rates drop.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">11. Appeal Property Taxes<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">The squeaky wheel gets the oil. Appealing your property taxes is a relatively inexpensive way to lower your expenses, especially if you choose to do it yourself.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The process tends to differ, however, depending on where you live. In some areas, it&#8217;s better to hire an attorney who specializes in doing just this, whereas elsewhere, contacting the tax assessor&#8217;s office should provide you with the forms you need.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">There is no silver bullet for investors to get around high interest rates. However, depending on your resources, implementing some of these suggestions could enable you to continue to invest, taking advantage of the lull in buying activity until you can refinance once rates drop.<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_b7d962c0845274509f35e3d888cc8e7f\" class=\"visibility-group alignwide  hidden\">\n        \n\n<div id=\"hero-block_4ce15fc2c7f64858c646afe452386153\" class=\"first:mt-0 hero-block py-4  alignwide   has-background has-slate-200-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-1\/2 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Find the Right Agent, Close the Best Deal<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:18px\">Step #1: Use Agent Finder to match with top <em><strong>investor-friendly<\/strong><\/em> real estate agents to help you find, analyze, and close your next deal.<\/p>\n\n\n\n<div id=button-custom-event-block_0da15e5e4f4c175c934d9e950c19fb32 class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/agent\/match\" x-on:click=\"window.analytics.track(&#039;Blog Block | B2C Marketplace Agent Finder&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/ways-to-generate-cash-flow-with-high-interest-rates&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Find an Agent<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/2 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/08\/Marketplace-Blog-Blocks-Agent-v3.png\" alt=\"investor friendly real estate agent\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/signup\" x-on:click=\"window.analytics.track(&#039;Blog Block | Acquisition | Free Membership Signup&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/ways-to-generate-cash-flow-with-high-interest-rates&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Rental properties have been one of the largest real estate industry sectors to be hit by the increase in interest rates. Investor purchases of single-family homes tumbled 29% in 2023, [&hellip;]<\/p>\n","protected":false},"author":613725,"featured_media":154529,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7380,7119],"tags":[],"class_list":["post-167500","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-long-term-rentals","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/167500","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613725"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=167500"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/167500\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/154529"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=167500"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=167500"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=167500"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}