How to Increase Cash Flow on Investment Rental Properties

Looking for ways to increase your cash flow? You’ve come to the right place. We use a few proven methods to increase cash flow for our investors and we’ve put them all together in this complete guide.

4 Ways to Increase Cash Flow

Collect More Rent

Of course, collecting more rent is the obvious way to increase cash flow, but it’s not the easiest. Study the market before you consider making rent adjustments. You always run the risk of losing your tenants to competition if your rates are too high, so only raise your rent if what you’re charging is under current market value.

Decrease Repair Expenses

Start by performing routine preventative maintenance, like changing filters and watering your foundation, to avoid expensive repairs. When you do need to hire someone to fix a problem, think quality over quantity. Always hire contractors you know do top-notch work. Even if they cost a little more upfront, you’ll save money in the long run.

Also, take the time to perform proper background checks to find quality residents. You only want renters with a positive track record who you can trust to take care of your property.

Decrease Turnover

Another easy way to increase cash flow is to simply keep your residents happy. When residents are happy, your property stays occupied and you don’t have to deal with vacancy loss or real estate agent commissions. You also won’t you have to spend money on repairs to get your property ready for tours and brand new tenants.

Adjust Your Rent Prices at the Right Time

This strategy isn’t as common as the ones above, but it’s extremely effective. Spring and summer months like May, June and July are peak times for renting. If you raise rents during these months, you’re more likely to find tenants who are willing to pay a higher price. We work with landlords to position their listings at the right time to get the most rent.

In contrast, you should also price aggressively to fill your vacancies between tenants, even if it means manipulating your rent. Remember, your cash flow depends on occupancy. Don’t keep a property vacant just to preserve a high rental rate – it’ll cost you.

If someone wants $2,000 per month for their rental and it’s not moving, we’ll suggest setting a more aggressive price like $1,800 to get it occupied right away. Otherwise, the investor may pay several mortgages without income to hold out for that $2,000.

Coming down to $1,800 is just $200 less per month and $2,400 less over the course of a year. Looking at the bigger picture, an investor is in a better position for cash flow if a property is occupied sooner for a few hundred dollars less per month.

Pitfalls of Increasing Your Rent Without Guidance

If you don’t have a pulse on the rental market you can set your prices too high and lose tenants. Thanks to the internet, renters can easily hop online to compare rental rates. They’ll pass on your property in a heartbeat if they can pay a few hundred dollars less down the road.

If that happens, you’ll lose money from turnover costs and vacancy expenses, and you’ll probably end up having to reduce your rent again anyway to find a renter. It’s a lose, lose situation.

Originally published on the LEAP Property Manageme nt blog.