It is important for rental property owners to know and understand how to manage cash flow. Cash flow is an important item in your budget that allows you to project income over the year. As an investment property owner you may find out your profit is 8% after expenses when it should be, say 10%. As an investor, you may come to a conclusion that a particular property will not be profitable, and it may be better to invest money elsewhere. Your cash flow creates opportunities as well as explained below.
Investors who are looking to refinance or sell a property also need to have a consistent stream of income. Properties that have a strong cash flow are more attractive to investors. Buyers may ask to see a rent roll in order to confirm that the rent has been consistently paid showing properties are in good standing and helps build investor confidence.
If you have a larger property, then a dip in cash flow may not hurt you much. They usually have enough income coming into to deal with dips. However, it can be difficult to manage cash flow at a single rental property versus a portfolio with multiple properties as dips are harder to take and overcome.
Our team at Barker Realty helps our property managers and also our clients who invest in properties work to understand and maximize cash flow for each and every property.
Reduce the Impact of Vacancies
You will likely have vacancies at some point. You can reduce the impact of vacancies by including a marginal vacancy rate in your budget. If you do not have a vacancy, then you will be able to offset unexpected costs.
Stagger Lease Expirations
Many property managers are tempted to have all of their leases on the same schedule. However, this may cause a cash flow problem if people move out, and their unit is not re-rented. Change the dates so that you are not hit with multiple vacancies at one time.
Review Your Contracts
If it has been a long time since you reviewed your property management contracts, then now is the time to do so. Have your insurance premiums increased? Is it time to refinance? Is your mortgage interest rate competitive with other rates? Are you getting the best rate for your service? Those are some of the key questions you need to ask yourself.
All recurring expenses you have should be evaluated in order to determine if you are getting the best rates. You will be able to increase your cash flow by reducing your monthly costs and our team of investment property managers in Apex is ready to help. Contact us today for more information or to schedule a meeting!
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