Cash flow can become a significant problem with your property investment. For beginners, slow cash flow could prevent you from building your portfolio as quickly as you’d like. Happily, there are some tricks you can use to improve your investment property cash flow.
So, you’ve got what you think is a great investment property. You’ve followed all the property investment basics, but your cash flow is tighter than expected. It can sometimes be a real struggle to pull together the money to pay for the property’s expenses.
This is a common problem, no matter how well you’ve followed investment property tips. Investment property Beginners, in particular, struggle with getting their cash flow up to the level they’d hoped for.
All is not lost. You can follow a few tips to improve your investment property cash flow.
Tip #1 – Raise the Rent
It may seem like a simple tip, but it’s one that many beginners don’t consider when dealing with cash flow issues. Raising the rent on your property can offer a short-term solution while looking at the more significant problems.
Of course, you can’t do this every time you face a cash flow issue. Constant rent increases will drive your tenants away. However, it becomes an option if you haven’t re-examined your rents for some time. In such cases, you may be charging less than other investors in the area.
You must also remember your tenancy agreement, along with the laws of your state. Either may prevent you from raising your rents. That’s why many investors wait until the end of a tenant’s lease period before increasing the rent. With some luck, you can secure the tenant on a longer fixed lease at the new rate.
Tip #2 – Take a Look at Your Home Loan
Do you still have the same home loan you applied for when you bought your investment property? Australia has dozens of lenders who offer hundreds of mortgage products between them. Take advantage of that fact to secure a better home loan.
Work with a mortgage broker to find out what other products are out there. You may find that switching your loan gives you access to lower interest rates and valuable new features.
Alternatively, you could use the information you find as leverage against your current lender. Most lenders want to keep reliable clients. If you’ve made on-time repayments, you may find that your existing lender offers a better deal when you threaten to leave.
Those are some long-term options. You could also switch your home loan to interest-only periods for a short while. This will help you to deal with more immediate cash flow concerns.
Tip #3 – Look at Other Income Streams
The property investment basics don’t always cover the other income streams your property may have to offer.
Take some time to consider how you could use your property to generate more than the rental income.
For example, you could lease the side of the building as advertising space if your property is near a busy road. Alternatively, you could lease out any unused parking spaces. Each offers a little extra income beyond your property’s rental income. Remember that every little bit can help when you have cash flow problems.
Tip #4 – Examine Your Outgoings
Reducing costs is a crucial part of property investment. For beginners, this means taking a detailed look at your figures. You may find that you’re paying too much for your insurance. Or, you could negotiate a better deal with your property managers.
Many who encounter cashflow issues find they’re paying too much for various services. You may also be paying for things you don’t need. For example, you could handle some basic maintenance issues yourself, rather than hiring somebody to do it for you.
Again, this frees up small amounts of cash. Nevertheless, you’ll improve your cash flow with each positive change to your outgoings.
Tip #5 – Get on Top of Depreciation
It’s incredible how many new investors don’t think about rental property depreciation rates. They don’t investigate the claims they could make on their assets. Instead, they keep plugging away without a depreciation report. Alternatively, they assume their accountants have factored depreciation schedules into their tax returns.
It would help if you had a depreciation schedule. You’re cheating yourself out of thousands of dollars if you don’t have one.
Hire a qualified Quantity Surveyor to draft a full depreciation schedule. Your surveyor will ensure you claim the maximum amount over the lifetime of each asset. Furthermore, you’ll learn more about tax compliance in your state.
Your Next Step
You’ll make short- and long-term improvements to your cash flow if you follow these tips. You can handle the first four with the help of an accountant and mortgage broker. However, it would help if you had additional support to create a depreciation schedule.
Washington Brown has the answer. Please speak to one of our Quantity Surveyors today to get a quote.
About Tyron Hyde
Tyron Hyde is the CEO of Washington Brown Quantity Surveyors. He is regarded as one of the industry's leading experts in property tax depreciation, is regularly quoted in the media & asked to speak at conferences.
Learn why more Property Investors Choose Washington Brown to prepare their depreciation reports.