Investing in rental real estate is one of the most powerful means of creating wealth and generating income.
Rent from well managed properties in decent areas will pay for mortgages and operating expenses while generating decent cash.
An added benefit, for investors looking to build retirement income, is that properties can be purchased and held in nontraditional IRAs! Whether you own a single property or you're adding to an existing portfolio, you can maximize your cash flow by: 1.
Refinancing and lowering mortgage payments.
Mortgage interest rates are currently the lowest they've ever been in history.
Lenders are currently offering 30 year loans for 5% APR (or less) for single family properties! 2.
Requiring tenants to pay for utilities.
One of the greatest pitfalls for investors is including utility fees in rent.
Many investors lost their properties, when natural gas prices spiked during the one of the coldest winters--the winter of 2000.
Some utility bills were over $800 for one month! 3.
Making sure rent is in line with comparable properties.
Many owners hesitate to raise rent, on existing long-term tenants in additional properties they purchase.
If the current rent is well below the local rates, most tenants will not object to incremental increases.
This is especially true for instances where they can see tangible improvements (paint, new carpet, etc.
).
The key is to ensure the rent covers the cost of these repairs and add to the overall value of the property.
4.
Including home warranty coverage in the rental agreement.
The premiums for the warranty should be paid for by the owner.
The tenant pays for service calls.
This will save tons of money for major repairs.
On one of our properties, the air conditioning unit died during the hottest month of the summer.
A replacement unit would've easily cost $1,500.
However, the home warranty cost only $45 for the service call! 5.
Trimming monthly management costs.
Many maintenance tasks can be handled by a skilled handyman.
For larger projects, such as tree removal and trimming, roof repairs, etc.
, most property management companies are able to get decent rates through companies they work with on other properties they manage.
Timely repairs and routine maintenance can save a great deal of money in the long-run.
Satisfied tenants equal less turnover and greater ability to increase rents appropriately.
Following these five valuable, easy to implement tips can help significantly improve your cash flow while improving property value.
This enables smart investors to leverage existing equity to add to their property portfolio.