Maximizing Cash Flow in Red Deer Real Estate

In running a real estate business in Red Deer, you need to have a good game plan so that you don’t lose. One of them is to properly manage your cash flow.  

What is cash flow? To put it simply, cash flow is the remaining rental income you have after you have paid all your expenses. For example, after collecting the rent, you pay all the operating expenses and set aside some cash for repairs. Whatever remains, that is your cash flow. 

It can be the profit – or loss, that you, as an investor, will have to work with each month.  

Through cash flow, we can gauge how profitable or reliable our investments will be. 

In the real estate business, our goal should be to gain a good return on our investment. After all, who would start a business without this in mind?  

The key to this? A positive cash flow. To be able to do that, we need to understand cash flow management so that we have a clear sight of where we are headed without stumbling around and making mistakes that may cost us our business.  

Cash flow management is handling your expenses, tenants and rental properties to achieve your profit goals.  

In this article, let’s learn how to manage cash flows for a profitable real estate investment in Red Deer.  

1. Vacancy

This is a negative in your cash flow analysis of a good investment. If you don’t have paying tenants, that means you have zero cash flow coming in. That further means that you have to pay for all the maintenance, mortgage, insurance, and taxes.  

To manage this, you must attract long-term tenants and retain quality ones. To do this, have a desirable housing environment and instill good customer relations.   

You can increase the chance of having long-term tenants by making sure that their needs are met and they get the value of their rent. You must reasonably attend to their requests for maintenance, and you must not be too greedy in increasing rents.

2. Increasing the rent

The most obvious way to increase the cash flow is to increase rent. However, you must do it reasonably, as mentioned previously. Sometimes, an additional $50 on rent might even cost you your tenants. So how do you increase the rent? 

First is that you must stay within market prices. Second, you may conduct small-scale renovations or add essential equipment like security cameras or central AC.   

You can also have a furnished rental property so you can bump up your rent. Furnished properties are generally more expensive than non-furnished ones. Another option is to find an underperforming property with good income potential, renovate it and add more amenities, then align its lease to the market rent.  

3. Refinancing

The two most expenditures in a real estate investment are mortgages and taxes. Talk to your lender and be in the loop for interest rates. When rates are falling, you may be able to refinance. Refinancing gets you a lower rate than your current one and also reduces your monthly mortgage payments. 

You may also negotiate with your banker to get better loan conditions such as the loan rate, the loan insurance rate, the application fees and the early repayment penalties. 

4. Reducing the costs

First, you must be able to identify which element has the most expenditures regularly. For instance, you may check on some major expenses like the heating or the electricity, that aren’t billed back to the tenants.  

It is also a good practice to conduct preventive maintenance to protect against larger maintenance expenses in the future. One good tip is to canvas and compare prices when looking for repair service companies.  

Another thing to watch out for is the property tax that can go up every year. You may run into negative cash flow if taxes increase faster than you can bump up the rent. Sometimes, it helps to contest your property taxes with your local government should you believe that based on your assessment, the increase was unjustified.  

Bottomline:  

Trying to run a real estate business is all about numbers. Understanding proper cash flow management is key to avoiding risky investment situations.  

being blindfolded in a maze: you may eventually figure out where you’re going, but you’ll be stumbling around and making mistakes before you get there.