5 Simple Ways to Boost Cash Flow When Buying a Home
The goal of most real estate investors is this: to boost cash flow with the purchase of a home.
Yes, I know there are more ways to generate income through real estate investments, such as generating wealth and equity in the long term, but most people who invest in real estate strive to increase income in the short term.
In this article, you are going to learn the top 5 tips to increase real estate cash flow, but before you start you should be clear about some essential concepts and terms:
Simply put, real estate cash flow is the money left over from your property's rental income after all business expenses.
Pay attention, as we did not say "rental property expenses".
As a real estate professional and entrepreneur, it is important that you account for all your expenses: vehicle, telephone, office space, insurance, and any other additional costs.
Of course, interest on debt may well be your biggest after-tax expense, so you need to look closely at your debt costs when calculating your cash flow.
Now let's see ...
How to increase cash flow
1. Refinance your debt
The fastest way to boost cash flow with a home purchase is by restructuring loans.
Ultimately, your property builds equity in two ways:
- Passively, through a rising real estate market value. Properties are worth more as the years go by.
- Actively, through equity that you actively add from improvements - renovations and remodels when tenants leave the property, adding considerable value to the investment property you own.
An important opportunity to increase your positive cash flow is through increasing property values. Refinancing your loans - for example, five to ten, twenty or more years - can help you get there. Another alternative is to take some cash out of the property and then use it for repairs or improvements.
You can even buy another property. The smartest real estate investors They monitor your capital by working closely with lenders. You can immediately lower your monthly payment and increase your cash flow by renegotiating the terms of your loans.
2. Reduce costs
Cutting costs to save expenses is another way to boost your cash flow when buying a home when you invest in real estate.
For example, reducing your vehicle expenses also has a snowball effect: paying less for insurance for less vehicle. Excise duties on vehicles are lower. And interest payments, too.
Similarly, if you rent an office space, think: could you be working from home? So you can deduct office space from your earnings, but you can also deduct home office space.
The main point here is that any business relies on a tight back end to maximize profits.
Also be sure to work with an attorney before considering a sale. You may get away with an accountant for your daily tax filing needs, but if you want to get started selling and buying property, a real estate tax attorney is essential.
3. Increase rents
Start increasing rents, and continue to do so as long as the market can support.
Tenants legitimately strive to keep rents low, so you will need to apply the same force to keep them on top of the market for the value of your investment property and regularly increase your rental income.
Study the law, study the market, and raise rents even if it means losing a tenant every now and then. In the long run, you need to keep up and rent to get more increases in cash flow.
4. Zero as many utilities as you can
Make sure all utilities that tenants can afford are handled that way.
No one will conserve water, heat, electricity, and other utilities better than the person who pays for them. Not only will you cut costs, but it will help the environment.
5. Maximize your local rebates
Be sure to take advantage of available tax credits and discounts when doing home renovations or remodels.
Many utility companies are required by law to offer rebates on aspects and available tax credits. Doors, windows, water heaters, thermostats, ovens… these are the most frequent renovations that focus on rebates.
Plan with a contractor how to get the reimbursement you deserve, following the law to the letter. Paying less for repairs now and adding capital in your future is also one way to positively impact your cash flow. Try to minimize your expenses if you have to pay for utilities.