Negative Cash Flow’s Common Remedies
No matter what your investment strategy is, one thing remains to be the most important factor in determining the success of your investment. It is cash flow.
Capitol Growth is important, of course however, cash flow is the most important of all and the one thing that you should ensure to maintain.
We all know that negative cash flow can never be completely avoided depending on your situation, here are some potential cures to fix negative cash flow:
Short-term Tenancies
Many landlords tend to stay away from this investment strategy however it can offer some advantages profitwise. Depending on the location, the type of property and the demand for this type of property it may offer a higher rental return than the market value when you rent out your property on a short-term basis. Factors to consider would be proximity to one or more of these areas:
- Hospitals
- Universities or colleges
- Business areas
- Resorts
- Airport
- Areas where there is production of natural gas
These are often the best places where you can attract short-term tenants, such as contractual employees hired by companies, tourists and college students.
Have Amenities Rented Separately
If your property has a few amenities that can be rendered useful, you can rent them out separately if you want to further maximise your return. One of the best examples is a car park. We all know how in demand a car park is especially in areas within or near the CBD. If your tenant does not have a car, you can rent it out to someone outside of the premise.
Establish a Rent-to-Own System
This strategy is specifically designed for those not qualified for a mortgage loan because of lack of confirmable income or deposit necessary to qualify for a mortgage.
This is how a rent-to-own system works. The tenant will be required to pay a small deposit, which will then be credited back to the tenant at the time of purchase, usually between one and five years further into the tenancy.
What is included in the payment is the market value rent and an amount above the rent, which is agreed upon by both parties. This amount will also be paid back to the tenant at the time of the purchase.
This strategy can be beneficial to both parties, given that the tenant can purchase the house in the future at a fixed price that has been agreed upon. As for the landlord, apart from receiving the initial payment from the deposit and uninterrupted rent topped with the amount above the rent, they also enjoy a significant decrease in management and maintenance obligations since the property is already being treated by the tenant as their own. This amounts to lower or virtually no maintenance costs and a positive cash flow.
Turn Unused Space Into Another Room
If you have a large house with plenty of unused spaces, this would sound like a pretty good idea.
Oftentimes, the most unused or underused spaces are the basement, attic, garage or even an out building. You can convert any of these into another bedroom, a kitchenette, or a bathroom. Just think about the extra income it can bring you.
Converting some barely used parts of your house can bring you extra cash. Just make sure to check with your local council and get approval before starting on it.
Hire a Property Manager
One factor in determining your success or failure as a landlord is by the way you handle rent collection and late payments. The only way for you to maintain a consistent cash flow is by collecting rent on time. It is important that your tenants understand that this is non-negotiable. If you are having a hard time dealing with issues regarding rent, a property manager can be your middle man.
Property managers are your front liners. Leave them the task of chasing down rent, and worse case scenario following through with the eviction process. Most tenants are aware that Property Managers are only doing their jobs and are, therefore, obligated to enforce the lease terms as per the legislation.
