Multifamily investors know that these properties are notorious for their cash flow potential. Whether you have 3 units or 30, these properties offer excellent income with relatively simple management.
In this post, we are going to discuss some of the ways real estate investors can save money on their expenses and increase their monthly cash flow.
1) Negotiate with Your Vendors
A significant expense in real estate investment will be your vendors. This includes heating and air conditioning contractors, landscaping, garbage collection and more. It’s essential to make sure you're getting a good deal on these services to reduce your overall expenses and enjoy a higher monthly cash flow.
The more units your property has, the easier it is to negotiate better prices for these services or look for more competitive quotes from other providers.
2) Keep Your Rents Competitive
To maximize your cash flow, you’ll need to keep vacancies as low as possible. Though higher rents might provide a temporary boost to your income, keeping your rates competitive with similar properties will keep occupancy high and keep vacancies to a minimum.
That being said, it might be necessary to raise the rent when tenants are paying below market rates. If it is a rent-controlled property, you might have to wait for that tenant to move out before you can raise the rent.
3) Make Improvements to the Property
If you do want to earn higher rents, you’ll need to make significant improvements to the property. What improvements you can make and the expected return largely depend on your available capital and the current condition of the building, but might include new flooring in your units, updated appliances, or adding additional amenities like a laundry room.
If you need access to capital to rehabilitate a property, there are many tools available including cash out refinancing, hard money, and other products.
4) Manage the Property Yourself
This tip isn’t feasible for every landlord, but you can save a significant amount of money by managing the property yourself rather than paying a property manager. You’ll find that you can often find tenants, run credit checks, and address tenant concerns for much cheaper, though it will require a significant amount of work on your part.
5) Find the Right Financing Option for You
Perhaps the most effective way to increase a property’s cash flow is to purchase it with financing that works for you. Depending on the type of property and amount of capital you have available for a down payment, there are many options out there from both traditional and private lenders. Finding loan terms that allow you to maximize your cash flow is essential, so do your research before you work with any lender.
Enjoy Higher Returns Through Careful Management
One of the most significant advantages of real estate as a tool for building wealth is the ability to improve the rate of return proactively. Unlike other asset classes, you can have a direct and immediate impact of the value of your property by lowering your operating expenses, adjusting rent, or otherwise improving the property’s value.
Utilize these tips to maximize your monthly cash flow and enjoy a higher return on your initial investment.