Expert Advice by Sam Saggers
While capital growth is what makes you wealthy, cash flow is the lifeblood of your investment portfolio. It’s what allows you to build your empire!
There are a number of ways you can increase your cash flow and not all of them necessarily require buying a new investment property.
The following tips can help you boost your cash flow and can be used either separately or combined for even more cash flow power!
There’s a good reason why this is a favourite of investors...it works! Improvements can range from simple (fresh coat of paint and new blinds throughout) to more involved (refurbished kitchens and/or baths).
Tip: Keep a tight eye on your costings to avoid overcapitalising.
If the type of property and location suits this option, it’s a great way to increase your cash flow. The furniture costs can reduce your taxes as well!
3. Rental increase
An obvious choice is to increase your rents, however, be aware of market conditions before you do - you don’t want to price yourself out of a tenant because the market is soft and the vacancy rates are high.
4. Rent by the room
This strategy will only work in certain markets, for example a university area. Realise that not every property manager will be keen to handle this scenario so you may end up managing the property for yourself. Also, some municipalities have rules and regulations for such things so it’s important to consult with the local regulatory bodies.
Hint: Check to see if other investors in the area are doing this kind of thing. This will give you an idea of any potential issues you may encounter.
5. Improve your finance
Change your mortgage from a P&I loan to an Interest Only loan and if you don’t already have an offset account, get one to put all of your income into so that it can accrue a healthy amount of interest.
Then live off of your credit card, paying the bill off in full (from your offset account) before any interest can accrue. This strategy requires discipline, however; so don’t use the credit card strategy unless you’re certain you can handle it.
6. Maximise Your Taxes
A good tax professional is worth his or her weight in gold - especially if they specialise in property investing issues. Potential cash flow possibilities include PAYG variations on a monthly basis and depreciation benefits.
7. Off Street Parking
If your property doesn’t have off street parking, consider adding a driveway or perhaps a carport. This strategy works well where parking is at a premium such as within 15km of the CBD.
8. Increase storage
This strategy works especially well in units as space is very often at a premium. Simply install one or more built-in wardrobes to create more storage space for your tenants.
9. Offer Rent Security
If your investment property is in a tight rental market you can offer your tenants a 2-year lease with built in bi-annual rental hikes. They have the certainly of accommodations and you have increasing yields.
10. Get better terms from your Property Manager
Negotiate for better fees but make sure that you’re still receiving the services you need! Remember, “you get what you pay for!”
Sam Saggers is CEO of Positive Real Estate and Head of the buyers agency which annually negotiates $250 million-plus in property. Sam's advice is sought-after by thousands of investors including many on BRW’s Rich 200 list. Additionally Sam is a published author and has completed over 2000 property deals in the past 15 years plus helped mentor over 2200 Australian investors to real estate success!
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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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