Improve Your Denver Rental Property Cash Flow With These 5 Tips
When you are considering purchasing a Denver rental property, cash flow is the most important factor. A Denver rental property with a strong monthly cash flow will have a positive impact on your overall investment portfolio. Put simply, cash flow is money left over after all of the expenses have been paid. Assign a monthly figure to all expenses, even if you don’t incur these charges monthly. For instance, you probably won’t need to make repairs every month, but you will need to at some point and you will need the money available at that time. Cash flow is not static every single month, and if your expenses increase, your cash flow decreases. The following five tips will help you to increase your Denver rental property cash flow.
Check Every Expense
The majority of property owners can quickly list all of the large monthly expenses they pay for such as the mortgage, insurance and property tax. However, it’s the minor expenses that add up quickly and become problematic for your cash flow. Take one day each month to do a thorough review of all of your expenses. You can do this by making a spreadsheet that lists every expense you have for the property and be sure to include items like lawn maintenance, snow removal and quarterly water bills. Once you have all of these in an easy-to-view list, you can take a look at how you may be able to reduce your monthly expenses in order to increase your cash flow.
Improvements
Making the proper improvements to your rental increases demand for the Denver rental property, which improves your bottom line. If you make the right improvements, you will be able to maximize your rental price regardless of the current market. You won’t be able to pick an arbitrary number, but you will be able to charge a higher rent than other comparable rentals in the area, because tenants will be willing to pay a premium for a superior product. The key here is doing work that combines quality and affordability and to do work that is practical for the area and that tenants will want.
Refinance
Without a doubt, your largest monthly expense will be your mortgage payment. Depending on when you took out your loan, you may benefit from refinancing because interest rates are still hovering near all-time lows. In order to take advantage of these, you will need look at your current rate, your principal balance and an estimate of the current value. If your loan balance is near 70 percent of the value, then you may want to refinance. Actual monthly savings are based on the size of the loan and the change in interest rate and in some cases, a refinance can save you a few hundred dollars.
Deferred Maintenance
Every Denver rental property will need maintenance at some point and while you may think you’re saving money by avoiding annual checkups, you’re really just making the problem worse. Avoiding smaller bills now will lead to more trouble farther down the road and this will have a huge impact on your monthly cash flow. Never skip seasonal checkups on the furnace, oil tank, fireplace and water heater. By taking care of these items every year you are not only improving your cash flow but protecting your investment.
Increase the Rent
You can increase your cash flow by increasing the monthly rent, but for this to be effective the timing of your raise is critical. Before you raise rents, there needs to be a positive shift in the market, improvements to the property or some other factor that makes your property more appealing. The way you go about increasing is also important, and typically it’s best to make rent creases incremental. Before raising rent, take a look at properties in your market and see how yours stacks up. Increasing too much can have a negative impact and you may end up with a vacancy rather than a higher cash flow. It’s important to do your homework before you raise your rent.
Denver rental property cash flow is not static and it can be a moving target at times. However, there are ways that you can help increase your cash flow and keep it positive. Stay on top of every expense each month and remember to care for your property properly. Using these tips will help you increase your rental property cash flow for a more lucrative rental investment.