Struggling to increase your cash flow so you can build a solid property portfolio? Discover 4 powerful tips that can help you do just that.
Did you know that most property investors never achieve their goals? That might sound a bit wacky, but it’s true.
Statistically speaking, the average property investor doesn’t get past their first property. Very few get to their second. And only about 1% end up investing in 5 properties. What’s more, you probably need to invest in at least 5 properties to better achieve your investing goals.
The reason why many property investors don’t get any further is that they get stuck. And they only get stuck because they’ve reached a bottleneck in their portfolio where there’s a critical constraint, specifically in terms of access to cash flow, access to capital, and/or access to debt or borrowing capacity.
If people can really understand how to navigate these things, it’ll unblock a bunch of stuff.
So, for today’s article, let me share with you four powerful tips on maximising your cash flow. This way, you could continue to build a property portfolio that allows you to achieve your goals. These tips came from our Head of Client Success, Jason D’Silva.
The 4 Tips
Tip #1: Ask about renovations
Renovations are a great way to add value to your property and maximise your cash flow. But to make the most out of your return on investment, make sure you’re renovating in the right areas.
One of the best ways to do this is by asking for professional advice from experts. You can consult with a local property manager or contractor to help you identify which renovations will give you the best bang for your buck.
Another thing to keep in mind is the many different types of renovations you can do. For example, updating the kitchen or bathroom is always a good investment, as these are high-traffic areas that tenants tend to pay attention to. Other popular renovations include adding extra bedrooms, installing new flooring or carpeting, and painting the walls with a fresh coat of paint.
Just remember that not all renovations will be appropriate for all kinds of properties. The type of renovation that will provide the most value for you will depend on various factors such as the property’s location, target market, and overall condition.
To better illustrate this, let me give you another example.
Let’s say a swimming pool may be an attractive feature for some. But if the location of your property does not suit having swimming pools in the area, it may not necessarily increase the value of your property. Worse, you might find it difficult to look for renters for your property.
By investing wisely in renovations, you can potentially reap the benefits of higher rental income and increased property value in the long run.
Tip #2: Get competitive rental appraisals from other property managers
The property of Ashwin, one of our clients, was due for lease renewal. His property manager offered to raise the rent from $460 per week to $520—which didn’t sound bad. But when Jason did his due diligence, he learned that the median rent in the area actually jumped by $100.
So, he got the property appraised by another property manager, who said that the rent for Ashwin’s property could actually be raised to $640 a week.
Jason then went to Ashwin and told him to instruct his current property manager to raise the rent to at least $620. The tenant accepted it straight away. With that, Ashwin was able to increase his yield from 6.4% to 8.7%. And the property has gone from $4,000 cash flow negative in the current environment to over $3,000 positive.
Getting competitive rental appraisals from other property managers is a smart move for any property investor. It allows you to get a better understanding of the current rental market, and to know if you’re charging the right amount for your property investment.
Here’s the thing: Many property investors end up either undervaluing or overvaluing their rental properties.
If their properties are undervalued, they could lose income. But if they have overvalued properties, those could become unoccupied. So it’s crucial that you get rental appraisals from other property managers to see if you’re actually charging the right amount.
Getting competitive rental appraisals is also a great opportunity to assess the services offered by other property managers to see if you’re getting the best deal. You can also evaluate how they handle tenant screening, property maintenance, and even rent collection. If they are actually doing a better job, it might be the best time to switch.
Tip #3: Consider getting a government tenant for your property
If you haven’t considered (or did not want to consider) getting a government tenant for your property investment… This is your sign to do it now.
One of the main benefits is that the tenants pay the rent six months in advance. Once they sign the lease, they pay six months of rent in advance, which can help with cash flow management. And as you get closer to that six-month period, they pay the next six months of rent in advance.
Ultimately, there’s consistent cash flow coming in without you having to worry about potential tenant default or any of those common issues. After all, you’re leasing the property to a stable tenant.
There are also a lot of maintenance benefits as well. There’s no bond required since the government will pay for any maintenance items as they come up within reason. And they will also accept any rent increases in line with the market, provided you justify how you’ve arrived at that amount.
There’s no real rental negotiation in that aspect as well, which helps to keep things a little bit easier. And this also helps to ensure that you’re getting the market rent for your property every time the lease has renewed as well.
But there is a caveat to this.
The process of finding a government tenant can be quite competitive due to the limited vacancies available. It’s also crucial to ensure that the property meets the government’s requirements and standards, which may involve additional paperwork and inspections.
Nevertheless, securing a government tenant can be a great way to maximise cash flow in your property portfolio.
Tip #4: Do an interest rate review
There are a few things that property investors can do to ride the interest rate storm out. And one is to call your bank and ask for an interest rate review.
This is something we’re encouraging our clients to do, and something that our broker partners do quite proactively as well. They’ll reach out to a client just to get their permission, and then they’ll call the bank and ask for a better interest rate.
Most banks will let you do this once every six months. But there are some that will let you do it even more frequently than that.
You can ask for a better interest rate and essentially threaten the bank that you’re going to refinance unless you get a better deal. From there, they will come to the party with a potentially better rate.
I’ve even had clients get cash backs by doing this as well. Jason shares that one of our clients was able to get $2,000 cashback by doing this… in addition to getting a better interest rate on their loan as well.
Start Maximising Cash Flow Today
Maximising cash flow is essential in building a solid property portfolio. But it can be challenging to do without employing the right strategies.
Hopefully, these 4 tips will help you overcome critical constraints that prevent you from achieving your investing goals.
By implementing these tips, you can potentially increase your rental income, property value, and cash flow, enabling you to expand your portfolio and achieve long-term success.
